FTSE ends six-day rally after Irish bank stress test results

BRITISH bank shares fell on further concerns about the state of finances in the peripheral Eurozone countries, dragging the country’s top shares lower by the close yesterday and ending a six-day winning run.

Ireland said its four remaining banks require another €24bn ($34.1bn) to enable them to withstand potential losses from a worsening of the economy.

The blue chip index closed down 39.54 points, or 0.7 per cent, at 5,908.76, having risen 0.3 per cent on Wednesday.

After a week of low volumes, trading was robust at 126 per cent of the average of the last 90 trading days.

The Irish announcement came as markets closed, but the index fell sharply at the closing auction where traders settle outstanding trades for the day.

“We saw equity markets suddenly slide very rapidly towards the close with the banking sector slipping back quite considerably,” said Michael Hewson, market analyst at CMC Markets.

“What we have seen in the closing auction [in the FTSE 100] is an early indication of what the market thinks of it.”

Fears about the state of finances in some poorer Eurozone countries had already been heightened when it was revealed that Portugal’s deficit was more than a percentage point above target at 8.6 per cent of GDP.

Europe’s largest banks HSBC fell 2.3 per cent while Barclays fell 2.3 per cent and insurer Prudential fell 2.1 per cent. Firmer commodity prices lifted some miners and energy firms, preventing heavier losses.

West African-focused gold miner Randgold Resources was the top gainer, up 8.8 per cent after it said it is sticking with the production forecast for 2011 which it gave early last month, even though the unrest in the Ivory Coast, home to its newest mine, has since worsened.

Shares in Vedanta Resources added 2.8 per cent after a press report raises hopes of a green light for its planned buy of a stake in Cairn Energy’s Cairn India unit.

Chip designer ARM Holdings climbed 2.2 per cent, boosted by a Bank of America Merrill Lynch upgrade. Retailers continued a poor run, with a profit warning from mid-cap Mothercare further shredding sentiment on the sector. Kingfisher slipped 3.3 per cent.

ITV, whose biggest source of revenue is advertising from retailers was the top faller, down 3.9 per cent.

“The domestic situation is difficult and the consumer-oriented part of the market will be a feature weighing on the market,” said Tim Rees, manager of the £270m ($434.6m) Insight equity income fund.

However, he added that the internationally focused index is supported by its exposure to commodity stocks which should continue to benefit from robust global demand.

Vodafone, the world’s largest mobile operator by revenue, shed 1.9 per cent after it said it would pay $5bn to buy out Essar Group from its Indian joint venture.

International Power slipped 2.3 per cent after JPMorgan expressed concerns over potential downgrades in the consensus market forecast for earnings and limited newsflow.

Technical indicators were seen as constraining potential future strength in the market.

“On a more long term scale the 5,975 level remains the area capping any gains on the upside, and has done since early in March,” James Hughes, senior market analyst, at Alpari UK, said.