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FTSE slides on fears over Spain's banks, Greek politics
Britain’s FTSE 100 slides to a four-month low amid concerns over the cost of efforts to rescue Spain’s banks and a political vacuum in Greece.
Britain’s FTSE 100 slid to a four-month low on Wednesday, amid mounting concerns over the cost of efforts to rescue Spain’s banks and a political vacuum in Greece that has yet again raised the prospect of a disorderly default by the nation.
The UK index of blue-chip shares faded 0.44%, or 25 points, to 5,531 – its lowest since late December – and the All Share index dropped 0.49%, or 14 points, to 2,870. See the FTSE’s performance and the index’s top winners and losers.
Spanish bank bailout
Spanish banks were among the biggest fallers on the FTSEurofirst 300 of top European shares, with Caixabank giving up 6.7% to €2.4 (£1.9) and BBVA shedding 4.7% to €5.
Reuters quoted financial sources as saying earlier that the Spanish government would demand banks set aside €35 billion euros against loans to its moribund building sector, in addition to €54 billion they are already provisioning.
Spain is also set to stage an estimated €10 billion bailout of its most exposed bank, Bankia.
Analysts at Royal Bank of Scotland estimated that the sector faces a €68 billion capital shortfall over the next three years on increasing bad loan provisions and regulatory capital. In a note, they added that capital needs could exceed €98 billion in a deeper recession scenario, with the rescue of Bankia being ‘just the start’.
‘We think public funds alone will not be enough to support all Spanish banks, without severe cost to the Spanish economy,’ they warned.
Spain's IBEX 35 sagged 2.8% to 6,812, a fresh post-financial crisis low, as the yield – or implied interest rate – on benchmark 10-year Spanish government bonds shot up 22 basis points to 6.08%.
Greece coalition talks
Meanwhile, Greece moved closer to a second snap election, as coalition talks foundered and the leader of the country’s conservative New Democracy party condemned calls by the head of the Lefist Syriza party to reject an international bailout.
Most stock markets elsewhere in Europe also fell, as worries over Greece also weighed: France's CAC 40 index was 0.2% lower at 3,119, and the FTSEurofirst 300 index of top European shares inched down 0.3% to 1,015.
However, Germany’s DAX index bucked the trend, adding 0.47% to 6,475.
Weir Group (WEIR.L) was among the biggest fallers on the FTSE 100, giving up 82p to £15.10, following poor order figures from its oil and gas division.
Financials also featured prominently on the loser board, tracking losses by their rivals on the continent. Lloyds (LLOY.L) gave up 1.2p to 31.3p, and Royal Bank of Scotland (RBS.L) slipped 0.8p to 22.8p.
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