A widespread sell-off has seen the FTSE 100 fall 70 points by lunchtime, as yields on Italian 10-year bonds hit 6%.
Only six of the FTSE 100 stocks were in positive territory, and only 24 of the FTSE 250. The FTSE 100 was trading at 5,773 at 12:45.
David Jones, chief market strategist at IG Index, said:
Italian bond yields have increased this morning as the market remains wary of European sovereign debt, and the disturbing lack of progress on agreeing terms to raise the US debt ceiling is also raising the tension. After having the weekend to digest the results of the EU bank stress tests, traders are also less than impressed by the lack of a Greek default inclusion. All of this means it is firmly a 'risk-off' day so far – hardest hit are the banks with Barclays back to its lowest levels in more than two years. It looks set to be another week of shares struggling to find much momentum while these worries persist.
