FTSE tumbles to lowest close for a week as bank shares fall

BRITAIN’S top share index fell yesterday, with declines from miners and banks offsetting a lift from merger and acquisition moves, as finance ministers were gathering to discuss changes to the Eurozone’s rescue fund.

Smiths grabbed top spot on the blue-chip leaderboard, up 7.7 per cent, after the engineering firm rebuffed a £2.45bn bid for its medical unit.

Artificial knee and hip maker Smith & Nephew rose 3.5 per cent following a weekend report Johnson & Johnson was considering a fresh takeover approach worth at least 800p a share, valuing it at £7.1bn.

The FTSE 100 ended down 16.37 points, or 0.3 per cent, at 5,985.70, its lowest close since 10 January and a third session of losses. Trading was lacklustre with US markets closed for the Martin Luther King Jr Holiday.

“It’s a pretty quiet day with regards to news on a general equity basis ... I think we’re waiting to see how the European finance ministers’ meeting goes, and we’ll take it from there,” Peter Dixon, economist at Commerzbank, said.

But IG Index’s chief market strategist David Jones said that at least for now the weak trading was not a concern.

“We have seen a reasonable amount of sell-offs already this year, and these have ultimately been pounced on by the bargain hunters keen to jump on board the markets medium-term positive trend. At the moment, this slide doesn’t give any real reasons for concern – it is only if the FTSE index starts to slip to fresh-one-month lows below 5,900 that it could start to look like more than just a normal-slight correction,” he said.

But City Index strategist Joshua Raymond said he believed the FTSE could see a correction to 5,500 “should it fail to break consistently above 6,050 soon.”

Eurozone finance ministers are meeting to discuss changes to the effective lending capacity of the European Financial Stability Facility, though no final decision was expected yesterday, with Germany seeing no need to bolster the fund.

BP edged up 0.2 per cent, outperforming sector peers, as investors and analysts gave a cautious welcome to its share swap and Arctic exploration deal with Russia’s Rosneft, saying any return is likely a long way off.

Vodafone Group added 1.8 per cent as investors awaited a deal for the British mobile operator to dispose of its 44 per cent stake in French mobile operator SFR for between €7bn and €8bn.

Banks fell as investors locked in profits from a sector that has enjoyed a good start to 2011 despite Europe’s sovereign debt problems lingering in the background.

Miners remained hamstrung by concerns over demand from China after the world’s biggest consumer of raw materials announced it was raising banks’ required reserves by another 50 basis points on Friday, a further sign of monetary policy tightening.

ARM Holdings fell 3 per cent, with traders citing concerns surrounding customer Apple’s chief executive Steve Jobs. He is taking medical leave two years after a six-month break for a liver transplant.

Autonomy shed 5.1 per cent, the worst performing FTSE 100 stock, after Standard and Poor’s equity research said a lack of a positive pre-announcement does not bode well for the British software firm’s Q4 results. Engineer Weir Group shed 2.8 per cent, with traders citing talk of a potential bid for Swiss rival Sulzer.