Britain’s FTSE 100 held fast at around its opening level on Friday morning, bucking a wider downward trend in Europe where Cyprus was racing to raise money to avert financial collapse.

London shares were little moved, with the FTSE 100 at 6388, but European markets were all in the red, following the US down. Investors waited anxiously ahead of a vote in the Cypriot parliament on measures to find €5.8 billion to allow it to qualify for a further €10 billion in international aid.

Cyprus, led by President Anastasiade (pictured), is in a race against the clock as European Central Bank liquidity assistance will be shut off on Monday if a solution is not found, after initial plans to raid deposits were rejected, and a Plan B involving Russian help failed. Banks remain closed until Tuesday, while queues at cash points in Cyprus were reportedly growing longer as desperation grows in the small island economy.

Current plans, according to press reports, include a bank restructuring and the use of pension funds to raise the money. Under such plans, deposits under the €100,000 bank guarantee would be protected.

Read more: Vigilante Draghi holds a gun to Cyprus' head

Adding to the concerns, Standard & Poor’s yesterday lowered its credit rating on Cyprus to CCC from CCC+ with a ‘negative’ outlook.

Analysts noted that the eurozone authorities were playing hardball with Cyprus, apparently willing to let the country leave the currency bloc.

‘Whilst I still think that imposing a levy on deposits within the guarantee scheme was wrong from a more European wide view, the fact is that many of these politicians may now be wishing that they had agreed the proposal that the troika put on the table at the weekend without any fuss,’ commented Gary Jenkins of Swordfish Research.

German vulnerability

A fall in the closely-watched index of German business sentiment, the Ifo index, added to the gloom after weak PMI reports across Europe yesterday. Carsten Brzeski of ING said that the report did not signal the start of a new downward trend, but did indicate that ‘relying too much on the German economy’s invulnerability could be dangerous’.

The FTSE Eurofirst index slipped 0.2% to 1,188, with slightly sharper losses on the markets of peripheral eurozone countries including Spain and Italy, down 0.4% and 0.5% respectively.

The euro, which had fallen in earlier trade, was slightly higher against the US dollar at $1.2915.Commodities were hit by the uncertainty, with the oil price continuing its decline. Brent crude oil futures dropped slightly to $107.39 per barrel.

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Many fund management houses and banks are telling investors to use the sell-off – which comes after strong gains in the first part of 2013 – to buy shares ahead of further rises. They point to the support from the European Central Bank and US Federal Reserve still underpinning markets.

Jeff Taylor, Head of European Equities at Invesco Perpetual, commented: ‘Our valuation-driven investment strategy remains unchanged by Cyprus: overreactions are there to be exploited’.

Similarly, Barclays Capital said in a report yesterday that any ‘correction’ in share prices would be contained with ‘extraordinary monetary stimulus, low risk of a cyclical downturn and attractive valuations relative to fixed income’ all providing support.

Astra and BP provide support

AstraZeneca (AZN.L) shares topped the FTSE 100, up 3.1% to 3,230p after analysts provided positive feedback from an investor day. ‘Management has gained incremental credibility regarding its plans to reshape R&D, and return AZN to growth,’ commented Morgan Stanley analysts. Natixis raised the shares to ‘neutral’ from ‘reduce’.

Marks & Spencer (MKS.L) was also higher after Societe Generale raised the retailer’s target price from 445p to 468p, keeping a ‘buy’ rating on the shares. The French bank, in a note entitled ‘cash machine in disguise’, said that recent bid speculation for the group ‘serves to highlight the strong underlying cash generation at M&S'.

BP (BP.L) rose by 2.2% to 459p after it announced an $8 billion share buy-back programme after the sale of TNK-BP.

Of the losers, Burberry (BRBY.L) shares dropped 4% to 1,330p after luxury retailer Mulberry (MUL.L) issued its second profit warning in six months. Mulberry shares dropped 16% to 1,038p.

Schroders (SDRt.L) was trading 1.9% lower at 1,631p after the asset management firm confirmed it was in bid talks to buy smaller City rival Cazenove.