FTSEdrops as windfall tax worries offset mining gains

Britain&rsquo;s top shares ended 0.2 per cent lower yesterday, with banks weak on concerns over a possible windfall tax, offsetting modest gains in miners and energy stocks which rebounded from earlier losses.<br /><br />The FTSE 100 closed 11.70 points lower at 5,310.66 points, paring some losses from earlier in the session when the index dropped to a day-low of 5,250.98 points.<br /><br />Banks were the biggest fallers, pressured by reports of a potential windfall tax on bankers&rsquo; bonuses. <br /><br />Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered (fell 1.4 to 4.7 per cent.<br /><br />A government source said that a tax on banks was one revenue-raising option being considered by finance minister Alistair Darling for his pre-budget report on Wednesday, and newspapers were heavy with speculation on what form this could take.<br /><br />In further woes for the sector, analysts at Evolution Securities said in a note that capital will remain tight for European banks in the next two years as regulatory changes bite, which will effectively &ldquo;scuttle&rdquo; many banks&rsquo; ability to lend. <br /><br />Defensive pharmaceutical and telecoms stocks fell back after posting gains on Friday, with AstraZeneca and GlaxoSmithKline off 0.7 and 0.6 per cent respectively, while shed 1 per cent.<br /><br />London Stock Exchange fell 1.7 per cent. The exchange said trades in November were 21 per cent lower than in the same period a year ago. <br />Scottish &amp; Southern Energy shed 0.9 per cent after UK energy regulator Ofgem set new price controls.<br /><br />Britain&rsquo;s six big energy suppliers must cut their power and gas prices early next year and should not use their need to invest as an excuse to overcharge customers, energy regulator Ofgem said. <br /><br />The FTSE has so far rebounded 54 per cent since hitting a low in March. A combination of brightening economic data and upbeat corporate earnings since the lows have put the index on track to post its best yearly gains since 1997.<br /><br />Analysts say equities could trend upwards before the end of the year.<br /><br />&ldquo;In the short-term we could see a bit more strength (on the FTSE) going into Christmas,&rdquo; said David Jones, chief market strategist at IG Index.<br /><br />&ldquo;People still have a fairly bullish bias towards stock markets and it wouldn&rsquo;t be surprising to see it run back up to the highs of the year at around 5,400,&rdquo; he said.<br /><br />Miners were mostly higher, as metals prices regained some lost ground after the US dollar eased off a five-month high against a basket of currencies. Antofagasta, BHP Billiton, Kazakhmys, Lonmin and Rio Tinto rose 0.5 to 2.2 per cent.<br /><br />BHP Billiton and Rio Tinto signed a $116bn iron ore joint venture agreement on Saturday to combine their Western Australian iron ore operations. <br /><br />Energy stocks reversed earlier losses as crude prices edged up slightly but remained below $75 a barrel. BG Group, BP, Cairn Energy and Royal Dutch Shell were up 0.3 to 0.7 per cent.<br /><br />Among the gainers TUI Travel added 1.5 per cent after Panmure Gordon repeated its &ldquo;buy&rdquo; rating following results last week from Europe&rsquo;s biggest tour operator. Within the sector, Thomas Cook, which was also rated as a &ldquo;buy&rdquo; by Panmure, rose 1.9 per cent.<br /><br />Accountancy software company Sage gained 0.8 per cent after BofA Merril Lynch raised its target price following the company&rsquo;s results.