Franco-German summit leaves investors anxious on euro debt crisis

FTSE: 5,331.60 (-26.03) Mid-250: 10,369.42 (-43.31) Small Cap: 3,004.35 (-13.26):WEAKER FINANCIAl stocks led British shares lower yesterday as the outcome of a Franco-German summit left investors still anxious about the euro zone debt crisis and concerned about the impact of plans for a new tax on the industry.

The FTSE 100 index closed down 26.03 points, or 0.5 per cent at 5,331.60, having at one stage dropped back below the psychologically important 5,300 level, snapping a four-session winning streak which saw the index jump around 7 per cent.

Weakness in banks was the biggest drag on the blue chips, with Barclays the worst off in the sector, down 4.2 per cent as concerns about their exposure to European debt continued after the meeting between French president Nicolas Sarkozy and German chancellor Angela Merkel.

Merkel and Sarkozy’s meeting on Tuesday failed to provide any hoped for moves to alleviate the euro zone debt crisis, such as creating a common euro zone bond, or increasing the size of the European Financial Stability Facility.

They did unveil a plan to explore a financial transaction tax (FTT), which had a further negative impact on sentiment for financial stocks. Interdealer brokers ICAP and Tullett Prebon were also among the top fallers on the FTSE 100 and FTSE 250 indexes respectively, down 3.7 per cent and 4.2 per cent, while mid cap spread-betting firm IG Group lost 3.7 per cent.

US blue chips, however, were 0.4 per cent higher by London’s close, buoyed by earnings reports from consumer bellwethers like Target. And strength in speciality metals and miners put a prop under the blue chips in London, with the sector supported by firmer copper prices on buying interest from Asia and as the dollar weakened.

Eurasian Natural Resources stood out, ahead 3.7 per cent after it posted first-half profit at the top end of expectations.

Gold also edged higher with safe-haven demand for bullion supported by uncertainty surrounding the euro zone debt situation.

Fresnillo was the top blue chip riser, up 5.6 per cent despite trading ex-dividend.

Overall ex-dividend factors knocked 9.48 points off the FTSE 100 index, with Anglo American, British American Tobacco, Hammerson, HSBC, Pearson, Prudential and Standard Life all also losing their payout attractions. – (Reuters)2