FTSE down as investors new governments face debt crisis

UK investors shied away from risk today as the enormity of the task faced by new governments in Italy and Greece sank in.

The FTSE 100 Index closed 26.3 points lower at 5511.9 after investors demanded an interest rate of 6.29% at an auction for five-year Italian bonds, the highest level since 1997.

The record rate - which suggests investors still lack confidence in the country's finances - came as premier-designate Mario Monti started talks on forming a new government of experts to guide the country through the financial crisis.

Elsewhere, new Greek leader Lucas Papademos must persuade his country's creditors to hand over the next €8bn instalment of the bailout to stave off a debt default.

The prospect of new political leadership in Italy as well as Greece had lifted the mood earlier in the session but this optimism soon faded and the Dax in Germany and France's Cac-40 also pulled back.

The US market was also lower as the London market closed as a weak set of corporate results from companies including retailer JC Penney added to the gloom in Europe.

The pound fell to 1.58 against the US dollar, which was bolstered by its position as a safe haven currency. Sterling also fell against the euro at 1.16.

Elsewhere, the underlying problems in the eurozone were brought to light by official figures showing a 2% drop in industrial production in the 17-country bloc.

The banking sector came under pressure amid fears over its exposure to sovereign debt - with Barclays losing 4.9p at 174.1p, Royal Bank of Scotland dropping 0.5p at 21.9p and Lloyds Banking Group off 0.5p at 28.4p.

The weak eurozone production figures and wider concerns about the impact of the crisis on the global economy hit the mining sector with Vedanta Resources falling 2% or 42p to 1120p and Kazakhmys losing 20p at 911.5p.

Broadcaster ITV topped the FTSE 100 Index after its advertising revenues improved by 1% in the three months to September 30, defying expectations for a fall.

While the group remains cautious about its prospects in 2012, particularly with advertising revenues due to decline by 10% in December, shares rallied 3% or 2.1p to 66.8p.

Meanwhile, Majestic Wine shares were 4% lower after a 20% jump in half-year profits was overshadowed by a less sparkling sales performance in the period since the end of September.

It said like-for-like sales were down 1.1% after two weeks of disappointing sales amid the economic turbulence in mid-October. Shares fell 16p to 400p.

The UK's biggest fresh milk supplier Robert Wiseman fell 0.5p to 280.5p after it revealed a 42% slump in pre-tax profits in the six months to October.

The biggest Footsie risers were ITV up 2.1p at 66.8p, Burberry ahead 44p at 1421p, Smith & Nephew up 14.5p at 572.5p and Vodafone ahead 2.7p at 182.7p.

The biggest Footsie fallers were Vedanta Resources down 42p at 1120p, Standard Chartered off 45.5p at 1356.5p, Pearson down 32p at 1105p and Weir Group off 55p at 1905p.