Banks weigh on the FTSE as Credit Suisse warns of future funding crisis

BRITAIN’S top share index closed a touch lower yesterday, as a weakening in banks after a cautious research note from Credit Suisse slightly outpaced buoyant oil issues and drugmakers.

The FTSE 100 ended down 4.42 points, or 0.1 per cent, at 5,602.30, having closed up 0.1 per cent on Monday, its highest close since 2 September 2008 – before Lehman Brothers collapsed.

The index has rallied nearly 60 per cent since hitting a low on 9 March 2009.

“The FTSE is pausing for breath after a strong run, but the fundamentals still remain very solid,” said Henk Potts, market analyst at Barclays Wealth.

Banks took the most points off the index, extending Monday’s losses. Credit Suisse issued a cautious note on British banks, saying the sector “is at best fair value for now.”

Lloyds Banking Group, Royal Bank of Scotland, HSBC and Standard Chartered fell between 0.7 and 2.8 per cent. Barclays was 0.2 per cent higher after Credit Suisse said the lender was its favourite UK bank.

Miners were also in the doldrums, after a recent strong run, with Randgold Resources, Lonmin and Fresnillo among the worst off, shedding 0.8 to 1.5 per cent.

But Antofagasta gained 1.1 per cent, recovering after falls earlier in the session. The Chilean copper miner said the recent earthquake would not hit new mine projects, so 2010 output would still jump 23 per cent after the group posted 21 per cent lower 2009 core profit on soft prices.

Imperial Tobacco dropped 2.5 per cent after UBS cut its rating on the stock to “sell” from “neutral”. British American Tobacco shed 0.7 per cent.

Britain’s biggest mall owner Liberty International was the top blue chip faller, down 4.1 per cent after it posted a 38 per cent fall in 2009 net asset value.

Energy stocks rose as crude traded above $81 a barrel for much of the day, after hitting an eight-week high in the previous session. Royal Dutch Shell, Cairn Energy and BP rose 0.5 to 0.8 per cent.

Meanwhile, drugmaker GlaxoSmithKline closed up 1.6 per cent.