Banks and oil firms weigh on the FTSE

BRITAIN’S top shares closed lower yesterday as banks fell out of favour after brokers urged caution on the sector after recent gains, while poor growth in the UK highlighted the challenges facing corporates to meet earnings expectations.

London’s blue chip index closed down 28.90 points, or 0.5 per cent at 5,723.00, as the FTSE 100 retreated from six-month highs hit on Monday, but held above 5,700 - the level it had struggled to close above since last August.

Banks were the main fallers, having risen around 15 per cent early in 2012, compared with about a three per cent gain on the UK’s benchmark index, as analysts at UBS and Macquarie cast doubt over the sustainability of the recent rally.

Royal Bank of Scotland shed 1.1 per cent as UBS cut its rating on the majority state-owned lender to “neutral” from “buy”.

Macquarie also downgraded its recommendation on RBS in a broader note on banks.

Peers Lloyds Banking Group and Barclays fell 2.3 and 0.5 per cent as Macquarie compared the current European crisis with that in Japan in the 1990s and concluded the recent rally is an opportunity to take profits.

Worries over their outlook hit integrated oils, as JP Morgan said the sector was set for some weak earnings in its fourth-quarter results preview.

Royal Dutch Shell and BP shed 1.6 and 0.6 per cent respectively, as JPMorgan cut its 2012/13 earnings estimates for both firms by up to 10 percent.