Banking shake-up gives the markets a case of the jitters

BRITAIN&rsquo;S top share index fell to its lowest closing level in a month yesterday, led down by banks after shake-ups at Royal Bank of Scotland&nbsp; and Lloyds and poor results from Swiss peer UBS<br /><br />The FTSE 100 closed 67.29 points or 1.3 per cent weaker at 5,037.21, having surrendered the 5,000 level for the first time since October 2 earlier in the session. It traded as low as 4,985.09.<br /><br />Upbeat data from across the Atlantic helped the index pare its losses, with new orders received by US factories beating Wall Street expectations and rising 0.9 percent in September.<br /><br />&ldquo;There&rsquo;s always going to be a bit of profit taking on any sustained move higher and that's certainly what&rsquo;s happening today,&rdquo; said Angus Campbell, head of sales at Capital Spreads.<br /><br />The index has surged about 46 percent from a six-year low in March, though is still 7 per cent below its level in mid-September 2008 before the collapse of Lehman Brothers.<br /><br />Campbell said investors would be keenly awaiting Friday&rsquo;s US non-farm payrolls figures to see whether last week&rsquo;s above-forecast US GDP figures will be complemented by the employment situation.<br /><br />Banks were hit hardest as Lloyds Banking Group launched a record &pound;13.5bn rights issue, and along with rival Royal Bank of Scotland agreed to sell off some businesses to limit their reliance on government support.<br /><br />The British Treasury said Lloyds and RBS would between them have to sell businesses equating to 10 per cent of the UK retail banking market. <br /><br />Lloyds shares rose 2.7 per cent on confirmation of long-expected plans, while RBS shares slid 7 per cent.<br /><br />Poor results from UBS added to the negative sentiment in the sector, which was also hit by a bankruptcy move by US lender CIT and comments from a Federal Reserve official warning about loan losses.<br /><br />Heavyweight HSBC fell 3.3 per cent, while Standard Chartered and Barclays dropped 1.8 per cent and 2 per cent, respectively.<br /><br />Demand concerns weighed on the mining sector, with investors cautious as the US Federal Reserve began a two-day meeting on monetary policy.<br /><br />Fresnillo, BHP Billiton, Xstrata and Vedanta Resources shed 1.1 to 2.3 per cent.<br /><br />Energy stocks also dropped, with BP, BG Group, Royal Dutch Shell and Tullow Oil&nbsp; down 0.6 to 2.5 per cent.<br /><br />Among individual movers, Tesco&nbsp; rose 0.5 per cent, helped by a rating upgrade to &ldquo;buy&rdquo; from Goldman Sachs, which said it had a compelling opportunity to take significant share of the UK retail banking market. The broker also cited its international exposure as a positive. <br /><br />Downbeat broker sentiment impacted GlaxoSmithKline, off 1.5 per cent, with BofA-Merrill Lynch cutting its rating on the drugmaker to &ldquo;neutral&rdquo;, on the grounds that the stock appeared fully valued.<br /><br />Engine-maker Rolls Royce fell 1.9 per cent after the company&rsquo;s interim trading update disappointed some investors, with Evolution Securities repeating its &ldquo;sell&rdquo; rating.