BANKS led the FTSE 100 index lower yesterday as they slipped on concerns the Greek crisis could spread while miners fell with weaker metals prices.
It ended the blue-chip index’s eight-session run to a four-month high on Monday.
Mid-cap oil producer Afren plunged 71 per cent after saying it was in talks with its largest bondholders over its liquidity and funding needs.
The benchmark FTSE 100 index ended 0.6 per cent lower at 6,811.61 points, also reacting to UK data showing gross domestic product (GDP) grew more slowly than expected in the last quarter of 2014.
“UK markets were hit by broad-based selling after UK growth estimates slipped ... with banks leading the declines under threat of a looming crisis in Greece spreading across the financial system,” Jasper Lawler, analyst at CMC Markets, said.
The UK banking index fell 1.2 per cent, tracking a 11.7 per cent fall in Greek banks to a record low, on worries Greece's new anti-bailout government would clash with the European Union over the nation’s debts.
Barclays, Royal Bank of Scotland and HSBC dropped 0.5 to 1.8 per cent, with traders citing news of UK banks facing hefty mis-selling claims as one reason for their weakness.
Around two million Britons who may have been mis-sold insurance to cover events such as credit card fraud will be asked to vote for a scheme that could cost banks hundreds of millions of pounds in compensation.
But some analysts were positive on the broader market's prospects.
“The FTSE is seeing some profit-taking ... However, (it) is flirting with levels seen last year,” said Jawaid Afsar, a trader at Securequity.
The UK mining index fell 0.4 per cent as copper prices dropped 2.8 per cent on concerns of slowing growth in China, weak US business investment and rising metal inventories. Aluminium prices were down more than one per cent.
The UK Oil and Gas index also fell, down 0.4 per cent.
“Oil prices are causing a great concern for some investors. People are getting into the mindset that there isn't going to be a quick fix,” David Battersby, investment manager at Redmayne-Bentley, said.
Centrica climbed 4.2 per cent to 280.08p after Credit Suisse raised its stance on it to “outperform” from “neutral” and increased its target price to 310p, up from 290p.