Britain’s FTSE 100 fell below the 5,500 mark and eurozone government bond markets showed fresh stresses on Monday, amid fears that an EU summit last week will fail to stem the monetary union’s debt crisis.
The UK index of blue-chip shares shed 0.56%, or 31 points, to 5,498 and the All Share index was off 0.57%, or 16 points, to 2,824. See the FTSE’s performance and the index’s top winners and losers
Talks of ‘little practical value’
During the summit in Brussels, EU nations committed to stricter budget rules and more co-ordination that would likely be adopted by 26 member states, but the use of a veto by Britain will make implementation of such moves more difficult than hoped.
The summit also agreed up to €200 billion (£171 billion) in bilateral loans to the International Monetary Fund (IMF) to help tackle the crisis.
‘In our view, the latest “final and comprehensive” resolution of the eurozone crisis... manages the unique trick of being simultaneously one of the most important ever agreements binding together European countries and of little practical value in fighting existential fire consuming the eurozone,’ wrote Viktor Shvets, strategist at Samsung Securities.
Mothercare bid speculation
Eurasian Natural Resources Corp (ENRC.L) was the top faller, dropping 28p to 657p, as the miner probed allegations of corruption at a Kazakh iron ore subsidiary.
Financials were also among the biggest losers, on fears over Europe. Lloyds (LLOY.L), another Citywire Top Stock, slid 0.5p to 26.1p and Aviva (AV.L) slipped 6p to 315p. Royal Bank of Scotland (RBS.L) shed 0.5p top 21.5p as a report said poor management decisions and flawed regulation dragged the bank to the brink of collapse three years ago.
On the FTSE 250, Mothercare (MTC.L) surged 12p to 172p following reports that private equity group Cinven is planning a break-up bid for the ailing baby goods chain.
Sanjay Vidyarthi, analyst at Espirito Santo Investment Bank, said speculation over a private equity bid was ‘inevitable’ in light of the recent share price decline, the vulnerability of the company in the absence of a chief executive, and the attractions of the brand and the international franchise business.
Elsewhere, Gulfsands Petroleum (GPX.L) faded 14p to 172p, after the group halted its operations in Syria following the latest EU sanctions on the country. And CPP (CPPG.L) tumbled 30p to 108p after the credit card insurer issued a profit warning as it awaits the outcome of an investigation by the Financial Services Authority watchdog.
Stock markets elsewhere in Europe also suffered, as the borrowing costs of Italy and Spain – the eurozone’s third and fourth biggest economies – renewed their recent lurch upwards. Germany’s DAX index was 1.12% lower at 5,920, France's CAC 40 index eased 1.07% to 3,138, and the FTSEurofirst 300 index of top European shares slid 0.78% to 978.
Strategists at RBS said that in the wake of the summit, they remained bearish on the monetary union.
‘The EU heads of states’ announcement is nowhere near a fiscal union,’ they wrote in a research note. 'It is largely the confirmation of measures which had already been announced. Small progress on rule enforcement has been made, offset by the UK veto which will lead to a weaker legal framework.’
Sterling weakened 0.46% versus the dollar to $1.558 but hardened 0.11% against the euro to €1.171.