Markets were in risk-off mode on Monday morning as fears over the Eurozone debt crisis resurfaced after a deal to bail out Cyprus sparked a run on banks across the country.
Banks and miners were bearing the brunt of the sell-off in London after Cyprus' €10bn bailout deal with the Troika - a move intended to save the country from default and recapitalise its banking sector - proposed slapping a levy on bank deposits.
Nevertheless, British retailer Marks & Spencer (M&S) was a bright spark this morning, limiting losses in London as M&A speculation escalated over the weekend.
The FTSE 100 had bounced well off its intraday low of 6,392 by midday but was still trading firmly in the red, registering a fall of around 0.7%.
Cypriot deal sparks bank-run worries
While the aid package for Cyprus had been trimmed from the initial €17.5bn amount (previous estimates) to €10bn, sentiment has been dampened by the plan for Greek depositors to share some of the burden to make up the difference. The government will impose a one-time tax on customer accounts once banks re-open on Tuesday following a bank holiday.
The country's President Nicos Anastasiades said that he chose the "least painful option" and that rejecting the tax proposal would have led to Cyprus having to exit the Eurozone. The proposal still requires the approval in parliament.
The tax, which will allow Cyprus to raise around €6.0bn, has already resulted in a race to withdraw cash from banks and ATMs across the country.
Matt Basi, the Head of UK Sales Trading at CMC Markets, said this morning that proposed tax "seems to amount to little more than common theft". He said: "The proposed levy on the savings of regular citizens comes as an affront to economic decency, and if imposed could signal the beginning of the end for the Eurozone.
"The willingness to stand behind the single currency shown by voters on the peripheries of the union - in the face of mass unemployment and mandatory austerity measures - has been nothing short of astonishing, but if the Eurozone's leaders vote to cut out the middle man and start helping themselves to people's savings, it's unlikely that they'll avoid a significant backlash."
FTSE 100: Qatar eyes takeover of High Street giant M&S
Takeover speculation at M&S stepped up a gear this weekend with Qatar's sovereign wealth fund thought to be mulling a bid for the High Street giant worth £8.0bn. According to The Sunday Times, the Qatar Investment Authority is said to be assembling a consortium of private-equity investors and has spoken to banks about financing a potential offer.
A potential offer is thought to value M&S's shares, which closed Friday's session at 372.5p, at a price of 500p each.
A slump in risk appetite following the Cypriot bailout deal hit banking and mining stocks today, with Barclays, RBS, Lloyds, Kazakhmys and ENRC among the worst performers in morning trade.
Financial services group Legal & General was also lower after announcing that it has bought a 46.5% stake in British home builder CALA from Lloyds, marking the group's first direct investment of this kind.
Energy group National Grid rose after JPMorgan Cazenove raised its recommendation from 'underweight' to 'neutral', saying it is now the lowest risk stock in the UK utilities sector.
In contrast, insurance and pensions firm Prudential was in the red after UBS downgraded it from 'buy' to 'neutral' following the stock's recent outperformance. Cruise operator Carnival also sunk after Exane BNP Paribas cut the shares
FTSE 250: Essar gained after appointing new CFO
India-focused energy firm Essar gained after saying that Chief Financial Officer P Sampath will be succeeded by Deepark Maheshawri , who has a "strong track record of providing strategic financial and capital markets advice across a number of industries".
Home builder Berkeley Group edged higher after saying that it is confident that it will met expectations for the year ending April 30th and is on track to return 1,300p per share to shareholders by September 30th 2015.
FTSE 100 - Risers
Marks & Spencer Group (MKS) 403.50p +8.32%
Croda International (CRDA) 2,673.00p +1.48%
Next (NXT) 4,143.00p +1.30%
Babcock International Group (BAB) 1,083.00p +1.12%
Randgold Resources Ltd. (RRS) 5,550.00p +1.09%
ARM Holdings (ARM) 938.00p +1.02%
Admiral Group (ADM) 1,349.00p +0.97%
Sainsbury (J) (SBRY) 365.70p +0.80%
Tate & Lyle (TATE) 824.50p +0.79%
National Grid (NG.) 739.50p +0.75%
FTSE 100 - Fallers
Eurasian Natural Resources Corp. (ENRC) 318.30p -8.22%
Kazakhmys (KAZ) 501.00p -6.96%
Royal Bank of Scotland Group (RBS) 291.90p -5.20%
Barclays (BARC) 304.85p -4.75%
Fresnillo (FRES) 1,417.00p -4.26%
Carnival (CCL) 2,292.00p -3.66%
Vedanta Resources (VED) 1,119.00p -3.53%
Xstrata (XTA) 1,126.50p -3.26%
Glencore International (GLEN) 376.00p -3.06%
Lloyds Banking Group (LLOY) 49.06p -2.89%
FTSE 250 - Risers
Essar Energy (ESSR) 151.80p +3.27%
Bwin.party Digital Entertainment (BPTY) 149.10p +2.90%
Drax Group (DRX) 596.50p +2.76%
F&C Commercial Property Trust Ltd. (FCPT) 102.80p +1.98%
International Personal Finance (IPF) 463.80p +1.89%
TalkTalk Telecom Group (TALK) 261.90p +1.79%
Phoenix Group Holdings (DI) (PHNX) 636.50p +1.68%
WH Smith (SMWH) 734.00p +1.59%
IP Group (IPO) 138.00p +1.55%
Hikma Pharmaceuticals (HIK) 1,015.00p +1.50%
FTSE 250 - Fallers
Petra Diamonds Ltd.(DI) (PDL) 119.70p -7.92%
Ocado Group (OCDO) 170.30p -7.09%
Bumi (BUMI) 325.10p -6.39%
Hochschild Mining (HOC) 289.60p -6.13%
Ferrexpo (FXPO) 197.30p -4.18%
Lonmin (LMI) 316.70p -3.74%
Anite (AIE) 129.50p -3.43%
Vesuvius (VSVS) 389.00p -3.26%
Balfour Beatty (BBY) 269.40p -3.13%
Mitie Group (MTO) 283.00p -2.75%
FTSE TechMARK - Risers
Torotrak (TRK) 28.25p +17.71%
Ark Therapeutics Group (AKT) 0.40p +8.11%
Promethean World (PRW) 18.00p +2.86%
Filtronic (FTC) 66.50p +0.76%
Triad Group (TRD) 5.75p 0.00%
Antisoma (ASM) 1.88p 0.00%
Oxford Biomedica (OXB) 1.93p 0.00%
Gresham Computing (GHT) 81.00p 0.00%
Puricore (PURI) 51.50p 0.00%
DRS Data & Research Services (DRS) 19.00p 0.00%
FTSE TechMARK - Fallers
Emblaze Ltd. (BLZ) 49.25p -5.29%
Skyepharma (SKP) 55.00p -4.97%
Phoenix IT Group (PNX) 155.25p -4.75%
Vislink (VLK) 30.50p -3.94%
Phytopharm (PYM) 1.65p -2.94%
BATM Advanced Communications Ltd. (BVC) 18.50p -2.63%
Wolfson Microelectronics (WLF) 188.00p -2.59%
Parity Group (PTY) 30.50p -2.40%
NCC Group (NCC) 146.00p -1.68%
Kofax (KFX) 301.00p -1.47%