By Carla Mozee, MarketWatch

British shares drop alongside broader European market

U.K. stocks dropped Tuesday, in step with a selloff across European equities as bond prices dropped and as Greece's debt crisis talks reach a crucial point.

London-traded shares remained lower after better-than-expected U.K. industrial-production data (http://www.marketwatch.com/story/uk-factories-ramp-up-production-as-oil-recovers-2015-05-12), but the British pound (GBPUSD) rose to a fresh yearly high above $1.57. It recently traded at $1.5656 versus $1.5588 late Monday.

The FTSE 100 fell 1.7% to 6,913.31, with shares of only four companies rising. Experian PLC shares were up 2.1% (http://www.marketwatch.com/story/experian-reports-fall-in-fiscal-2015-pretax-profit-2015-05-12-2485378), with the credit-checking services provider saying it expects margins for the year to be stable.

The FTSE 100 fell alongside the Stoxx Europe 600 , which lost as much as 2.1%. In addition to Greece's bleak financial situation, stocks also wrestled with a renewed selloff in global bonds, driving yields higher.

The "extent of the bond market selloff is surprising," as the European Central Bank "has only just started its colossal bond-buying program, which should keep yields under extreme pressure for another 1.5 years at least," said Fawad Razaqzada, technical analyst at Forex.com, in a note. "Indeed, we are of the view that bond yields will probably head back lower soon, and this in turn may result in a rebound in European stocks."

On the FTSE 100, EasyJet shares tumbled 10% after the budget airline warned revenue per seat would fall (http://www.marketwatch.com/story/easyjet-swings-to-interim-profit-2015-05-12-24855820) by a low single-digit percentage in the six months to September. It swung to a first-half profit of 5 million pounds ($7.8 million), while revenue rose 3.8% to GBP1.8 billion.

"Air traffic control strikes in France have affected airlines across Europe, and with uncertainty over oil prices and currency exchange rates it's no surprise to see the airline industry on shaky ground at the moment," wrote James Hughes, chief market analyst at eToro.

Shares of British Airways parent International Consolidated Airlines Group also fell, by 2.6%.

Stock in mining industry giant BHP Billiton PLC (BHP) turned lower by 0.6%. Earlier Tuesday, BHP said it plans deeper cost cuts (http://www.marketwatch.com/story/bhp-billiton-plans-deeper-cost-cuts-2015-05-12-24855925) as weakness in commodity prices persists.

Grexit/Brexit: Fears about Greece's debt problems were heightened Tuesday, with a Reuters report saying Greece used funds from an emergency account held at the International Monetary Fund to repay EUR750 million it had owed the lender, a move made to avoid default. Greek Finance Minister Yanis Varoufakis on Monday said the country may be a couple of weeks away from running out of cash. Varoufakis's comments followed Monday's meeting of Eurogroup eurozone finance ministers, who said progress was made, but more work needed to be done.

Meanwhile, the Ecofin group of EU finance ministers was holding a meeting Tuesday in Brussels. Before the meeting, U.K. Chancellor George Osborne said he had come with a mandate "to improve Britain's relationship with the rest of the EU and to reform the EU", media reports said. The newly elected Conservative government has promised to hold an in-or-out referendum on the U.K.'s membership of the EU, raising fears of a "Brexit", or Britain's departure from the union. Read: Risk of Britain leaving the EU just got real (http://www.marketwatch.com/story/risk-of-britain-leaving-the-eu-just-got-real-2015-05-08)

(http://www.marketwatch.com/story/risk-of-britain-leaving-the-eu-just-got-real-2015-05-08)

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