Markets: Greek hope balanced by Spanish fears

Britain’s leading share index gave up most of its gains yesterday as hopes that Greece will stick to the terms of its bail-out gave way to fears that Spain will be the next country to need one.

Angus Campbellat Capital Spreads, said: “Earlier gains couldn’t be sustained, with investors becoming nervous again due to Spanish government bond yields edging higher.”

Spain’s borrowing costs came within touching distance of 6.5 per cent as the government attempts to prop up troubled lender Bankia with billions of euros it is itself having to borrow on the international debt markets.

The FTSE 100 Index, which had rallied by as much 60 points earlier in the session, closed just 4.8 points higher at 5,356.3.

British Airways and Iberia owner International Airlines Group was the biggest top flight faller, down 3.8p at 137.1p, as investors considered the ramifications of Bankia selling its 12 per cent stake in the firm as part of competition rules arising from its state aid.

The banking sector lost hold of an initial boost, with Barclays reversing a 2 per cent gain to slip 0.7p to 181p, but Lloyds Banking Group managed to gain 0.2p at 26p. Lloyds held a meeting for analysts in the morning, which Investec said yielded no news to underpin hopes of a quick recovery but instead painted “a perfectly sensible picture of a regulatory-constrained outlook” that was enough to keep its “buy” recommendation.

The mining sector remained higher following reports that the Chinese government has taken further steps to boost growth in the country amid fears the economy is coming off the boil. Risers included Antofagasta, ahead 21p at 1,038p, Kazakhmys up 10.5p at 690.5p and Rio Tinto, up 62.5p to 2,857.5p.