FTSE 100 falls on Greece concerns

UK stocks fell today as investors monitored the situation in Greece, where the government has yet to agree to a new round of budget cuts, which are necessary to receive more financial aid and avert a disastrous bankruptcy.

The FTSE 100 stood at 5,862 in early afternoon, down 30 points (0.5 percent) from Monday’s close.

The Greek government is under pressure to accept the terms of the next €130 billion bailout from the Troika of official lenders including the EU, the ECB and the IMF, which include another round of unpopular austerity measures.

Prime Minister Lucas Papademos faces opposition from other leaders of the ruling coalition, which warn of social unrest if more wage and pension cuts are imposed.

Media reports suggested that there is a tentative agreement and a deal could be struck before the end of the day, paving the way for the debt ridden nation to secure the next bailout package. However, a rebound in stock markets is seen as unlikely without a firm agreement in place.

In the meantime, European Commissioner Neelie Kroes told a Dutch newspaper that Greece’s exit would not lead to the breakup of the euro zone.

She added that the governments of Germany and the Netherlands would find it hard to convince their taxpayers that the bailouts are necessary if Greece fails to pass the necessary economic reforms to get its fiscal problems under control.

“The Greece situation continues to be watched carefully by investors, though the fact that we have not seen a large correction in stock prices thus far indicates that they remain confident that despite the wrangling and delays, an agreement will arise,” said chief market strategist at City Index Joshua Raymond.

Biopharmaceutical major Shire (LON:SHP, up 3.6pct at 2,206p) after Goldman Sachs raised its target price from 2,500 to 2,600 pence per share, while repeating its ‘buy’ recommendation.

Investors also bought financial stocks including financial services firm Hargreaves Lansdown (LON:HL., up 3.5pct at 456.4p) and interdealer brokder ICAP (LON:IAP, up 1.4pct at 388.5p).

Concerns over the euro zone debt crisis pushed base metal prices lower today, reducing demand for mining stocks.

Kazakh copper miner Kazakhmys (LON:KAZ, down 3.5pct at 1,148p) was the heaviest faller in the sector, followed by Xstrata (LON:XTA, down 3.4pct at 1,218p) and Eurasian Natural Resources (LON:ENRC, down 2.8pct at 701p).

Precious metals miners including Randgold Resources (LON:RRS, down 3.1pct at 7,330p) also were in decline as investors bought the US dollar, an alternative asset to gold, to protect wealth.

Other notable fallers included fashion house Burberry (LON:BRBY, down 3.4pct at 1,397p) and builders’ merchant Wolseley (LON:WOS, down 2.4pct at 2,234p).