The FTSE 100 Index was mired in the red today as investors showed nerves ahead of tomorrow's UK budget and banking stocks continued their slide.
Lloyds Banking Group, Royal Bank of Scotland and Barclays all suffered as inflation figures gave investors a timely reminder of dire economic announcements expected tomorrow.
The Footsie closed down 3.4 points at 3987.5 despite upbeat results from Primark owner Associated British Foods and Tesco.
Trading was laced with caution ahead of tomorrow’s budget with poor results from the US also weighing.
News that the Retail Prices Index (RPI) measure of inflation fell to minus 0.4% last month – the first negative reading since March 1960 – also gave the market pause for thought.
Banks extended Monday’s slide in the wake of concerns over rising bad debts following Bank of America’s results. Lloyds led the fallers’ board with a near 9% slump, down 9.5p at 95p.
It was closely followed by RBS, which shed 1.9p to 30.6p, and Barclays, off 10p to 199p.
Market talk of a possible plan to scrap high-rate tax relief on pensions - hitting the flow of cash into the financial industry also undermined insurers.
Several leading players were in the red, led by Aviva, down 20.5p to 253.5p. Standard Life fell 8.7p at 178.2p and Prudential lost 17.25p at 363.25p.
But AB Foods stormed the risers’ board with a gain of almost 5% or 32p to 686p, after hailing a “first class performance” from Primark and a 10% rise in operating profits.
Supermarket giant Tesco gained 16.2p to 348.3p after it became the first UK retailer to post profits of more than £3bn (€3.37bn). Both firms were also cautiously optimistic on trading prospects.
Tesco’s rivals also saw support on the back of its figures. Sainsbury’s gained 5p to 311.25p, while Morrisons was up 1.5p to 243p.
Homebase and Argos owner Home Retail Group also shared in the retail rise, up 5p to 256p.
House builders saw big rises early on after reports that the British government was considering a further £1bn (€1.13bn) of support for the industry, although many slipped back into the red later.
In the FTSE 250, Taylor Wimpey was on the risers’ board with a 9% gain, up 4.25p to 49.5p. Barratt was up 1p at 149.5p and Persimmon rose 11.5p to 379.5p, but Bellway shed 9.5p to 714.5p.
Burberry was the second tier’s leading riser after the luxury goods retailer reported an improved sales trend in recent months. Shares were up 43p to 374.5p - or almost 13% – as the international retailer added it remained on track to meet City profit expectations.
The biggest Footsie risers were Eurasian Natural Resources up 42p at 550p, Associated British Foods up 32p at 686p, Tesco up 16.2p at 348.3p and Thomas Cook up 8.5p at 261.25p.
The biggest Footsie fallers were Lloyds Banking Group down 9.5p at 95p, Aviva off 20.5p at 53.5p, Royal Bank of Scotland down 1.9p at 30.6p and Old Mutual down 3.3p at 56.5p.