Italian vote deadlock worries investors
LONDON
STOCK markets plunged across Europe after inconclusive Italian election results reignited fears over eurozone instability.
The FTSE-100 index closed 1.3% lower after an 84.93 point fall to 6270.44, while Italy’s MIB plunged nearly 5% and markets in France and Germany fell by more than 2% as the deadlock is expected to make it harder for Italy to pass the reforms it needs to reduce its debts.
Wall Street shrugged off the eurozone worries as the Dow Jones Industrial Average rose more than 50 points in early trade after US new-home sales saw the biggest jump in nearly two decades last month and as US Federal Reserve chairman Ben Bernanke reinforced his commitment to the Fed’s bondbuying programme.
This failed to ease declines on the London market as investor sentiment was also hit by weak manufacturing figures from China and the prospect of spending cuts in America ahead of a deal to trim the budget deficit.
Yesterday’s sharp decline for the FTSE comes after the top flight approached a fresh fiveyear high on Monday, despite the fall-out from the decision of ratings agency Moody’s to strip the UK of its AAA status.
The pound, which received a battering after the ratings blow, fell further despite euro weakness after Bank of England deputy governor Paul Tucker said he was open to more monetary easing and that the pound may need to fall further.
Sterling fell to $1.51 and just under €1.16 as he also revealed to MPs that policymakers had discussed the possibility of negative interest rates.
Banks were hardest hit in the market sell-off, with Barclays down 14.7p at 297p, Royal Bank of Scotland off 15.3p at 339.5p and Lloyds Banking Group 1.8p lower at 53.1p.
They were joined by leisure group Whitbread after it reported slower sales growth in the 11 weeks to February 14. The figure of 2.7% compared with 3.3% in the previous quarter but the Premier Inn, Costa and Beefeater owner said some of the slowdown reflected the wintry conditions last month.
Shares in the top flight stock fell 94p to 2469p.
In the FTSE 250 Index, shares in Sports Direct International were 5% lower after it emerged that Mike Ashley has sold a 4% stake worth £100 million.
The discounted price of £4 raised eyebrows, while there are fears Mr Ashley was calling the top of the share price after a rally that has seen the stock jump 46% over the past year.
The disposal of 25 million shares will still leave Mr Ashley with a 64% stake. Sports Direct shares were 21.5p lower at 409p.
NEW YORK
US stocks rebounded from their worst decline since November after Federal Reserve chairman Ben Bernanke defended the Fed’s bond-buying stimulus and sales of new homes hit a fourand-a-half-year high.
The SP 500 had climbed 6% for the year and came within reach of all-time highs before the minutes from the Fed’s January meeting were released last Wednesday. Since then, the benchmark index has lost 1%.
Mr Bernanke, in testimony yesterday before the Senate Banking Committee, strongly defended the Fed’s bond-buying stimulus programmeandquieted rumblings that the central bank may pull back from its stimula- tive policy measures, which were sparked by the release of the Fed minutes last week.
His comments helped ease investors’ concerns about a stalemate in Italy after a general election failed to give any party a parliamentary majority, posing the threat of prolonged instability and financial crisis in Europe, and sending the SP 500 to its worst decline since November 7 in Monday’s session.
Gains in homebuilders and other consumer stocks, following strong economic data, lifted the SP 500, and a 5.7% jump in Home Depot to $67.56 boosted the Dow industrials, which gained 115.96 points, or 0.84%, to 13,900.13. The PHLX housing sector index rose 3.2%. The SP 500 rose 0.61% and the Nasdaq Composite was up 0.43%.