FTSE retreats, euro fades after Greece deal clinched

Britain’s FTSE 100 fell and the euro faded on Tuesday after eurozone finance ministers agreed a second bailout for Greece to avert a messy default by the debt-ridden nation.

The UK index of blue-chip shares eased 0.2%, or 12 points, to 5,934 and the All Share index shed 0.19%, or six points, to 3,069. See the FTSE’s performance and the index’s top winners and losers.

Bigger haircut

Under the deal agreed in Brussels, Greece will try to cut its debt to 120.5% of its gross domestic product by 2020 and accept an 'enhanced and permanent' presence of European Union monitors, in return for €130 billion (£110 billion) in loans.

Eurozone officials also said that Greek bondholders would be offered a ‘voluntary’ deal with a haircut of 53.5%, higher than the 50% cut in the value of their bonds agreed last year.

But a report on Greece’s debt projections prepared for eurozone finance ministers, published by the Financial Times on Monday, revealed that Athens’ rescue programme was way off track and suggested the country may need another bailout.

‘This conclusion is very much in line with our own analysis that Greece is increasingly trapped in a vicious circle where ever more austerity comes with an ever higher price tag on growth,’ said Michala Marcussen, head of global economics at Société Générale.

She added: ‘Consequently, implementation risk will remain high, but for now markets are relieved that agreement was reached.’

The euro edged down 0.05% versus the dollar to $1.323, even as yield – or implied interest rate – on benchmark Italian 10-year government bonds dropped 14 basis points to hit a four-month low of 5.42%. In late November, the yield hit a euro-era high of 7.51%, above levels at which other eurozone nations were forced to accept bailouts.

Meanwhile, stock markets on the continent also weakened: Germany’s DAX index slid 0.18% to 6,936, France's CAC 40 index was 0.07% lower at 3,470, and the FTSEurofirst 300 index of top European shares fell 0.21% to 1,089.

Tullow slides

Tullow Oil (TLW.L) topped the loser board on the FTSE 100, sliding 59p to £15.42, after the explorer said it had found oil in a well offshore Sierra Leone.

Andrew Matharu, analyst at Westhouse Research, branded the discovery ‘encouraging’ and pointed out that the move came after the shares had hit an all-time high.

He added that the ‘oil-water contact’ had not been encountered – meaning it was unclear what pressure support the reservoir would have – and that Tullow had not yet tested the well to determine whether they could get a commercial flow rate.