Weak banks drag on FTSE as Moody's warns on Spain

BRITAIN’S leading share index slipped back yesterday, snapping a four-session winning streak, with banks the worst performers as investors' risk appetite waned on fresh eurozone debt concerns.

The FTSE 100 ended down 9.03 points, or 0.2 per cent at 5,882.18, having finished at its highest close for 30 months on Tuesday after putting on 1.7 per cent since 9 December.

“It looks like it wants to go higher into the year-end ... but it’s tricky with the big fourth-quarter futures and options expiries happening tomorrow,” said David Morrison, market strategist at GFT Global.

“There is also some fairly significant resistance on the FTSE coming up around 5,930 and that might provide a bit of a barrier, so we just need to be a bit wary around that level.”

Banks were the main drag on blue chips, with Barclays the top FTSE 100 faller, down 3.7 per cent as worries resurfaced over Eurozone debt worries.

Other banks also suffered as HSBC dropped 10.6p to 661.1p, part-nationalised Royal Bank of Scotland lost 0.6p to 40.8p and Lloyds Banking Group declined 0.8p to 68.5p.

Moody’s put Spain's Aa1 rating under review, citing concerns about its mounting debt and 2011 funding needs, though it said it did not expect Madrid to need an EU bailout.

A cautious statement from the US Federal Reserve on the economic outlook Tuesday night also knocked investor sentiment.

US blue chips, however, were up 0.3 per cent by London's close, helped by in-line US inflation data and a stronger than expected manufacturing report from the New York Fed, although the broader S&P 500 index was lower.

On the domestic data front, the number of Britons out of work rose for the first time in six months in the three months to October.

Among commodity plays, silver miner Fresnillo fell 2.5 per cent, while gold miner Randgold Resources lost 2 per cent as the prices of precious metals retreated under pressure from a firmer dollar.

Integrated oils were weak as a sector, although the crude price managed a slight rally with BG Group, down 1.3 per cent, and Royal Dutch Shell off 0.4 per cent.

BP, however, bucked the trend, as speculation of corporate action kept the stock higher, up 0.7 per cent. After vague talk of a possible bid from Royal Dutch Shell on Tuesday, traders noted rumours BP was seeking to raise capital from investors in the Middle East to help fend off any takeover.

Capital Shopping Centres was the top FTSE 100 riser, up 4.9 per cent as Simon Property made a 425p per share indicative offer valuing the British mall owner at about £3bn.

Rexam gained 3.8 per cent, taking its advance for the week up to nearly 5 per cent, as traders cited hopes for a disposal of the consumer packaging firm's Closures unit.

Scottish and Southern Energy was also up on rumoured interest from Cheung Kong Infrastructure, possibly in tandem with EDF. Its shares have added 11p to £11.47.