Leading index records triple digit losses as Greek bond swap deadline approaches, with Polymetal hit by UBS downgrade

As the FTSE 100 recorded its biggest one day fall since 14 December on renewed fears about a Greek default and a global economic slowdown, the leading loser was Russian gold miner Polymetal.

The company’s shares slumped 64.5p to 951.5p after analysts at UBS moved from buy to neutral and cut their price target from £14 to £11. UBS slashed its earnings forecasts by 6% to 22% between 2012 and 2015, reflecting a cut in its forecast gold output since it believes output from the Amursk site is unlikely before 2013. UBS said:

We view Polymetal as a high-quality name with an attractive 2010-15 estimated output compound annual growth rate of 11%, though we think this growth is largely priced in. Without catalysts such as a strong gold/silver price or expansion in reserves base, the stock is unlikely to outperform the sector in the short term.

Mining shares were generally weaker in the wake of China cutting its growth forecasts on Monday. Fresnillo bucked the trend for much of the day after a 63% rise in full year profits, but finally caved in to close down 2p at £18.30.

Overall, growing concerns about Greece ahead of this week’s deadline for agreement with its private bondholders, as well as poor European surveys and China’s downgrade on Monday, left the FTSE 100 109.02 points lower at 5765.80. This left the leading index at its lowest level since 31 January. Germany and French markets were even worst hit, each down more than 3%. Josh Raymond at City Index said:

March not always a great month for the FTSE. The last 11 years has seen March be a bearish month six times. When it’s bearish, the average loss is 2.4%.

There were only two risers in the leading index. Hargreaves Lansdown added 13.8p to459.1p despite its expected ejection from the leading index in this week’s quarterly review, while BSkyB edged up 0.5p to 683.5p.

Essar Energy, another due for demotion from the FTSE 100, fell 5.5p to 101.6p, while insurer Aviva lost 17.2p to 350.2p after Exane BNP Paribas moved its recommendation from neutral to underperform. Ahead of results on Thursday, Exane’s Andy Hughes said:

We have long seen Aviva as cheap but leveraged, but with the earnings power to pay down the high level of debt.

We have changed our view on the group’s earnings power. In the current low-yield, low-growth environment Aviva’s earnings will be lower and cash flows under pressure. Declining earnings put more pressure on the group to further reduce debt leverage, in our opinion. In the meantime, Aviva’s share price has re-rated based on the recovery in Italian government bonds over the last three months.

Cape topped the FTSE 250 risers, up 15.9p to 445.3p after the industrial services group issued an upbeat outlook statement despite flat full year profits of £69.4m. Both JP Morgan Cazenove and WH Ireland raised their target prices.

But Centamin, a miner focused on Egypt, fell 7.3p to 79.2p as the company said it had temporarily stopped operations at its Sukari mine due to what it called “illegal labour unrest.”

Cable & Wireless Worldwide lost 2.25p to 31.21p on doubts about whether Vodafone would end up bidding for the business after its earlier expression of interest, although India’s Tata is still in the frame.

Finally drug discovery company Summit rose nearly 2% to 7p after unveiling positive trial data for its programme targeting Alzheimer’s disease. Analysts at its broker Singer Capital Markets said:

The results announced today complement positive pre-clinical data highlighted over summer 2011, increasing the likelihood of Summit’s candidate attracting a partner.