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Barclays shares suffer as Qatar sells warrants European markets drop as Greece talks continue

Article By: ,  Senior Market Analyst
November 26, 2012 6:04 PM

European markets edged lower in trading on Monday after a bullish 5 day rally last week, which saw the FTSE gain almost 4%. A more downbeat mood engulfed traders today as they turned their full attention to Greece and Euro zone finance ministers, who meet again to discuss a debt sustainability deal for indebted nation.

Nervousness about the possible outcome of the meeting kept the markets in negative territory. This is the third meeting in a month to attempt to agree on terms to bring Greece’s debt – projected to be 190% of GDP next year – back under control, which is a prerequisite for the release of the next tranche of bailout aid.

Greece has met the international lenders criteria by imposing strict austerity measures and tax cuts. It is now the turn of Euro ministers and the IMF to deliver. However without knowing that Greek debt is sustainable in the time frame permitted, the IMF has held up payments to Athens. Progress has been slow on deciding how to achieve a credible solution but at least policy makers have now at least agreed that a write down of Greek debt is not a possibility, for the time being.

Other measures being discussed include a lower interest rate on Greek debt, debt buybacks and a compromise with the IMF to extend the target date for debt at 120% of GDP to 2022 from 2020. Although the market is nervous, there is also a common feeling that a solution will be reached, even if not today but possibly later in the week. The lenders will not allow Greece to fail.

Barclays leads the decliners in London trading

Here in the UK, banks led the decline with Barclays topping the loser board, shedding 5.7% after Qatar Holding said it had sold its remaining warrants in the UK bank. This does not affect its 6.7% stake in Barclays which remains unchanged. The entire UK banking sector was pulled lower by the news and Royal Bank of Scotland and Lloyds lost 2.9% and 2.4% respectively.

With little economic data to guide them through the afternoon, investors remained focused on news from the Eurogroup meeting and look towards tomorrow for the second reading of UK 3rd quarter GDP. Canadian Mark Carney was also surprisingly named as new Bank of England chief, taking the reins next year, when Paul tucker had been widely predicted to take the helm from Mervyn King.

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