Jitters in markets at prospect of a hung parliament
Published 07/05/2010 | 13:41
London's leading shares were hit by another sell-off today as the uncertainty of a hung Parliament and the Greek debt crisis sent investors rushing for the exits.
The FTSE 100 slumped more than 1% to its lowest level since February as trading screens turned red across the City.
The share fall followed a 2% slide for the pound against the dollar to 1.46 as investors fretted over delays in tackling the UK's huge deficit.
Just a handful of FTSE 100 stocks were in positive territory, with financial firms among the biggest fallers.
Part-nationalised Royal Bank of Scotland — which posted a £248m loss for the first three months of 2010 — shed more than 6%, followed by similar declines for Barclays and Lloyds Banking Group.
The election jitters added to already frayed nerves in stock markets which have been punished in recent sessions amid concerns over the Greek crisis.
Although austerity measures in return for a bailout to save the country from bankruptcy were voted through yesterday, worries over the Greek government's ability to deliver have widened into fears over the crisis spreading to Portugal, Spain and even the UK.
Wall Street's Dow Jones Industrial Average fell 3.2% overnight — slumping more than 1,000 points, or 9%, at one stage before recouping some of the losses.
Experts said that a weak coalition between Labour and the Liberal Dems could be the worst result for the UK's credit rating with the chances of a Tory overall majority fast vanishing.
ING Bank's James Knightley said: “There is going to be a lot of discussion between the parties over coming days, with the uncertainty likely to increase the risk of very volatile markets.
“The worst thing for markets would be a coalition government failing in a few months and a new election being called. This would intensify the pressure on ratings agencies to downgrade the UK's sovereign rating from AAA and make fiscal consolidation even more difficult.”