Markets: Political uncertainty adds to jitters

FINANCIAL stocks were hit heavily for a second successive session as fears over the Greek debt crisis affecting European banks continued to weigh massively on the markets, along with the uncertainty of the UK's hung parliament.

Royal Bank of Scotland fell 2.7p – or 6 per cent – to 45.5p even though the Edinburgh-based lender narrowed losses to 248 million for the first three months of the year and confirmed that its turnaround plans remain "on track".

Lloyds Banking Group slipped 3.1p to 53.3p, but HSBC fared better – adding 1.2p to 629.6p after first-quarter profits "comfortably ahead" of last year and an improving position on bad debts. However, Asian- facing bank Standard Chartered fell 2.5 per cent, or 39.5p, to 1,572p, following the company's annual general meeting in London.

Support services group Capita was among the biggest Footsie casualties, down 46p to 770.5p after a downgrade from brokers at Shore Capital.

British Airways was another heavy faller after the airline's cabin crew overwhelmingly rejected an offer aimed at ending their long-running dispute. Shares dipped 12.4p or 6 per cent to 192.2p. Rival EasyJet dropped 13.3p to 429.7p in the FTSE 250 after it said it had suffered 750,000 cancellations as a result of the Icelandic volcanic ash cloud.

Elsewhere in the second tier, broadcaster ITV dropped 5.25p – or more than 8 per cent – to 55.75p after new boss Adam Crozier reported rising revenues but warned that the outlook for the latter part of 2010 and early 2011 looked tough.

Plumbing and heating supplier Wolseley – which owns the Plumb Center, Build Center and Bathstore brands – dropped 8 per cent, or 125p to close at 1,411p, making it the hardest-hit stock in the FTSE 100. Thomas Cook was not far ahead, off 16.6p at 215.7p.

Traders are hoping for a speedy assembly of a stable UK government over the weekend.

Anthony Grech, head of research at IG Index, said: "The speed of political horse-trading between the three main UK parties will now have to be upped to prevent markets continuing their meltdown.

"Investors may have breathed a sigh of relief when the FTSE closes for the weekend, with many traders no doubt now aiming to call the bottom of the market and hoping that an acceptable political solution may be found over the weekend."

Describing the atmosphere on the trading floor, Manoj Ladwa, senior trader at ETX Capital, added: "It's certainly noisy – it's very volatile. There seems to be quite a bit of panic selling coming in.

"We had the issues with the US (on] concerns in Greece spreading to the rest of the eurozone, and the election."

On the other side of the Atlantic, US stocks fell in early trading as worry persisted about a financial meltdown stemming from the European debt crisis and after a dramatic intra-day drop in indices in the previous session.

American stocks shrugged off a report showing that the US economy added jobs in April at the fastest pace in four years, and a measure of investor fear jumped almost 30 per cent.