FTSE 100 to slip below 5,000 as Korean tensions rise, European debt fears persist

The FTSE 100 is set to decline sharply today and go below 5,000 yet again on renewed fears over the European debt crisis following yesterday’s bailout of a savings bank by the Bank of Spain and concerns over the situation on the Korean Peninsula, where North Korea has declared it is combat ready after UN Secretary General called on the Security Council to impose sanctions in response to the sinking of a South Korean ship, apparently torpedoed by the communist state and the US and South Korea held military exercises in preparation to defend S Korea against possible aggression.
The UK’s blue chip index is seen 2.3% lower after tacking on 0.1% yesterday.
Insurer Prudential (LSE: PRU) and beverage group SABMiller (LSE: SAB) led the blue chips, advancing 2.5%. Consumer goods company Reckitt Benckiser (LSE: RB), chipmaker ARM Holdings (LSE: ARM) and Imperial Tobacco Group (LSE: IMT) followed, adding slightly more than 2%. Miner Anglo American (LSE: AAL) and retailer Marks & Spencer (LSE: MKS) climbed 2%.
BP (LSE: BP) was at the bottom of the pile, shedding nearly 3% after the US government threatened to remove the oil and gas supermajor from the ongoing clean-up operation in the Gulf of Mexico after it missed a series of deadlines and appeared unable to contain the oil spill. Outsourcing group Capita (LSE: CPI), oil and gas company Cairn Energy (LSE: CNE) and engineering firm Invensys (LSE: ISYS) lost more than 2%. Another oil and gas supermajor Shell (LSE: RDSB) declined 1.8% and asset management firm Schroders (LSE: SDR) lost 1.4%.
US stocks closed with big losses on Monday and are set to decline further today. The Dow Jones Industrial Average lost 1.25%, while the broader S&P 500 index tumbled 1.3% and the technology heavy NASDAQ composite slid 0.7%.
Asian markets were in selling mode today. Hong Kong’s Hang Seng slipped 2.4%, China’s Shanghai Composite Index lost 1.8%, South Korea’s KOSPI tumbled 2.8%, Australia’s S&P/ASX 200 declined 3%, as did Japan’s benchmark Nikkei 225 index.
Commodities
Oil prices declined as July Brent Crude moved down to US$69.58/barrel, while US light, sweet crude for July delivery slid to US$68.59/barrel.
Precious metals also moved south with gold and silver declining to US$1,188/oz and US$17.65/oz, while platinum slipped to US$1,492/oz.
Base metals followed. Copper and nickel were down to US$3.06/lb and US$9.68/lb and zinc retreated to US$0.85/lb.

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