Equity markets were around 1% weaker today, the FTSE 100 once again weighed down by financial stocks as concerns mounted over a Greek exit. A report that customers had withdrawn over €1 billion from the part nationalised Spanish Bankia also aided the flows out of risk assets as contagion fears increased. Shares in the Bankia, which was formed in 2010 following the merger of seven troubled savings banks, fell 30% at one stage although recovered after the Spanish government said there had been no exit of deposits.
From a macroeconomic point of view, Spain was also in the spotlight as it sold €2.5 billion in short dated bonds. The auction was successful in that the government raised its target amount, but the other key metric indicated a heavy price was being demanded by investors, pushing up the cost of funding for the country.
International Consolidated Airlines group was the worst performer on the FTSE 100, falling 6% as investors grew cautious over the aforementioned Bankia’s significant shareholding in the group. The news today increased the likelihood that the troubled lender may be a forced seller of shares in a move that would likely result in further share price weakness.
The FTSE 100 finished down 1.2%, losing 67 points to 5338 although the picture had looked even worse around midday with the index close to a 2% loss. Gold was higher by around 2%, top rated sovereign debt remained near historic lows, and Brent crude was lower at $108.5 per barrel.