Britain’s top shares fell sharply on Thursday as fears over the global recovery and a contagion impact from the Greek debt crisis prompted investors to sell out of riskier assets such as commodity stocks.

The FTSE 100 ended down 43.74 points, or 0.8 percent, at 5,698.81, back at levels last seen after the Japanese earthquake, having shed 1.0-percent on Wednesday.

Investors were unnerved by Greece’s debt problems and a lack of agreement in the euro area on an aid plan, with the cost of insuring Greek debt against default hitting fresh record highs on Thursday.

Fears of contagion were reflected by a move in Spanish 10-year government bond yields to 11-year highs after tepid demand at a Spanish debt auction.

It’s the overall uncertainty that’s again getting hold of everyone and leaving us with literally nowhere to go, James Hughes, senior market analyst at Alpari UK, said.

When a deal (for Greece) does come through, then of course you have to deliberate the overall problems that are still there, and of course… who’s going to be next?

Commodity stocks bore the brunt of the sell-off as investors fretted about future demand for natural resources.

Among miners, Lonmin and Kazakhmys were the worst off, down 3.4 percent and 3.3 percent respectively, while BG Group led integrated oil stocks lower, off 1.4 percent.

The market was dealt another blow in the form of a disappointing business activity survey from the Philadelphia Federal Reserve Bank, a day after negative New York State manufacturing data.

U.S. blue chips , however, were up 0.7 percent by London’s close, as bargain hunters moved in after a more than 7-percent sell-off in the last few weeks.

HIGH STREET GLOOM

Ratcheting up the pressure yet further, British retail sales fell more than twice as fast as expected in May, with economists’ near-term prognosis for the situation gloomy as consumers are faced with rising prices and slow wage growth.

Kingfisher and Tesco sank 1.5 percent and 1.7 percent respectively.

Elsewhere, GKN shed 3.1 percent after the British industrial and engineering group said a fatal explosion last month at an American plant it runs will result in a 30 million pound ($48.51 million) one-off hit to its profits.

Despite the cocktail of negative macro newsflow, strategists remained upbeat, citing resilient corporate earnings as supportive for markets on a long-term view.

Investors look at the rioters on the streets of Athens, they look at the yield on Greek debt.. and that obviously sends them into a cautious frame of mind, Henk Potts, market strategist at Barclays Wealth, said.

We anticipated that there was a potential for a pullback given the problems that you see from a macro perspective but we still see this as an opportunity for long-term equity investors to take advantage of some cheaper prices.

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