S&P downgrade drags FTSE lower

BRITAIN'S top share index dropped 2.6 per cent yesterday, the biggest fall in more than five months, after ratings agency Standard & Poor's downgraded Greece and Portugal, fuelling fears the Greek debt crisis could drag down other European nations.

In London, blue-chip companies' shares dived after S&P downgraded Greece's credit rating to "junk" status, while Portugal's debt was also trimmed.

The FTSE 100 index sank 150.33 points to 5,603.52 amid a global sell-off as fears over the economy worsened.

On Wall Street, the Dow Jones Industrial Average fell more than 1 per cent in early trading, while France's Cac 40 lost nearly 2.7 per cent and Germany's Dax was 2.4 per cent lower. David Morrison at GFT Global, said: "It's not just been a nice excuse to take profits off the table, it looks to be something more substantial, which does suggest there is some genuine worry over eurozone debt out there."

Greece called for funds from a bailout package on Friday, but some European countries still have to approve the aid and fears are rising over whether the money will arrive before a May bond payment deadline.

The threat of Greek default has sent borrowing costs higher in other indebted European countries.

S&P raised fears the crisis could spread to other nations by downgrading its credit rating on Portugal amid concerns about the country's ability to manage its debt.

The euro took a hammering as traders sought a safe haven in the dollar, while the pound also fell back on the fresh European concerns. Sterling was down to 1.15 and slumped more than 1 per cent to $1.53.

In London, banking shares were under pressure amid the economic jitters and nervousness surrounding the Goldman Sachs hearing in the US. Even news of profits at part-nationalised Lloyds Banking Group failed to provide cheer.

Despite an early boost to Lloyds' shares after it announced it had returned to the black for the first three months of the year, the lender ended the day down nearly 3 per cent.

The bank expects to report profits at both the half-year and full-year stage, but the firm – which is 41 per cent owned by the taxpayer – slipped 2.07p to end the day at 68.17p.

Oil giant BP was also among the fallers, despite saying first-quarter profits more than doubled compared with last year, at $5.6 billion (3.6bn), helped by rising crude oil prices.

Its results have been overshadowed by the continuing oil spill from a BP well in the Gulf of Mexico and shares were more than 2 per cent lower – down 16.8p to 610p.

Only two firms made it onto the risers' board and the overall sell-off saw them lose much of their momentum towards the end of the session.

BP rival Shell, which reports this morning, topped the leaders' board, adding 9p to 1,922p after an upgrade from brokers at JPMorgan Cazenove.

A stronger dollar hit metal prices and hurt heavyweight commodity shares, helping to drag the market lower.

Kazakhmys was one of the biggest Footsie casualties, losing 91p to 1,389p, while Vedanta Resources shed 135p to 2,660p.