United kingdom Daily news: FTSE LIVE: Spain relief subsides as worries mount about Italy and Cyprus

FTSE LIVE: Spain relief subsides as worries mount about Italy and Cyprus

By This Is Money Reporters

PUBLISHED: 02:27 EST, 12 June 2012 | UPDATED: 06:17 EST, 12 June 2012

12.10: London shares remain in the black but are struggling to build much momentum - the Footsie is up 22.9 points at 5,455.3 shortly after midday.

â€˜Fragile is perhaps the most appropriate word to describe sentiment at present,' said Ben Critchley, sales trader at IG Index.

'Yesterdayâ€™s trading showed that even â‚¬100billion is not sufficient to rebuild battered investor confidence, and Spanish and Italian yields [government borrowing rates] are creeping higher once again.

Cyprus worry: The tiny county, which is heavily exposed to Greece, hinted that it may need a bailout too

'A warning from Fitch this morning about Spainâ€™s deficit reduction efforts reminded investors that the underlying problems in the Iberian economy are far from being fixed, with the ratings agency saying that Madrid will miss its deficit targets for 2012 and 2013.

'Italy of course is never far away when we consider Spainâ€™s situation; add Greece into that mix and you have a dangerous combination.'

Fiona Cinotta, market analyst at City Index, said: 'There is a real need for a line to be drawn under the entire messy eurozone affair, and investors are seeing straight through temporary patch-up solutions much more quickly today than perhaps a year ago.

'Any form of market recovery is unlikely to happen until a long term fiscal solution is implemented and this will likely be born out of a greater fiscal union within the eurozone and its banks.

'The concept of euro bonds is something the markets want to see yet despite the ambition, the prospects of delivering this to many investors remains some way in the distance, for now.'

9.50:

The FTSE 100 is trading just 4.9 points higher at 5,437.3 as investors size up the latest eurozone developments.

After an initial burst of relief, traders remain lukewarm about the moves to shore up Spain's banks - particularly the prospect of the eurozone effectively becoming 'preferred creditor' to the nation above private investors.

Markets were lower overnight in Asia and the U.S. as eurozone debt fears also turned from Spain to Italy.

David Buik of BGC Partners said of the Spain bank plan: 'This bailout was always going to be a "pup", as there was too little meat on the bone as to the terms and how this bailout would affect growth in Spain.

'Yesterdayâ€™s initial market surge was a classic relief or bear-squeeze rally! It had no legs behind it at all.Â

'Sundayâ€™s Greek election is likely to be inconclusive and even though the bureaucrats and politicians say that Spain has made greater efforts to introduce austerity packages than Greece, one is entitled to have some sympathy for Ireland, who after their banking bailout, looked to have been kippered up by the EU, as Spainâ€™s loan terms look far less draconian.

'As we understand it Spain will only have to pay interest at between 3-4 per cent. Expect Ireland to seek to renegotiate terms.'

The eurozone crisis kept banks under pressure in London, with Barclays off 4.85p to 185.7p, Royal Bank of Scotland 4.5p low er at 216.9p and Lloyds Banking Group off 0.35p to 28.1p.

In corporate news, shares in designer label Ted Baker were down 2 per cent despite a 16.2 per cent rise in store sales as it stepped up its international expansion.

The stock, which has enjoyed a decent run in recent weeks, was down 20p to 890p as analysts noted cautious comments from founder and chief executive Ray Kelvin about trading prospects.

Spirit Pub Company was also lower, down 1.75p to 46p, as the Chef Brewer owner reported a slowdown in sales growth in its managed pubs estate, alongside an 8 per cent drop in like-for-like net income for its leasehold pubs.

8.30: The FTSE 100 has opened down 0.4 points at 5,432 as initial euphoria over a rescue package for debt-stricken Spanish banks fades.

A relief rally ran out of steam yesterday, and after peaking at 5,536.27 the blue chip index ended down 2.71 points at 5,432.37. Wall Street and Tokyo also fell overnight.

After weeks of nervousness, eurozone finance ministers agreed over the weekend to lend Spain up to â‚¬100billion (Â£80billion) to shore up its teetering banks.

Euro crisis: Traders remain wary after Spain bank deal as spotlight turns on Italy and Cyprus

But there are fears this deal could exacerbate the country's rising public debt. The spotlight has also now turned on debt-laden euro member Italy, and on Cyprus which has hinted that it may need a bailout by the end of the month.

Back in London, heavyweight energy companies could be hurt by a tumble in oil prices after top exporter Saudi Arabia said OPEC may need to raise oil output targets at its Thursday meeting in Vienna.

There was mixed news for the real estate and construction sectors, with the RICS survey showing house prices falling at a slower pace in May, although the outlook worsened as the eurozone crisis intensified and sales took a temporary hit from the expiry of a tax holiday. Â Â Â

Today's diary features industrial output data for April as well as speeches from several policy makers including IMF chief Christine Lagarde.

Stocks to watch today include:

London Stock Exchange: The chief financial officer o f the London Stock Exchange Group, Doug Webb, is standing down and will be replaced by David Warren, who formerly held the same post at Nasdaq OMX. Â Â Â

BP: The oil major's 405,000-barrel-per-day refinery in Whiting, Indiana, returned a 75,000 bpd crude distillation unit to service over the weekend, said sources familiar with refinery operations. Â Â Â

GlaxoSmithKline: GSK's unit Stiefel buys eczema drug Toctino from BasileaÂ for an initial payment of Â£146million.

Royal Bank of Scotland: The bank has warned more than 48,000 staff that if they want to retire with a full pension at 60 they will have to start making contributions, The Guardian reports.Â Â Â
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