Banks drag FTSE down as concerns over US recovery harms sentiment

BRITAIN’S top shares fell yesterday, led by banks as worries over the economic recovery in the US and lack of action taken by the Federal Reserve hit sentiment, offsetting gains in miners.

The FTSE 100 ended down 24.28 points or 0.4 per cent at 5,551.91, after falling 0.5 per cent on Tuesday.

The US central bank’s policy-setting panel opened the door wider late on Tuesday to pumping hundreds of billions of new dollars into the economy on worries over low inflation.

US Treasury debt prices surged and the dollar fell sharply as investors speculated about further easing.

Gold and base metal prices rallied as investors retreated from the dollar, fuelling demand
for mining stocks, with precious metals miners Randgold Resources and

BHP Billiton was up 2.1 per cent. Potash Corp said it filed a lawsuit against BHP Billiton that seeks to block the mining giant's $39bn hostile bid for the Canadian fertilizer producer.

Banks were the biggest drag on the index, with Lloyds Banking Group off 1.4 per cent and HSBC one per cent weaker.

Banks were also weighed down by a statement from Deutsche Bank, which sent a warning shot over Q3 earnings late on Tuesday.

Santander, Europe’s largest banking group by market, fell after a Credit Suisse downgrade.
Minutes of the Bank of England’s Monetary Policy Committee meeting on Sept 8-9 showed BoE policymaker Andrew Sentance had repeated his lone call for an interest rate hike while his colleagues thought the probability that more monetary easing would be needed had increased.