Market overview: FTSE 100 drops 1.2%

1605: UK stocks have dropped sharply following a weak start on Wall Street with the FTSE 100 down 1.3% at 6,939. According to analyst Jasper Lawler from CMC Markets, "political turbulence" in Greece is driving risk-averse sentiment across European markets after reports that talks between Athens and creditors scheduled for Wednesday were cancelled. "The market reaction on Tuesday is more consistent with a belief Greece maybe on the cusp of default," Lawler said. Rumours that Greek Finance Minister Yanis Varoufakis was considering a tax on cash machine withdrawals have also worried investors.

1501: Consumer sentiment in the States unexpectedly improved this month, according to data released on Tuesday by the Conference Board.The closely-watched consumer confidence index rose to 95.4 in May after dropping to a four-month low of 95.2 in April. The consensus forecast was 95.0.

1430: US house prices climbed in the first quarter, according to the Federal Housing Finance Agency (FHFA) House Price Index. House prices increased 1.3% year-on-year in the first three months of the year, marking the 15th consecutive quarterly price increase in the index.

1330: US durable goods orders grew by more than expected in April, if the defence sector is excluded. Orders for goods made to last more than three years dropped by 0.5% month-on-month. The consensus estimate was for a drop of 0.5% over the month. However, excluding defence orders increased by 1% month-on-month (consensus: 0.3%).

1300: Hungary's central bank cuts main policy rate by 15 basis points to 1.65%, as expected.

0955: Soco International is leading the FTSE 350 fallers after being downgraded by JP Morgan to 'underweight'. In a note on European oil and gas exploration and production, the bank said oil price shock absorbers have become clearer and that there was "still a bumpy path" for many companies. Tullow Oil is another big faller on related profit taking, allied to a dissipation about a potential takeover by BP, while weaker first-quarter earnings has sent Nostrum Oil & Gas down 1%.

0940: The dollar is up 0.36% against the pound and 0.64% against the euro this morning and Brenda Kelly, head analyst at London Capital Group said this will be due to the words of caution from Fed Chair Janet Yellen’s still "ringing in the ears of traders" as the residual effects of a fairly hawkish Fed are weighing on European equity indices. "The dollar is clearly benefiting from Yellen’s belief that the US is on course to bounce back from an extremely sluggish first quarter." Markets are now pricing in a 55% probability of a rate hike in December, Kelly added. On the euro she said the single currency may languish further if the Greek stand-off continues into the weekend, while regional election gains by leftist parties in highly indebted Spain have added to concerns. "Greece has never been considered systemic, but Spain being the 4th largest economy in the Eurozone any upheaval could create contagion." Looking forward, Kelly noted that there was plenty to look forward to on the US macro calendar today but called the Dow lower by 50 points to 11,180.

0925: The Irish government is expected to approve the sale of its 25% stake in Aer Lingus to British Airways owners IAG today. Taoiseach Enda Kenny confirmed this morning that his cabinet will be discussing the matter, the Irish Independent reported.

0920: Among the top risers are Ryanair, which has soared on the back of strong full year results; Micro Focus has advanced after it reiterated full-year guidance after a strong fourth quarter, and Cineworld has boosted hopes after strong first quarter sales were whipped higher by films such as Fifty Shades of Grey, with new Star Wars and Bond films to come this year.

0915: Bank of America Merrill Lynch have put out a note in which they warned of the effects of the political uncertainty in Spain. The bank warned of the risks to investor sentiment and said it was "increasingly clear that it will be difficult to form a strong government in Spain" with the general election due before December.

0910: Despite the strong market finish on Friday and England's thrilling cricket victory on Monday, London's blue chip equity index started the foreshortened week in a gloomy mood. The cause was Greek bailout talks dragging on with no end in sight, with traders also now given real cause to fear Spanish contagion after the ruling PP party's major losses in regional elections over the weekend. The FTSE 100 was down 0.66% to 6,984.99 after just over an hour's trading.