FTSE turns downwards on unease over France’s banks

SHARPLY weaker banks dragged Britain’s top shares lower yesterday as fears about Europe’s debt came into sharp focus on rumours France may be in danger of losing its triple-A credit rating, and on concerns over the outlook for French banks.

The UK benchmark index ended down 157.76 points, or 3.1 per cent, at 5,007.16, its lowest close since 6 July 2010, having risen 1.9 per cent on Tuesday to snap a seven-session losing streak when it lost about 14 per cent of its value.

UK banks were left nursing their biggest one-day percentage fall since May 2009 as shares of their French peers took a hammering, with Societe Generale down 14.7 per cent as market talk circulated about the bank.

A Societe Generale spokeswoman denied the series of rumours related to its financial solidity.

Concerns that France’s AAA rating was at risk unnerved markets, although credit ratings firms Moody’s and Fitch reiterated their top tier ratings for the country, a day after Standard & Poor’s did the same.

“There’s chatter that France may be downgraded this evening which has obviously hit all the banks very hard. The French banks are really really poor but it’s locked onto our banks as well,” said Joe Rundle, head of trading at ETX Capital.

Barclays was the worst off among the UK banks, down 8.7 per cent, reversing earlier gains inspired by a WestLB upgrade to “buy” and after Citigroup had named it as a most preferred stock on valuation grounds.

Standard Life remained strong, up 5.7 per cent and at the top of the blue-chip leader board, after the insurer unveiled a bigger-than-expected 44 per cent jump in first-half profit.

Man Group advanced 3.2 per cent, boosted by recent director share buying and after the hedge fund manager reported that the net asset value at its flagship AHL fund rose by 1.9 per cent last week.

Essar Energy topped the fallers’ list, off 12.6 per cent, as Goldman Sachs downgraded the India-focused refiner and power generator.