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UK Markets Set For Diamond Jubilee Hangover As FTSE Forecast To Plummet

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The FTSE 100 is forecast to drop after the long jubilee weekend | PA

Weak economic data on the continent highlighted the underlying problems in the eurozone today, setting up the London market for a Diamond Jubilee hangover.

The FTSE 100 Index, which has been closed due to the royal celebrations, is forecast to open 25 points lower when it re-opens tomorrow as fears over Europe persist.

The latest blow to confidence came today as a purchasing managers' survey showed the fourth consecutive month of declines in the eurozone private sector in May.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The eurozone is being buffeted by major headwinds, notably including increased fiscal tightening in many countries, squeezed consumer purchasing power and markedly rising unemployment."

Meanwhile, a private discussion among finance ministers and central bank governors from seven of the world's biggest economies will take place.

US officials have reportedly called for more action to strengthen the European banking system in the next two weeks before a meeting of the G20 in Los Cabos, Mexico.

The composite output index, from financial information services firm Markit, for services and manufacturing activity, sank to a 35-month low of 46.0 in May, from 46.7 in April. The 50.0 level indicates stable activity.

London's leading shares index finished last week on a low, losing more than 60 points after a bleak set of US jobs figures added to the uncertain global outlook.

World markets have suffered consistent falls in recent weeks amid fears that Greece will crash out of the eurozone and cause havoc in the currency bloc.

The debt-ridden nation, which is in its fifth year of recession, faces a crucial election later this month, which has been branded a referendum on whether it will stay in the eurozone and stomach more painful austerity measures.

Meanwhile, there are fears over the health of Spain's banking sector, after its fourth biggest lender, Bankia, said it needed a 19 billion euro (£15.2 billion) bail-out.

The most recent survey from the eurozone highlights the uphill struggle faced by the continent as political leaders attempt to roll out tough austerity packages at a time of weak growth.

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