FTSE Hit by Decline in Energy Stocks, Worries over Greece

A fall in major energy stocks and worries over the political outlook in Greece knocked down Britain's top equity index on Monday.

 

The blue-chip FTSE 100 closed down 2 percent at 6,417.16 points. The index also retreated 0.3 percent on Friday, after falling 2.7 percent in 2014.

 

Weaker energy stocks, including BP and Royal Dutch Shell (RYDAF), took the most points off the FTSE, as concerns about a surplus of global supplies and lacklustre demand pushed oil prices to 5 1/2-year lows.

 

The UK Oil and Gas index fell 4.4 percent. BP was down 5.1 percent and Shell 4.1 percent.

 

Marks & Spencer fell 4.3 percent after SocGen downgraded the supermarket retailer to "hold" from "buy".

 

European stock markets have been held back over the last month by concern over Greece, which holds a election on Jan. 25. The left-wing opposition party Syriza - which wants to cancel a chunk of Greek debt and the austerity measures imposed after an international bailout - narrowly leads in opinion polls.

 

German Vice Chancellor Sigmar Gabriel said on Sunday that Germany wanted Greece to stay in the euro zone and there were no contingency plans to the contrary. He was responding to a newspaper report that Berlin believes the euro currency union could cope without Greece.

 

"The euro zone has been threatened by the chance of an election victory for left-wing Greek party Syriza, who would set the proverbial cat amongst the euro zone pigeons with their wish to severely renegotiate Greek debt," said Spreadex financial analyst Connor Campbell.

 

But other traders said the prospect of new stimulus from the ECB - such as mass purchases of government bonds, a process called quantitative easing - could give the market some support.

 

"As far as Greece is concerned, there is still that backdrop of more stimulus from the ECB. No one wants to be too far out of the market in case the ECB intervenes," said Dafydd Davies, partner at Charles Hanover Investments.