Trading hit by Greek tragedy

THE escalating Greek tragedy sunk any hopes of the London market ending the week on a bright note.

Britain's leading share index slipped 0.4 per cent yesterday, despite an initial bounce, as economic woes continued to haunt the eurozone.

A shock report showing growth of just 0.1 per cent in the 16-nations group during the last three months of 2009 put the brakes on the top flight's four-day winning run.

Banks were in the doldrums, with underlying sentiment also cautious over the detail of the European Union's rescue plan for Greece, and ahead of the sector's upcoming reporting season.

News of a surprise move by China to increase the level of reserves commercial banks must hold to curb lending and inflation also weighed on investor sentiment closer to home. CMC Markets analyst Michael Hewson said: "This weak (eurozone] data refocused the market's attention on sovereign debt and increased fears about Europe's ability to sort out, not only Greece's problems, but also the other vulnerable European countries.

"Banks are also suffering ahead of the results season, but also on concerns over their potential liabilities to the eurozone's weakest members, which is estimated to be just under 250 billion."

The euro continued to be under pressure as fears over the eurozone economies persisted. The pound rose to 1.14 but fell against the US currency, with 1 worth about $1.56.

Miners were off the menu in London following the monetary tightening move in China, as investors fear any slowdown in growth would hurt demand for raw materials. This left Vedanta Resources 61p lower at 2,363p, Xstrata down 25.5p at 1,005p and Anglo American off 37.5p to 2,310p.

Angus Campbell, head of sales at Capital Spreads, said: "At the moment, there is quite a lot of newsflow that's quite risk negative. The China news is certainly a bit of a blow to the bulls and, from a technical point of view and fundamentally, the equities look a little bit overstretched at the moment."

The flight from risk also put banks under pressure as Lloyds Banking Group fell 1.56p to 46.59p, Barclays dropped 6.35p to 262p and Standard Chartered eased 22p to 1413.5p. Barclays is due to post annual results on Tuesday.

Royal Dutch Shell fell 22p to 1,663.5p after oil prices dipped below $74 a barrel as the dollar strengthened. BP bucked the trend with a modest fall of 0.9p to 573.7p.

There was a further blow to confidence after fast-fashion chain New Look abandoned plans for a stock market listing that would have raised 650 million.

In the retail sector, Next fell 3p to 1,917p and Marks & Spencer dropped 4.1p to 327.9p.

Investors sought refuge in safer sectors, with rises for National Grid – up 16p to 640p – household products group Reckitt Benckiser lifted 43p to 3,313p and Severn Trent added 9p to 1,132p.

Two companies under pressure after results presentations were back on the front foot after heavy losses the day before. Telecoms group BT returned to positive territory – up 2.6p to 122.5p – after dropping 9 per cent on Thursday due to the Pension Regulator's "substantial concerns" about how the company plans to tackle its 9bn pension deficit.

As well as BT, Diageo got a shot-in-the-arm after results on Thursday showed a fall in half-year profits. Shares recovered 12p to 1,030p, as Royal Bank of Scotland maintained a "buy" rating on the stock and said the drinks giant should benefit when consumer confidence starts to return.

British Airways – another firm with a large pension fund shortfall – fell 8.4p to 195.5p.