Europe’s debt woes hit FTSE; banks, commods fall

Monday, 15 November 2010 22:42 - - {{hitsCtrl.values.hits}}

LONDON, (Reuters) - Britain’s top shares fell on Monday, led by commodity and bank stocks, as concerns over Europe’s sovereign debt problems hit sentiment, while Invensys rose 4.5 percent on bid talk.

In an interview with the Daily Telegraph on Saturday, Invensys Chief Executive Ulf Henriksson said China Southern Rail (CSR) had the “possibility of acquiring Invensys” if the price was right.

Invensys said on Monday that it has not received an approach nor had any discussions regarding a possible offer for the company or about a strategic partner taking a minority stake.

By 0859 GMT, the FTSE 100 was down 33.64 points, or 0.6 percent, at 5,763.23, having closed 0.3 percent lower at 5,796.87 on Friday.

Banks were among the heaviest fallers, under pressure on euro zone debt concerns, with HSBC and Barclays down 0.6 and 1.2 percent respectively.

Ireland is considering asking for money for its banks from the European Union’s emergency fund in a bid to fend off the threat of a bailout for the state, the Irish Independent reported on Monday, quoting an unnamed source.

Meanwhile, pressure continues to mount on Portugal, the next high-deficit euro zone country in the market’s crosshairs.

“The fear is that unless the problem is solved early contagion will be an issue for global financial markets,” Henk Potts, market strategist at Barclays Wealth said.

“Hopefully the EU have learned their lessons from what happened in Greece and will come up with a proactive package but you can understand why investors are nervous.”

COMMODITIES FALL

Miners fell along with metal prices, which were dented by strong Chinese inflation data last week, and with risk appetite waning on Europe’s debt worries.

BHP Billiton shed 1.1 percent after the global miner scrapped its $39 billion bid for Canada’s Potash Corp, the world’s biggest deal this year, and bowed to calls from investors to return cash with a $4.2 billion share buyback.

Lonmin, however, rose 1 percent after the world’s third-biggest platinum producer, restarted dividends and posted a swing to full-year profit, which prompted JP Morgan to upgrade its rating on the firm.

Energy stocks were generally lower, although Tullow Oil added 0.4 percent after Anadarko Petroleum Corp said its Mercury-1 oil exploration well located in the waters off the Sierra Leone coast, in which Tullow has a 10 percent stake, encountered oil.

And on the FTSE 250, Premier Oil was up 5 percent with traders citing an Observer newspaper report of a bid approach from Korea’s KNOC.

British outsourcing firm Serco added 2.2 percent after a bullish update, with peer Capita rising 0.9 percent in tandem.

Rolls-Royce was the top FTSE 100 faller, down 1.6 percent as Qantas’s six Airbus A380s remained grounded after the failure of a Trent 900 caused one of its aircraft to make an emergency landing on Nov 4.

A Qantas flight bound for Buenos Aires returned to Sydney on Monday due to technical problems.