FTSE closes lower after China ups bank reserves

Britain’s top share index fell on Friday, led lower by banks and commodity stocks on monetary tightening in China and downbeat growth figures from the euro zone, while defensive stocks were in demand. The index was in positive territory at the start of the session, rising as high as 5,207.73, before a surprise move by China to increase the level of reserves commercial banks must hold to curb lending and inflation. [ID:nTOE61B069] The sell-off was compounded by news the euro zone’s economic recovery stumbled in the final quarter of 2009 as gross domestic product barely expanded, dragged down by a poor German performance despite healthy figures from France. [ID:nLDE61B0L9] Banks were in the doldrums, with underlying sentiment also cautious over the detail of the European Union’s Greek rescue plan, and ahead of the sector’s upcoming reporting season. [Read the full article]

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European shares ended a four-day winning run on Friday after China surprised financial markets by raising banks’ reserve requirements, though demand for defensive stocks helped limit losses. The FTSEurofirst 300 .FTEU3 index of leading European shares closed 0.3 percent lower to 987.86 points, after trading as high as 1,002.50 earlier in the session. China increased the level of reserves commercial banks must hold for the second time this year to curb lending and inflation [ID:nTOE61B069], weighing on miners and banks. Banks were among the worst performers, with Barclays (BARC.L), BNP Paribas (BNPP.PA), HSBC (HSBA.L), Societe Generale (SOGN.PA), Lloyds Banking Group (LLOY.L), Banco Santander (SAN.MC) and Credit Agricole (CAGR.PA) down 1.1 to 3.2 percent. [Read the full article]

World stocks slumped and the dollar hit a seven-month high on Friday versus a basket of other currencies after China surprised markets by tightening monetary policy, raising fears about a global economic recovery and denting investors’ appetite for risk. Worries over Greece’s debt problems and signs of slow growth in Europe continued to sting the euro, driving it to a nearly nine-month low against the dollar. China increased its reserve level for banks by 50 basis points on the eve of its New Year’s holiday in a move aimed at slowing lending and tempering inflation. For details, see [ID:nTOE61B069] Crude oil fell more than 2 percent as the news out of China sparked fears of slowing demand for commodities imports and as data showed U.S. oil inventories rose more than expected last week. [Read the full article]

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Euro zone finance ministers, will not discuss specific ways of supporting Greece in their meeting on Monday, five euro zone sources preparing the meeting said on Friday. “No. Very definitely not. It is too early,” one senior euro zone source with insight into the Eurogroup meeting said. The ministers will instead put pressure on Greece to implement the measures it has already announced to reduce its huge budget gap, because the ministers were convinced that if they were fully translated into action, no euro zone rescue measures would be necessary. There has been some market speculation that the ministers might agree on specific aid steps at their meeting, but a second euro zone source described this as “a misunderstanding”. “It is impossible to discuss something at the ministers’ level without preparation, having something written down on paper, etc. I have no knowledge of any such preparations,” the second euro zone source said. [Read the full article]

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