Portuguese woes snap winning streak

BANKS were on the back foot yesterday after credit ratings agency Moody’s downgraded Portugal’s debt to “junk” status, bringing the Footsie’s eight-day winning streak to an end.

The FTSE 100 index closed 21.11 points or 0.4 per cent lower at 6,002.92, having risen more than 6 per cent in the previous eight sessions – its longest winning run in almost two years.

Moody’s warned that Portugal may be following in the footsteps of Greece and request a second European Union bailout.

This, and lingering fears over the health of Italian lenders, sparked a sell-off of banking shares and served to weaken confidence in the strength of the global economic recovery.

The pound was up against the euro, at €1.12, after the single currency was pushed lower by the concerns over the eurozone debt crisis. But sterling was down at $1.60 against the safe-haven of the dollar, which gained as appetite for risk waned.

Steve Barrow, head of G10 currency research at Standard Bank, warned: “Greece is a basket case and we will probably have Portugal and Ireland drifting in the same boat.”

The banking sector was hit hardest by Moody’s downgrade with Barclays, which is heavily exposed to the Iberian peninsula, the biggest faller, down 9.8p at 249.8p, or nearly 4 per cent. Royal Bank of Scotland fell 1.3p to 37.9p and Lloyds Banking Group shed 1p at 47.8p.

Elsewhere, an interest rate hike in China fuelled concerns over a slowdown in global demand and hit the heavily-weighted mining sector.

The People’s Bank of China announced an increase in the benchmark one-year lending rates for the third time this year.

Vedanta Resources was down 46p at 2,023p, copper giant Kazakhmys was off 21p at 1,363p and Eurasian Natural Resources dropped 19p at 795.5p.

BSkyB was 18p lower at 827p as concerns grew over the possible impact new phone hacking allegations could have on News Corporation’s bid for the satellite broadcaster.

Credit checker Experian was among the top risers after broker Citigroup raised its target price on the back of prospects in Brazil. Citigroup saw the Brazilian market as a long-term opportunity for Experian, adding short-term risks in the region have been overplayed. Shares were up 12p at 823p.

Outside the top flight, Sports Direct International pushed 3 per cent higher after the retailer revealed it had bought fashion chains USC and Cruise from Ayrshire entrepreneur Sir Tom Hunter for £7 million. Shares in Sports Direct, controlled by Newcastle United owner Mike Ashley, were 8.4p higher at 250.9p.

Superdry fashion chain SuperGroup was also in demand, adding 23p to 937.5p, ahead of next week’s full-year results.

Among the Scottish stocks, the Edinburgh-based Wolfson Microelectronics was in demand following a broker note on Samsung’s new Galaxy Z smart-phone, in which Wolfson’s chips feature, sending shares up 8.9 per cent or 15.25p to 187.5p.

Medical testing kit maker Axis-Shield soared 49.25 per cent or 165p to 500p after New York-listed Alere revealed it had made an approach for the Dundee firm but had been rebuffed.