The FTSE 100 is recovering slightly after posting a sharp fall at the open on Monday, as oil and bank stocks weighed on the index.
The Bank of England is set to announce the results of its stress tests for UK banks on Wednesday. The stress tests investigate how the banks would fare in a repeat of the global financial crisis.
Banks are required to hold capital “buffers” in case of a crisis. The stress tests have been made more stringent this year for systemically important banks.
RBS led the declines in the FTSE, with shares dropping by over 2 per cent. Lloyds and Barclays posted the next biggest declines, falling by 1.14 per cent and 1.67 per cent respectively. Both are on the global list of systemically important banks, which require them to hold additional capital.
The other two UK sytemically important banks, HSBC and Standard Chartered, were also posted declines of 0.97 per cent and 0.28 per cent respectively.
Meanwhile, FTSE oil stock declines were led by Tullow Oil, Petrofac, and Royal Dutch Shell. In morning trading Tullow fell by over 1.43 per cent, Petrofac by 1.15 per cent, and HSBC by 1.05 per cent.
Oil prices have fallen since Friday as sentiment shifts away from an Opec cut on Wednesday. West Texas Intermediate crude oil had enjoyed a rally from $42 per barrel to hit $49, but have since fallen back below $46 per barrel. The North Sea benchmark, Brent crude, was also down 0.33 per cent to $45.91 per barrel.
It had seemed that markets were predicting an Opec production cut at their meeting, also on Wednesday, but comments from Saudi oil minister Khalid al-Falih that he expected oil markets to balance even without Opec cuts have spooked investors.