Billions Wiped Off London Stock Exchange Amid Euro Crisis Fears

PA  |  Posted: 08/05/2012 19:29 Updated: 09/05/2012 09:49   PA

Ftse Trader
It was a difficult day for traders at the London Stock Exchange

Nervous traders wiped £26 billion from the value of London's leading shares index as eurozone fears returned to haunt world markets on Tuesday,

The latest sell-off, which followed a similar rout on Friday, left the FTSE 100 Index down 1.8% at its lowest closing point so far in 2012.

The turmoil was triggered after the leader of Greece's left-wing Syriza bloc said he will try to forge a coalition government that would tear up the austerity deal that underpins the country's €240bn (£190 bn) bail-out.

Alexis Tsipras' radical plans would likely see Greece default on its debts and be ejected from the single currency.

While it is far from certain that he will win enough support to form a government, another round of general elections next month now seems increasingly likely, casting more doubt on the future of Greece.

There were similar falls on other markets, with Germany's Dax down nearly 2%, France's Cac-40 nearly 3% lower and the Dow Jones Industrial Average in the United States more than 1% lower as the London market closed.

The euro was sold off on currency markets amid the worries over the future of the eurozone.

The pound now buys 1.24 euro - a three-and-a-half-year high against the single currency. This is good news for holidaymakers travelling to the continent but a blow to exporters to the currency bloc.

The fresh round of volatility on world markets came after elections in Greece over the weekend failed to lead to the formation of a coalition government. The Greek stock market closed at its lowest level since 1992.

Adding to the nerves, France's new president Francois Hollande has said he will look for alternatives to austerity, prompting fears of a rift between him and German chancellor Angela Merkel.

The political uncertainty has added to fears over the strength of the recovery in the eurozone, with several countries including Italy, Spain and Greece back in recession and fears mounting that the US economy is slowing.

Simon Furlong, a trader at Spreadex, said: "Investors are nervously waiting to find out what direction France's new president will take with regards to Germany.

"Athens is also in a bitter struggle to find a coalition government, with repeat general elections a distinct possibility.

"This period of uncertainty for Greece can only make matters worse. Greece needs a strong united government in order to pass measures to give the country some direction."

The FTSE 100 Index closed down 100.5 points at 5554.6.

Loading Slideshow...
  • Female protestors display the colors of various flags painted on their hands during a demonstration demanding the trial of former President Ali Abdullah Saleh in Sanaa, Yemen, Tuesday, May 8, 2012. (AP Photo/Hani Mohammed)

  • Actors, from left, Josh Brolin, Will Smith and Tommy Lee Jones arrive for the Japan premiere of their film " Men in Black III " in Tokyo, Tuesday, May 8, 2012. (AP Photo/Koji Sasahara)

  • Rea Inu Bake, from the Indian tribe Hunikui, takes part in a protest against slave labor outside the Chamber of Deputies in Brasilia, Brazil, Tuesday, May 8, 2012. Brazil's lower house is expected to vote on a constitutional amendment that would punish landholders found to be using slave labor. The proposed bill would allow the government to confiscate all property of those found to be using slave labor, among other penalties. (AP Photo/Eraldo Peres)

  • Ricky Crompton, from stunt bike team the Riderz, does a jump at St Bernard's Primary in Glasgow, during a photocall to remind drivers across Scotland to look out for children. Picture date: Tuesday May 8, 2012. As children get ready to start taking their bikes to school over the summer months, Mr Beaumont visited pupils at St Bernard's primary school in Glasgow to launch the "Give Me Cycle Space" safety campaign. See PA story SCOTLAND Cycling. Photo credit should read: Andrew Milligan/PA Wire

  • New Jersey Devils' Dainius Zubrus, front, of Lithuania, checks Philadelphia Flyers' Erik Gustafsson, of Sweden, into the boards during the first period of Game 5 of a second-round NHL hockey Stanley Cup playoff series, Tuesday, May 8, 2012, in Philadelphia. (AP Photo/Matt Slocum)

  • US Serena Williams falls during her tennis match of the Madrid Masters Russian Anastasia Pavlyuchenkova on May 8, 2012 at the Magic Box (Caja Magica) sports complex in Madrid. Williams won 6-2, 6-1. AFP PHOTO/JAVIER SORIANO (Photo credit should read JAVIER SORIANO/AFP/GettyImages)

  • A jetliner flies over the Mike and Arline Walter Pyramid as it approaches landing during the NORCECA volleybal tournament on May 08, 2012 in Long Beach, California. AFP PHOTO/JOE KLAMAR (Photo credit should read JOE KLAMAR/AFP/GettyImages)

  • The sun reflects off a residential building, early in Hong Kong on May 9, 2012. Financial pressure, career-driven mentalities and limited space are seen as key drivers of a fertility rate in Hong Kong that is one of the lowest in the world by some measures, with an average 1.04 births per woman according to the World Bank. AFP PHOTO / Antony DICKSON (Photo credit should read ANTONY DICKSON/AFP/GettyImages)

  • A picture taken on May 8, 2012 shows a detail of the installation entitled Photo-souvenir 'Excentrique(s), travail in situ' by French artist Daniel Buren during the Monumenta 2012 event at the Grand Palais in Paris.The event runs until June 21. AFP PHOTO FRANCOIS GUILLOT (Photo credit should read FRANCOIS GUILLOT/AFP/GettyImages)

FOLLOW UK

Filed by David Hobbs  |