Eurozone crisis sends FTSE deep into negative territory

Rating agency Moody's stoked more concerns over the crisis spreading to Portugal, Italy, Spain, Ireland and Britain as politicians in Athens voted through the harsh economic conditions which come with the bail-out.

Another volatile session for the FTSE 100 Index saw it shed 80.94 points to 5260.99.

The declines followed losses for Asian markets with Wall Street's Dow Jones Industrial Average losing more than 1 per cent in early trading after mixed economic news.

The main focus of the markets, however, was the Greek drama and fears of the crisis spreading elsewhere in Europe.

The euro was under heavy pressure – falling below 1.27 against the dollar. The pound strengthened above 1.17 against the single currency at one point – and then took a late slump against the dollar to 1.49.

Investors were treating the greenback as a safe haven until the outcome of the general election and the Greece situation is clearer.

IG Index market strategist Anthony Grech had this to say: "The short-term fortunes of the London index will be dictated by the outcome of the general election, although failure to see a clear result by the markets opening could easily pave the way for further volatility ahead of the weekend break."

In the US, productivity grew solidly in the first quarter, although not as fast as in previous periods, and data also showed the number of US workers filing claims for jobless aid fell slightly last week.

The Labor Department yesterday said non-farm productivity rose at a 3.6 per cent annual rate, the smallest advance in a year, after expanding at a brisk 6.3 per cent pace in the fourth quarter.

Analysts had expected productivity, which measures the hourly output per worker, to rise at a 2.5 per cent rate in the January-March period.

The bigger-than-expected rise reflects the successful efforts by businesses to hold the line on hiring but the sharp slowdown indicates they won't be able to do so forever.

With all eyes on the financial sector amid the European turmoil, banks were London's biggest fallers.

Barclays lost 21p to 3013/4p, HSBC fell 241/4p to 6283/8p and Royal Bank of Scotland slipped 21/8p to 481/4p ahead of its latest update.

Lloyds Banking Group – which faced protests from its shareholders over pay at the bank's annual meeting yesterday – saw shares fall 31/2p to 565/8p.

Supermarket Morrisons was among the biggest fallers after food inflation virtually ground to a halt in its first quarter, leading to disappointing sales growth. Analysts said the firm was outperforming the industry but shares still fell 9p to 2693/4p.

Fellow grocers Tesco and Sainsbury were also on the back foot amid caution on the industry's growth prospects. The pair declined by 71/8p to 4193/4p and 71/2p to 3251/8p respectively.

Another faller was British Airways, which slid 43/8p to 2045/8p after announcing a 22 per cent plunge in traffic last month due to volcanic ash disruption.

Insurer Prudential saw a second day of rises on the Footsie, up 1/2p to 5491/2p despite delays to its record rights issue to fund the purchase of insurance giant AIG's Asian business.

The world's biggest drinks can maker, Rexam, was also in demand after first quarter results came in ahead of expectations. Shares advanced by 83/4p to 3211/2p.

The biggest Footsie risers were Schroders which added 80p to 1389p, Rexam, and Randgold Resources added 135p to 5580p.

The biggest Footsie fallers were Barclays and Lloyds.