Tesco shines but FTSE breaks below 5,000 points on Greek bailout fears
Eurozone worries were driving markets lower this morning as news broke that the bloc’s Finance Ministers had delayed a decision as to whether to release the next tranche of bailout funds to Greece. The signing off of the next €8bn of funds was previously anticipated to occur during a meeting on the 13thOctober, however this has now been cancelled. Adding to woes were comments from the BNP Parisbas CEO who, speaking at a Bank of America Merrill Lynch conference in London, stated that numerous EU banks need to be recapitalised.
The Franco-Belgian bank Dexia’s 37% loss in opening trade this morning was the latest manifestation of the European troubles. It follows a 10% decline on Monday after Moody’s placed the group on review for a possible downgrade. The bank, part owned by the French and Belgian governments after its bailout in 2008, is rumoured to be on the brink of collapse or break up over its peripheral debt exposure. In a joint statement issued by the French and German finance ministers, it was pledged that Dexia’s financing would be guaranteed in a bid to calm account holders and creditors. The shares recovered slightly to finish the day down closer to 20%.
Markets took a further negative turn as US Federal Reserve chairman Ben Bernanke addressed Congress’s Joint Economic Committee, warning of a weak domestic labour market. The FTSE 100, which had comfortably broken through the 5,000 point barrier earlier in the day, reach a day low of 4870 although gained some ground to finish the day down 2.6% at 4944 points.
Tesco was a stand-out performer on the day, its 2.6% gain attributable to an upgrade from neutral to buy by analysts at UBS. The 510p price target was justified by perceived improved trading conditions through 2012. Sentiment was also boosted by comment from the investment bank Espirito Santo, which highlighted the benefits of the online expansion of Tesco’s F&F clothing range in Europe. Burberry and Glencore were the only notable gainers on an otherwise disappointing day for remaining FTSE 100 constituents.
This was posted in Bdaily's Members' News section by John Dance .
Enjoy the read? Get Bdaily delivered.
Sign up to receive our popular morning National email for free.