Banks head FTSE slide on euro zone, Korea worries

By Jon Hopkins

LONDON (BestGrowthStock) – Britain’s leading shares tumbled on Tuesday, laid low by big falls from banks and commodity issues as ongoing euro zone debt contagion fears and rising tensions in Korea kept investors wary.

By the close, the FTSE 100 (.FTSE: ) index was down 128.93 points, or 2.5 percent, at 4,940.68, having touched an eight-and-a-half month low of 4,898.49 early in the session.

British blue chips have fallen by over 15 percent since fears escalated about the euro zone sovereign debt crisis in mid-April, with benchmark UK stock valuations at their lowest level in 10 months, at 11.43 times reported earnings.

Banks were the biggest drag on blue chip sentiment as jittery investors feared southern Europe’s sovereign debt problems could derail the global economic recovery.

Lloyds Banking Group (LLOY.L: ), Royal Bank of Scotland (RBS.L: ), Barclays (BARC.L: ), HSBC (HSBA.L: ), and Standard Chartered (STAN.L: ) shed 1.8 to 8.9 percent.

Confidence in the sector took a knock as investors fretted over how deep the debt issue could run after Spain’s central bank bailed out regional bank CajaSur on Saturday.

Increased tensions between North and South Korea also heightened market caution. North Korean leader Kim Jong-il has ordered his military to be on a combat footing. (.MIAPJ0000PUS: ).

“There is just no good news out there.” said Mic Mills, senior trader at ETX Capital. “The euro zone debt concerns knock us one way, then Korea comes back to punch us the other.”

“Investors have been left reeling on the ropes with no sign of a breather in sight, and banks and commodity issues just keep taking most of the beating.”


Miners suffered as metal prices retreated on demand concerns, with Eurasian Natural Resources (ENRC.L: ), Antofagasta (ANTO.L: ), Vedanta Resources (VED.L: ), Rio Tinto (RIO.L: ), and Xstrata (XTA.L: ) losing 3.5 to 7.1 percent.

Oil majors also fell back as crude prices lost ground, down 2.8 percent, with BP (BP.L: ), BG Group (BG.L: ) and Royal Dutch Shell (RDSa.L: ), off 1.2 to 2.0 percent.

BP was dogged too by ongoing worries over its liability for a major oil spill in the Gulf of Mexico.

Among some individual blue chip fallers, Wolseley (WOS.L: ) shed 4.3 percent with investors nervous about the builders merchants’ exposure to the U.S. housing market.

After U.S. existing homes sales figures showed a gain in inventory on Monday, which is likely to drag on house prices, on Tuesday the Standard Poor’s/Case Schiller home prices index showed a fall in the first quarter.

U.S. blue chips (.DJI: ) were down 1.8 percent by London’s close, with news that U.S. consumer confidence rose for the third straight month in May to the highest in more than two years shoved aside.

Investors also failed to take heart from news that Britain’s economy grew slightly faster than initially estimated in the first three months of this year after a rebound in manufacturing and business services.

There were no gainers among the UK blue chips on Wednesday.

Among other individual fallers, chipmaker ARM Holdings (ARM.L: ) fell 5.7 percent as JPMorgan Cazenove downgraded the stock to “underweight” in a cautious note on the sector.

And Marks & Spencer (MKS.L: ), Britain’s biggest clothing retailer lost 2.1 percent after it said it was cautious about the outlook for consumers ahead of expected tax rises as it met forecasts with a 4.6 percent rise in annual profit.

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(Editing by David Cowell)

Banks head FTSE slide on euro zone, Korea worries