London close: Last-minute Greek proposal fails to lift stocks, FTSE plunges 1.5%

A last-minute request from Greek prime minister Alexis Tsipras for a new bailout programme failed to inspire gains on London's stock market as the heavyweight mining sector bore the brunt of a reduction in risk appetite.

A sell-off on the base metals market was weighing heavily on mining stocks, pushing the FTSE 100 down 1.5% to 6,520.98. This was the lowest finish for the Footsie since 12 January.

Tsipras on Tuesday proposed a new funding agreement with the European Stability Mechanism, Europe's bailout fund, just hours before the current bailout programme expires and it defaults on a €1.6bn debt repayment to the IMF.

The request would cover Greece's financial needs over the next two years and includes a debt-restructuring plan, along with an extension of the current bailout until the new loan is agreed.

"Maybe the closure of banks, first reports about petrol shortages and news that some pensions for self-employed can no longer be fully paid in euros are helping to get the radical left in touch with reality? Maybe Tsipras has finally noticed that Europe is not bluffing," said economist Holger Schmieding from Berenberg.

Eurogroup head Jeroen Dijsselbloem said that an extraordinary meeting would take place at 19:00 in Brussels to discuss the proposal. However, Germany Chancellor Angela Merkel was cited as saying that she would not consider Tsipras's request until after Greece holds its referendum on Sunday.

UK stocks extended losses in afternoon trade despite a positive start on Wall Street as sentiment was buoyed by a better-than-expected reading of US consumer confidence. The Conference Board's confidence index climbed to 101.4 in June from a downwardly-revised 94.6 in May, exceeding the consensus forecast of 97.5.

Closer to home, the Office for National Statistics revised its UK GDP growth estimate upwards for the first quarter from 0.3% to 0.4%, in line with estimates.

Miners provide a drag

Blue chips such as BHP Billiton, Anglo American, Rio Tinto, Randgold and Glencore were falling sharply as metal prices weakened.

Supermarket rivals Tesco and Sainsbury were out of favour after industry data from Kantar revealed that both retailers suffered a decline in sales in the 12 weeks to 21 June.

However, sector peer Ocado erased earlier losses to finish higher as investors digested its half-year results. The online grocer reported an 11.4% rise in operating profits as revenues jumped 18.2%.

Commercial van hire group Northgate fell after underwhelming with its annual results, as it posted a 41% increase in underlying profits to £85m and hiked its dividend 45%. Broker Numis said trading was “solid” but lowered its rating on Northgate from ‘add’ to ‘hold’ due to less upside risk.