FTSE 100 is dragged down by banks despite healthy UK economic recovery

BRITAIN’S top share index ended 0.7 per cent lower yesterday, dragged down by banks, which extended the previous session’s losses, in thin trading ahead of the Easter break.

The FTSE 100 index ended down 38.34 points at 5,672.32, having closed above 5,700 for the last three sessions. The index hit a 21-month intra-day peak at 5,742.75 earlier.

Banks took the most points off with heavyweight HSBC down 2.1 per cent and Barclays off 2.4 per cent.

Part-nationalised banks Royal Bank of Scotland and Lloyds Banking Group shed 3.4 and 3 per cent respectively, unsettled by uncertainty about what a British government might do with its stakes in the two following the impending general election, expected on May 6.

Midcap fund firm Gartmore slid more than 31 per cent after the company suspended fund manager Guillaume Rambourg after an internal probe.

On the economic front, Britain emerged from an 18-month recession in the fourth quarter of last year with more momentum than previously thought. The UK economy grew 0.4 per cent in the last three months of 2009, above analysts expectations for an unrevised 0.3 per cent.

“The GDP numbers are good for the economy as a whole ... but for equity markets, of course, if that means tightening, possibly you could see a little bit of a sell-off, and you could be seeing a little bit of profit taking today,” said Angus Campbell, head of sales at Capital Spreads.

Energy stocks were in the doldrums, tracking a fall in the crude price. BP, BG Group and Cairn Energy dropped 0.4 to 2.1 per cent.