Shares slip back after big gains

Stock markets have fallen back in early trading, after shares across the world surged on Monday in the wake of a deal to tackle Europe's debt crisis.


In London and Frankfurt, leading shares fell 1.5% after gaining 5% on Monday, while in Paris they lost 2% after soaring 9% in the previous session.

Analysts had expected shares to slip after such large gains.

UK gilt yields also rose, suggesting political uncertainty in the UK is undermining investors' confidence.



The yield is used as a measure of UK government borrowing costs.

Last week's UK general election failed to give any party a clear majority.

The Labour party is currently negotiating with the Liberal Democrats about forming a coalition government.

Both parties want to delay spending cuts designed to reduce the UK's budget deficit until next year, and analysts say this could be a cause for concern for some currency traders.

Loan deal

But any doubts about the formation of a new government have not yet had any major impact on share prices in the UK.

They have fallen in line with other major European markets.

This is simply a reaction to the large gains seen on Monday, which were driven by the 750bn-euro ($975bn; £650bn) loan-guarantee deal agreed by the European Union and the International Monetary Fund on Sunday.

This was specifically designed to stop the debt crisis in Greece from spreading to other European countries with high levels of debt, particularly Spain and Portugal.

Markets were surprised by the size of the deal, and so responded very positively to it.

Sourced from The BBC