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FTSE slides as doubts cast over dual bailout fund

(Update) UK index falls back to 5,550 on fears over dual bailout fund, and Vodafone falls 0.4% ahead of a ruling on its £7 billion tax bill.

 
FTSE slides as doubts cast over dual bailout fund

(Update) The FTSE erased early gains as German officials poured cold water on the prospect of a dual eurozone bailout fund.

Overview

The benchmark UK index of blue-chip shares lost 0.3%, or 19 points, to 5,550 and the Mid-250 index took on 0.24%, or 25 points, to 10,287.

Markets retreated as rumours circulated that German officials will oppose a dual eurozone bailout fund, with the European Financial Stability Fund (EFSF) and the European Stability Mechanism (ESM) both providing a backstop for eurozone economies.

Randgold Resources (RRS.L) rose to the top of the FTSE 100, adding 270p, or 4%, to £69.80 after analysts at Investec placed a ‘buy’ on the stock despite its reduced production forecasts.   

Insurance group Resolution (RSL.L) took on 9.2p, or 3.57%, to 266p as Deutsche Bank raised its rating on the stock from ‘hold’ to ‘buy’.

See the FTSE’s performance and the index’s top winners and losers

Among Citywire Top Stocks Burberry (BRBY.L) gained 28p, or 2.2%, to £12.95 as analysts at Liberum raised their ‘buy’ target price to £15.35. BG Group (BG.L), Weir Group (WEIR.L), Unilever (ULVR.L) and Devro (DVO.L) all rose more than 1%. Vodafone (VOD.L) was the only Top Stock to post a fall.

More stock news at the end of this report

Doubts cast on dual bailout fund

Michael Hewson, analyst at CMC Markets, wasn’t suprised by the growing doubt. ‘It’s all about expectation management on the part of unnamed German officials. Earlier there was talk of a dual bailout fund.

‘A German spokesperson has now said it is unlikely to happen: quelle surprise! Two bailout funds does seem somewhat unlikely given that policymakers can’t even fund the one they already have, namely the EFSF, properly,' he said.

The details of the proposals for strengthening the fiscal union between eurozone countries will be presented to Herman van Rompuy, president of the European Council, in a letter tomorrow ahead of the meeting.

Other stock markets in Europe also lost ground: Germany’s DAX index dropped 0.66% to 5,989, France's CAC 40 index fell 0.3% to 3,170, and the FTSEurofirst 300 index of top European shares shed 0.48% to 984.

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3 comments so far. Why not have your say?

Christopher

Dec 07, 2011 at 13:20

There seems to be a bit of hypocrisy in the French complaints about S&P. If they think S&P are so cavalier in threatening France's AAA, why do they place any value on the AAA which was given them by S&P in the first place?

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an elder one

Dec 07, 2011 at 16:51

For the French its not so much a matter of economics, as gallic pride; they feel it makes them look second rate I reckon.

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Bob saxton

Dec 07, 2011 at 18:37

I bought the AAA bonds in the Icelanic Glitnir Bank. Once bitten twice shy.

Bob the electrician

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