Week of gains set back by S&P UK outlook downgrade

A CUT in the UK's ratings outlook from agency Standard &amp; Poor's weighed on the FTSE 100 yesterday, with weakness in heavyweight oils, miners and banks contributing to a 2.8 per cent slide by close of play.<br /><br />The index ended 122.94 points lower at 4,345.47, its biggest daily fall since 27 March, having closed 13.84 points lower on Wednesday.<br /><br />&ldquo;The potential downgrade (from S&amp;P) has given an excuse for investors to sell after the recent sharp gains,&rdquo; said Grahame Exton, fund manager at Tilney Investment Management. &ldquo;Investors are realising it won&rsquo;t be the V-shaped recovery that they were pricing in.&rdquo;<br /><br />The extent of the economic gloom for the UK&rsquo;s finances was reinforced by data showing public borrowing hit a record high for an April since records began in 1984.<br /><br />Banks weighed heaviest, with <strong>HSBC, Royal Bank of Scotland, Barclays, Standard Chartered</strong> and <strong>Lloyds Banking Group</strong> shedding 3.1 to 5.9 per cent.<br /><br />Oil majors fell back as crude weakened, with <strong>Royal Dutch Shell, BP, BG Group</strong> and <strong>Cairn Energy</strong> down between 1.8 and 2.9 per cent.<br /><br />Miners retreated with lower metal prices, led by <strong>Kazakhmys</strong> and <strong>Eurasian Natural Resources</strong> down 6.6 and 7.4 per cent respectively, while <strong>BHP Billiton, Xstrata</strong> and <strong>Rio Tinto</strong> fell 5 to 9.6 per cent.<br /><br />Property group <strong>British Land</strong> slid 6.4 per cent after it saw its full-year net asset value tumble 64 per cent to 398p a share, below the average forecast of 423.6p<br /><br />Other real estate stocks suffered as well, with <strong>Land Securities, Hammerson</strong> and<strong> Liberty International</strong> losing 6.6 to 8.2 per cent.<br /><br /><strong>ICAP</strong> shed 9.1 per cent, extending the previous session&rsquo;s sell-off following confirmation after the market close on Wednesday that the firm&rsquo;s founder and chief executive, Michael Spencer, had sold a chunk of shares in the inter-dealer broker.<br /><br />Mobile telephone giant <strong>Vodafone </strong>slid 4.3 per cent after Nomura cut the stock to &ldquo;reduce&rdquo; from &ldquo;buy&rdquo;, UBS removed it from its &ldquo;most preferred&rdquo; list and Deutsche Bank cut its price target on the stock.<br /><br />There were just five blue chip risers with <strong>Capita, Unilever, Glaxosmithkline, Astrazeneca, Tullow</strong> and<strong> Lonmin</strong> up between 0.4 and 3.6 per cent.<br /><br />Investors will watch the second release of first quarter GDP data today for more insight on the ferocity of the headwinds facing the UK economy.