European markets fall as €750bn bailout deal loses feelgood factor

Tuesday, May 11, 2010
By Paul Martin

Nic Fildes
May 11, 2010

European markets opened lower this morning as the feelgood factor of the eurozone stability measures evaporated.

The FTSE 100 quickly lost 1.7 per cent, although the rate of decline eased as trading settled. Within 15 minutes of opening it was 75.40 points lower at 5312.09, a fall of 1.4 per cent.

The prospect of further drawn-out negotiations over the formation of a new government triggered fears of a reversal of yesterday’s 5.2 per cent gain on the FTSE 100.

The market slide was matched by all the major indices across Europe. Germany’s DAX opened 1.6 per cent lower while the CAC 40 in Paris shed 2.1 per cent and Spain’s IBEC fell 2.8 per cent.

Miners bore the brunt of the sell-off in London, with Xstrata the leading faller on the FTSE 100 with 44p slide to 1048p, a 4 per cent decline. RBS fell 2.9 per cent, or 1.5p, to 50.25p after yesterday’s announcement that it would cut 2,600 jobs.

Asian markets fell overnight as euphoria surrounding Europe’s €750 billion (£650 billion) rescue package wore off. Japan’s Nikkei index fell 1.2 per cent, or 126.22 points, to 10,404.48 amid concerns over the details of the rescue fund to prevent the Greek debt crisis spreading across Europe. There is doubt whether the package will be enough to allow smaller eurozone countries to ease their debts substantially.

Moody’s, the rating agency, added to those doubts last night by saying that it was considering both downgrading Greece by another notch and cutting Portugal’s rating.

Chinese inflation figures hit an 18-month high, adding to the unease.

The Dow Jones industrial average gained 404.71 points to 10,785.14 last night, its largest daily rise in more than a year.

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