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FTSE slides as doubts cast over dual bailout fund

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.

The euro fell as sterling added 0.5% to 1.1697 against the currency.

Gold rose to $1,734.80/oz in afternoon trade amid eurozone uncertainty.

More company news

On the FTSE 250 Micro Focus (MCRO.L) rose to the top adding 29p, or 7.6%, to 410.5p as its interim statement showed

Construction and solar panel firm Carillion (CLLN.L) added 9.5p, or 3.1%, to 315p following the release of its trading statement for the fourth quarter of 2011 with profits before tax and earnings per share expected to grow in line with expectations and over £30 billion in contracts in the pipeline.

Vodafone (VOD.L) was the only faller among the Citywire Top Stocks as it lost 0.7p, or 0.4%, to 174p. The fall followed news that a UK parliamentary committee may rule that HMRC should not have waived the company’s £7 billion tax bill.

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