World markets down on Greek instability

World markets suffered heavy losses today as Greek party leaders struggled to reach an agreement to form a coalition government nine days after an election was held.

Wall Street’s Dow Jones Industrial Average was down 0.9% after Greek President Karolos Papoulias failed to broker a deal late last night, a week after national elections produced a deadlock with no party winning enough seats to form a government.

The FTSE 100 Index was 120 points lower at 5455 after the anti-bailout party Radical Left Coalition party, known as Syriza, which came in a surprising second in the May 6 vote, said it would refuse to join a coalition government.

The uncertainty in Greece, which analysts said could lead to Greece leaving the single currency, hit financial stocks as banks and insurers.

Investment firm Man Group continued to tumble, falling 6% or 5p to 82.8p to the bottom of the FTSE 100 Index. The company has seen its shares slide 66% in the last 12 months.

Royal Bank of Scotland was not far behind, dropping 1p to 21.9p, while Barclays fell 6% or 11.6p to 191.2p and Lloyds Banking Group shed 1.8p at 29.3p.

The mining sector suffered heavy losses as Greek fears were compounded by concerns over China’s growth, after reports that the country had cut its reserve requirement ratio – the amount of cash banks are required to hold as reserves.

Xstrata slipped 49.5p to 1002p, Eurasian Natural Resources dropped 24.5p at 492p and Vedanta Resources fell 36p to 1053p.

Severn Trent was at the top of a shortened risers board, boosted by its safe-haven investment status. Shares were 5p ahead at 1698p.

Outside the top flight, shares in Mecca Bingo owner Rank rose 5% after it unveiled a proposed £205 million acquisition of rival Gala Coral.

The proposed takeover of Gala’s 23 casinos will give Rank’s Grosvenor division 58 UK sites – taking it above Malaysian firm Genting, which has 45 locations including Crockfords casino in London’s Mayfair. Shares were 5.5p ahead at 122.2p.

Thomas Cook’s warning that it is in danger of collapse if shareholders fail to back two planned disposals wiped 11% from its share price.

Its warning came as one analyst said the recent poor performance of its shares, which have slumped 90% over the past 18 months, showed the City believes there is a one in three chance of it failing.

The tour operator posted documents to shareholders over the weekend in which it explained the financial importance of the planned sale and leaseback of part of its aircraft fleet and the disposal of five Spanish hotels. Shares fell 2.3p to 18.9p.