The London market fell into the red today in the face of deepening concerns over a European debt crisis, with the banking sector bearing the brunt of the pressure.
Investors’ confidence was rattled after ratings agency Standard and Poor’s warned the price of bailing out Anglo Irish Bank could exceed €35bn, fuelling concerns over European recovery.
This was compounded by weak UK housing data released earlier in the day, revealing a six-month low in mortgage approvals for house purchases, which contributed to the FTSE 100 Index closing nine points lower at 5569.
The pound came under pressure after Adam Posen, a member of the Bank of England’s Monetary Policy Committee, called for more quantitative easing. Sterling was down against the dollar and euro at 1.58 and 1.15 respectively.
Banking stocks were among the major Footsie losers, with HSBC down 10.5p at 649p, Lloyds off 1p at 74.3p and Barclays slipping 3.8p to 305.2p.
The biggest faller, however, was Vedanta Resources. Shares dropped 4% or 96p to 2165p after it was ordered to close one of its key smelting plants in India.
On the plus side, BP surged 4%, up 16.7p to 421.9p, after incoming chief executive Bob Dudley announced a raft of measures aimed at rebuilding the shaken company.
Mr Dudley, who takes over from embattled boss Tony Hayward on Friday, said he hoped the launch of a new safety division would restore trust after the Gulf of Mexico disaster.
Elsewhere in the top flight, BP’s competitors failed to follow suit, with Royal Dutch Shell down 3.5p at 1910.5p, Tullow Oil holding at 1283 and Cairn Energy slipping 2p to 458.1p.
Airport scanners and medical devices firm Smiths Group reported a 17% rise in annual profits to £435m, but an initial rally in shares faltered as investors noted cautious comments over the potential impact of government spending cuts on sales growth. Stocks were down 18p to 1196p.
Rolls surged ahead 3% or 20.5p to 612p after Morgan Stanley upgraded the stock and said the City may have missed the potential for improved profitability following the recovery in after-markets.
Other firms on the front foot included Smith & Nephew, which climbed 9p to 573.5p, while industrial testing firm Intertek added 16p to 1836p.
Elsewhere, Dairy Crest put back recent falls to rise 23.6p to 372.6p in the FTSE 250 Index after it announced that it has renewed a contract to supply the supermarket Morrisons with fresh milk through to 2015.
Transport provider FirstGroup added 17.7p to 367.3p after reporting signs of more stable trading in its North American school bus arm. The Aberdeen-based group said demand for first class train travel is also recovering to levels not seen since the recession struck and said it was trading in line with management expectations.
The biggest Footsie risers were Wolseley, up 96p to 1591p, BP, ahead 15.8p at 421p, Rolls Royce, up 20.5p at 612p, and Essar Energy, ahead 12.3p at 465p.
The biggest Footsie losers were Vedanta Resources, down 96p at 2165p, Astrazeneca, off 62.5p at 2165p, Inmarsat, down 11.5p at 669p, and BG Group, off 18.5p at 1133.5p.