FTSE index drops almost 2% amid EU debt worries

Europe’s sovereign debt crisis refused to loosen its grip on world markets today as commodity stocks led a fresh plunge for the FTSE 100 Index.

Europe’s sovereign debt crisis refused to loosen its grip on world markets today as commodity stocks led a fresh plunge for the FTSE 100 Index.

Despite the finalisation of Ireland’s £72bn (€85bn) rescue package at the weekend, investors remained worried about the economies of Portugal and Spain and the potential for further bailouts.

The FTSE 100 Index started the day more than 40 points higher but a weak opening on Wall Street deepened London’s faltering performance to leave the top flight 96.2 points lower at 5572.1 – a drop of almost 2%.

It was a similar picture in Europe, while the Dow Jones Industrial Average was down by more than 1% as investors overlooked decent sales over the Thanksgiving holiday to focus on the situation in Europe.

The euro suffered another bleak session against the dollar, falling by more than 1%, while the greenback was also higher on the UK pound.

This put pressure on the value of mining stocks as Vedanta Resources fell 74p to 2001p and Eurasian Natural Resources dropped 21p to 888.5p.

London’s banks were caught in the sell-off but managed to limit losses after a difficult end to last week, with HSBC up 1.7p to 652.8p, Royal Bank of Scotland flat at 38.7p and Lloyds Banking Group down 1.1p at 60.8p after an initially positive start.

Elsewhere in the top flight, BSkyB shares were half a penny higher at 721p after the pay television operator unveiled plans for a joint venture free-to-air, Arabic language news channel across the Middle East and North Africa from 2012.

In a thin session for corporate news, British Airways fell 7.2p to 264.7p after the Unite union announced plans to ballot cabin crew over fresh strikes in their long-running dispute. The news came just hours after shareholders voted in favour of the airline’s £5 billion merger with Spain’s Iberia.

Outside the top flight, Punch Taverns lifted 6% amid speculation that it planned to call time on nearly 6,000 pubs in a move to slash its £3 billion debt mountain. Punch, which climbed 3.7p to 62.8p, will reportedly focus on its 800 managed pubs after offloading the leasehold estate to bondholders.

Meanwhile, shares in home interiors firm Walker Greenbank jumped 9% – up 3.75p to 44p – after the owner of brands including Sanderson and Harlequin reported record sales and profits for the past few weeks.

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