London shares closed lower on Monday as investors grew nervous after Cyprus clinched a controversial 10-billion-euro bailout that averted their exit from the eurozone.
The benchmark FTSE 100 index of leading stocks slipped 0.22% to 6,378.38 points while in Frankfurt, the DAX 30 slid 0.51% to 7,870.90 points.
Investors had initially breathed a sigh of relief after a last-gasp deal was agreed, and bank shares rallied in the morning before turning direction on fears the agreement to liquidate a major Cypriot lender could become an example in other troubled eurozone nations
“Downsizing the financial system was the explicit objective of the EU and IMF,” Neil MacKinnon, an economist with VTB Capital in London, told AFP.
“It may be that the social and political reaction in Cyprus is such that the hostility towards the EU builds and you could not rule out a future exit,” he said.
Cyprus President Nicos Anastasiades battled for 12 hours overnight with his eurozone partners and the IMF to secure the deal.
In the end however, he let one banking chain go to the wall and left major investors in the island’s biggest bank — many of whom are Russian — take a giant hit.
Under the terms of the agreement the island’s second largest lender Laiki (Popular Bank) will be wound up, an operation Dijsselbloem said would deliver a 4.2-billion-euro ($5.5 bn) saving.
As the impact of the deal sank in, European banks went deep into negative territory shares in afternoon trading, with Barclays down 0.58 percent to 290.30 pence, BNP Paribas down 1.49 percent to 40.56 euros and Deutsche Bank falling 1.61 percent to 31.88 euros.
ARM Holding topped the FTSE 100 leaderboard after the semi-conductor group got a boost after analysts said the stock was undervalued. The helped shares in the Cambridge-based firm rise by 4.21% to close at 916 pence.
Vodafone was also in demand after weekend reports that the telecoms giant is moving towards offloading its stake in Verizon.
The rumoured sell-off of its US-based network pushed Vodafone shares up more than 2% to close at 187.20 pence.
The mining sector was another big casualty and Eurasian Natural Resources and Vedanta Resources led all blue-chip fallers.
Eurasian was the biggest casualty as it slipped by more than 6% to close at 268.10 pence, while Vedanta dropped back 4.77% to close at 1,039 pence
Lloyds Banking Group (LBG) remained the most traded blue-chip by volume, seeing 167 .29 million units change hands.
It was followed by telecommunications firm Vodafone, which saw investors exchange 139.75 shares
On the currency markets, sterling lost ground against the greenback and was trading at $1.5171 at 5:20 pm from $1.5230 at the same time on Friday.
It fared better against the single currency and rose to 1.1813 euros from 1.1725 euros over the same period.
London shares down on Cyprus deal
