Fears of fresh Portuguese bailout hit markets

The FTSE 100 has fallen 1.1% as concerns over Portugal and the continued lack of a Greek bond swap deal weigh on global markets.

The UK's blue chip index extended earlier losses, dropping to 5,651, after US markets opened and mirrored the uneasiness seen elsewhere earlier in the day. Losses were later pared but the index remained down 1.1% at 5,671.

The S&P 500 is testing the 1,300 resistance level after dropping 0.9%, with the Dow falling 0.8% to 12,555. On the Continent, the Dax was down 1.2% at 6,432 with the Cac 40 down 1.4% to 3,273 in France.

Banks and miners led the falls in the UK, with Lloyds among the largest fallers - 4.3% lower at 31p - as concerns over Greece and Portugal resurfaced.

EU leaders are meeting today in Brussels but investors are concerned a  Greek bond swap deal has not been finalised. Negotiations centre on the extent of the private sector haircut that will be agreed as part of Athens' latest bailout.

A agreement must be reached by the time a €14.4bn bond becomes due on 20 March if Greece is to avoid a full-scale sovereign default.

Portugal has not yet required a second bailout deal but 10-year bond yields have moved significantly higher again today, rising more than 2 percentage points to a fresh euro-era record of 17.4%.

Portuguese 5-year CDS also moved to new record highs, moving towards the 1,500 level for the first time - a figure which prices in the probability of a default at 70%.