World markets slipped into the red today after a scheme to boost liquidity and ease the eurozone debt crisis failed to settle traders’ nerves.
The European Central Bank moved to prop up the beleaguered banking sector with nearly €489bn of three-year loans, which was taken up by 523 unnamed banks.
The FTSE 100 Index had initially surged 1.5% on the news but surrendered its earlier gains to close down 29.9 points at 5389.7.
Sentiment was at first buoyed by the initiative, the biggest liquidity operation ever for the central bank, but soon turned sour as the huge demand for the scheme illustrated the stresses in the banking sector.
Traders were also rattled by a potential downgrade to France’s AAA rating and Moody’s warning last night that the UK’s top-notch rating faces an uncertain future due to the impact of the eurozone crisis.
It was a similar story in other markets, with the Dax in Germany and the CAC-40 in France down by nearly 1% and the Dow Jones Industrial Average in the US off 0.5% as the London market closed.
The pound was up against the euro at 1.20 after it was boosted by better than expected Government borrowing figures in November. Sterling was flat against the dollar at 1.57.
Banking shares remained ahead, with Lloyds Banking Group the biggest riser, up 1.3p at 24.9p.
Royal Bank of Scotland moved 0.2p higher to 19.8p and Barclays was 0.6p ahead at 172p.
There was more woe in the retail sector after chocolatier Thorntons said it was unlikely to make a profit in the financial year to June.
It blamed discounting by rivals for its poor trading, which prompted analysts to slash their previous forecasts for profits of around £4m.
Shares slumped by more than a third, off 14.8p to 23.3p.
Other retailers on the back foot included Marks & Spencer, which dropped 6.8p to 302.7p, while Tesco was 5.1p lower at 382.9p and Sainsbury’s dropped 5.6p to 287.3p.
In the second tier, Halfords was 10.6p lower at 290.4p and Dixons Retail Group dropped 0.2p to 9.6p.
Fashion brand Mulberry saw its shares rise 5%, up 65p to 1475p, after it announced it had poached 46-year-old Bruno Guillon from French luxury brand Hermes to be its new chief executive.
He will take over from current executive chairman Godfrey Davis, who has overseen a period of spectacular growth for the UK firm.
But holidays firm Travelzest, which owns brands such as Best of Morocco and Captivating Cuba, fell 25% or 2.1p to 6.3p after it rejected a takeover approach from Canadian firm Red Label.
It also announced plans to sell a host of under-performing UK assets in a bid to focus on its more successful operations in Canada.
The biggest Footsie risers were Lloyds up 1.3p at 24.9p, Evraz ahead 10.3p at 375.3p, CRH up 30p at 1204p, and Wolseley ahead 43p at 2052p.
The biggest Footsie fallers were Essar Energy down 6.1p at 171.9p, ITV off 1.9p at 62.3p, Vedanta Resources down 28p at 1042p, and Amec 22p lower at 871p.