European markets take a battering as Italian unease grows
EUROPEAN markets turned sharply lower today after a jump in Italy's borrowing costs fuelled uncertainty over the country's future.
The FTSE 100 Index was 1.7pc lower - off 96.8 points at 5470.6 - as Italian 10-year bonds soared past the 7pc mark to the same unsustainable levels that pushed Ireland and Portugal into a multi-billion bailout from the EU and IMF.
The latest sign that investors have lost confidence in the country's creaking finances came despite prime minister Silvio Berlusconi vowing to resign after key budget reforms are passed.
The markets initially posted modest gains after the resignation move bolstered hopes for coordinated action on the debt-laden country's austerity drive.
However, the uncertainty over when the election will take place and the position any new government may take troubled investors, with the CAC-40 in France and Germany's Dax later dropping more than 2pc.
Miners lost initial gains in London while banking stocks took a fresh battering in the wake of fresh eurozone uncertainty.
The mood in the sector was not helped by HSBC's disclosure of a 23pc drop in third quarter earnings from its investment banking division.
The bank joined a long list of financial firms hit by turbulence in the markets, including Barclays, Royal Bank of Scotland, Goldman Sachs and JP Morgan.
HSBC shares were 6pc or 31.55p lower at 505.95p, while Lloyds Banking Group fell 1.2p to 27.7p after Moody's warning that the bank's credit rating was under review because of chief executive Antonio Horta-Osorio's absence on sick leave.
Admiral shares crashed 29pc after the car insurer said higher-than-normal levels of personal injury claims were likely to dent its profits growth.
Shares slumped by 344p to 849p after it said current trends suggested 2011 profits were now set to be towards the bottom end of City hopes.
In the FTSE 250 Index, Kesa Electricals lost initial gains seen after it announced a deal to rid itself of loss-making UK chain Comet.
Retail turnaround firm OpCapita is paying a token £2 for Comet, while Kesa will pump £50 million into the business and take on its pension scheme.
In corporate results, shares in transport giant FirstGroup accelerated 11.2p to 339p after its operating profits improved 25pc to £216.3 million on the back of a strong performance in its UK rail division. The Greyhound coach owner also raised its interim dividend by 7%.