FTSE falls below 5,000

21 May 2010 0:00 am | Updated: 21 May 2010 12:24 pm | By Chris Salih

At 12.53, the blue chip index stood at 4971.57, a fall of 2 per cent from its opening price. By 3pm it had rallied slightly to 5,036 and closed slightly higher at 5062, down 0.2 per cent for the day.

Other markets across Europe have also posted losses with the German Dax down 1.6 per cent and the France’s Cac 40 down 1.1 per cent. There were also falls in Asian stocks overnight, while the US Dow Jones closed 3.6 per cent lower.

Hargreaves Lansdown market analyst Richard Hunter says weak senitment was compounded by Germany’s decision this week to restrict short-selling.

He says: “It led to concerns that we may see the collapse of a German bank or even a country. It is also showed some of the disunity currently in Europe with regards the proposals to contribute to the rescue package for the eurozone. The US is also beginning to get concerned that this may stall a global recovery.

“There was a lot of selling yesterday as investors headed for the hills and the early signs are that the US may open a little weaker today.”

Earlier today, Germany’s lower house of parliament approved the country’s 148bn euros contribution to the 750bn package for the eurozone. The upper house is expected to follow suit. An EU taskforce is expected to meet in Brussels later today to discuss how to ensure there is no repeat of the economic crisis in Greece.

Hunter says: “The concerns are not about whether the money is going to be made available, but rather how much doubt this will throw the eurozone into as there clearly is a difference of opinion within the euro member countries. It just sees the debt switch from A to B and the fact of the matter is that each of the individual countries needs to get their own fiscal house in order and there are concerns they will not be able to do that.”

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