BP weighs on FTSE as Greek worries linger

[May 04, 2010]  LONDON (AP) -- BP PLC, Europe's biggest oil company, weighed on Britain's main stock index as investors returned from a long weekend increasingly worried about its exposure to the disastrous oil spill in the Gulf of Mexico.

Europe's other main markets, which unlike the FTSE were open on Monday, were also lower as the euro dropped toward one-year lows against the dollar amid ongoing concerns about the Greek debt crisis -- in spite of the weekend deal by the eurozone and the International Monetary Fund to give euro110 billion ($144 billion) in aid over three years.

By midmorning London time, the FTSE 100 was down 69.23 points, or 1.3 percent, at 5,484.06 while Germany's DAX fell 65.20 points, or 1.1 percent, to 6,101.72. The CAC-40 in France was 65.37 points, or 1.7 percent, lower at 3,763.09.

In London, there was much attention on BP's share price as the White House continued to ratchet up the pressure on the company to stop the oil spill that threatens the coast of Louisiana and pay the costs of the cleanup. There are estimates that BP's cost for the cleanup could total as much as $16 billion.

There are also fears that BP's brand name is severely damaged by the spill even though BP's Chief Executive Tony Hayward insisted the company will meet all "legitimate" claims related to the environmental disaster.

BP, which has a big impact on the overall level of the FTSE because of its position as one of the index's biggest companies by market value, was down 4.3 percent at 550.50 pence.

"Today's weakness has pushed BP to its lowest levels since October last year and with uncertainty still surrounding the costs around the Gulf of Mexico slick it seems unlikely that investors will be seeing this price as a bargain until the situation becomes clearer," said David Jones, chief market strategist at IG Index.

Meanwhile, the reaction in the markets to the weekend bailout deal for Greece remains lackluster at best as investors worry about the approval process in Europe's capitals and whether the Greek government can actually deliver the massive austerity it has promised in return for the cash.

In addition, fears that other eurozone countries -- notably Spain and Portugal -- will be dragged into the mire have not gone away. Europe's capacity to bail out anyone else is seen as remote at best.

Mitul Kotecha, an analyst at Credit Agricole, also said there are "growing worries" that the package will not be enough to cover Greece's funding requirements over the next three years.

All these concerns have hit the euro over the last couple of days -- by late morning London time, the single European currency was trading 0.5 percent lower at $1.3133. If it drops below $1.3166, then that would be a new one-year low.

The main thing investors are looking for, after months of prevarication in Europe, is if Greece gets the money.

If it does get it in the next week or so, which most analysts still reckon the most likely outcome, then the government of Prime Minister George Papandreou will have some breathing space to get a handle on its debts -- the next repayment of euro8.5 billion is due on May 19.

"The financial support for Greece provides a window of opportunity for the Greek authorities to implement radical fiscal and structural reform necessary to secure sustainable economic growth and solvency," said Chris Pryce, lead analyst at Fitch Ratings.

"However, the political challenge of implementing and sustaining such a program should not be underestimated against the backdrop of a potentially prolonged and deep recession," he added.

Tuesday's retreat in the markets came in the wake of Wall Street's biggest gains in nearly three months. Solid economic data helped U.S. stocks rally amid hopes that the world's largest economy was recovering from recession faster than anticipated.

However, U.S. stocks are set to give up some of those gains later -- Dow futures were down 52 points, or 0.5 percent, at 11,050 while the broader Standard & Poor's 500 futures fell 7.6 points, or 0.6 percent, to 1,191.

Earlier in Asia, stocks were dragged down on concerns that Chinese moves to slow a soaring property market will undermine economic growth while Thai stocks vaulted on hopes of a resolution to the country's political crisis.

China's benchmark index in Shanghai fell 35.33 points, or 1.2 percent, to 2,835.28. This was Shanghai's first opportunity to respond to Monday's move by the People's Bank of China to raise the deposit reserve requirement ratio for most banks for the third time this year, the latest in a series of measures aimed at cooling the country's skyrocketing property prices.

Elsewhere, Hong Kong's Hang Seng fell 0.2 percent to 20,763.05 while Indonesia gained 0.2 percent. South Korea's Kospi slipped 0.1 percent to 1,718.75. Singapore dropped 1 percent.

Big gains were posted in Thailand, where the benchmark stock index surged 4.1 percent after Prime Minister Abhisit Vejjajiva proposed a Nov. 14 date for fresh polls if anti-government protesters occupying central Bangkok accept his reconciliation plan and peace and stability is restored.

Benchmark crude for June delivery was down 84 cents to $85.35 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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