Overseas fears drive Footsie down into red

Market report Hannah Burley

European stocks sank into the red thanks to jitters over new bank capital rules in China and worries over Italy’s relations with Brussels.

The FTSE 100 was down over 1.1 per cent at 7,233.33.

This came as Chinese authorities cut the cash cushion required to be held by its banks for the fourth time this year, in a bid to support the national economy.

David Madden, market analyst at CMC Markets UK, said: “The move is viewed as a sign of weakness and dealers are fearful the Chinese economy is cooling at a quick rate and needs support. Beijing and Washington DC are still locked in a trade spat, and trimming the RRR could be construed as an indication that they are in it for the long haul.”

Traders were also cautious as the yield on Italian government debt hit its highest level in four years, signalling greater risk on investments.

“The Rome administration is set to be on a collision course with Brussels over the budget deficit. Investors are nervous about the prospect of an already very indebted nation potentially clocking up even more debt,” said Madden.

In UK stocks, Lloyds Banking Group fell 0.77p to 58.16p as the lender confirmed it was in talks with investment giant Schroders over the creation of a new wealth management venture.

Reach, the publisher of the Daily Record, rose 90p to 64.7p after reporting higher revenues on the back of its acquisition of the Express and Star titles, as well as OK! magazine.

Mitie was up 0.7p to 145p as the outsourcer struck a £14 million deal to acquire Vision Security Group from Compass Group.