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Mining and financial shares lead market lower as FTSE loses 2%

Miners and financial shares are leading London shares lower as the growing Eurozone crisis sends investors scurrying away from risk.

The FTSE 100 is down more than 2% – off 119.26 points at 5095.39 having fallen as low as 5071, but it is at least outperforming many European markets, with France’s Cac down nearly 5% on concerns about the exposure of the country’s banks to Greek debt and a possible ratings downgrade by Moody’s.

The market’s prime concern is what seems like an inevitable Greek default. with Germany apparently ever more reluctant to keep bailing the country out. News of the sudden resignation on Friday of European Central Bank board member Juergen Stark over a conflict over the bank’s bond buying programme has heightened the disputes within Europe about how to tackle the crisis. Simon Denham at Capital Spreads said:

We can expect a downgrade to French banks from Moody’s this week, the credit ratings agency that’s had them on review for the last three months. Their banking sector is one of the most exposed to Greek debt and when you have rhetoric changing from not “if” the Greeks default to “when” then investors are going to push the sell button and push it hard.

The sell off this morning has brought the FTSE down to 5100 at the time of writing just above its lows. Key near term support is at 5050 which looks dangerously like being tested; meanwhile to the upside resistance is rather further away, expected at 5200/85 and 5325.

The Greek crisis is part of a wider concern about a global economic slowdown, which has hit the mining sector. Antofagasta is down 55p at £12.34, while Eurasian Natural Resources Corporation has fallen 24p to 6521p.

Banks – while not as badly hit as their European counterparts – have also been undermined by the long awaited Vickers report on ringfencing retail and investment banking.

Barclays is down 4.1p at 139.9p, Royal Bank of Scotland has fallen 0.43p to 21.07p and Lloyds Banking Group is 0.58p lower at 30.46p.

Insurers are under the cosh as the market plunges and hits the value of their equity holdings, with Prudential down 19.5p at 557p and Aviva down 9.1p at 293.6p © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds