FTSE plummets on Korea tension and Spanish bank bailout

The FTSE 100 hit a new low for 2010 this morning as early trading put the UK’s top index substantially below 5,000, sliding as much as three per cent as markets across the world fell on new fears of war between North and South Korea and the reports that the Spanish Government has had to bailout a local bank.

Rob Hull
shareprices.com - Tuesday, May 25, 2010

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Lloyds Banking Group is the top faller this morning on European bank concerns

The FTSE 100 hasn’t fallen below the 5,000 ceiling for eight months, apart from an extremely brief spell in recent days. But the reports that North Korean leader Kim Jong Il has put his military on combat alert has hammered indices across the globe.

Tensions between North and South Korean heightened yesterday after South Korea pointed the finger at Kim Jong Il’s regime for the sinking of one of its warships back in March in which 46 sailors died.

Shortly after the accusation, Jong Il upped his military position to red alert.

The reports forced a 1.2 per cent fall for the US Dow Jones last night and stocks in Asia also followed suit with Japan’s Nikkei losing 3.06 per cent, the South Korean benchmark index sliding 2.75 per cent and the Hang Seng index in Hong Kong dropping 3.13 per cent.

And stock markets in Australia, Malaysia, China, India and Singapore all feel between one and two per cent.

A Spanish bank bailout only hampered global indices more with investors seeing very little light for European banks and remained highly cautious.

The FTSE 100 sank by 2.7 per cent within minutes of the market opening this morning and has continued to fall with losses in the region of three per cent as the index shed 149 points.

The bank of Spain said on Saturday that it had taken over the Spanish Savings bank CajaSur after a merger between the bank and another small lender fell through at the last minute.

Despite CajaSur being fairly small and only accounting for 0.6 per cent of assets in Spain’s financial system, investors feared these were early signs of the problem materialising on a wider scale with eurozone countries struggling to reduce their deficits.

As a direct result, banking stock on the FTSE 100 has been battered.

Lloyds Banking Group (LON:LLOY) tops the fallers with a loss of almost seven per cent with RBS (LON:RBS) and Barclays (LON:BARC) following closely behind with losses of over five per cent.

But it isn’t just the banking sector that’s down this morning – almost every blue-chip is currently in the red this morning before 09:00BST.

The mining sector is playing its part in dragging the index down with Kazakhmys (LON:KAZ), Xstrata (LON:XTA), Antofagasta (LON:ANTO) and Vedanta Resources (LON:VED) all over four per cent down.

But it’s London-based miner Eurasian Natural Resources (LON:ENRC), which has operations in China and Russia, which tops the mining sector fallers with losses in excess of six per cent.

Severn Trent (LON:SVT), the parent company of Severn Trent Water, is the only stock minimally nudging into the green after it announced yesterday the group’s new £60m HQ in Coventry – which will be ultra-energy efficient – is months from completion.

 

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