Housing and Middle East concerns drag FTSE down

The London market closed in the red today after a volatile session amid concerns over the housing market and political tension between Israel and Iran.

The FTSE 100 closed 32.5 points down at 5634.7, although a late bounce-back from the banking sector helped the Footsie claw back a 1.3% drop in mid-session trading on rumours of a strike on Iran’s nuclear sites.

The speculation was later denied, but compounded a poor day for London’s leading share index, with worrying lending figures from the British Bankers’ Association starting the market on the back foot.

Investors also remained cautious ahead of a US Federal Reserve statement tomorrow that could shed light on the timing of potential interest rate increases.

In London, sentiment was hit by figures showing the number of new mortgage approvals dived to a new record low, hitting housebuilders and retailers.

Lending data showed that the number of new mortgages approved for people buying a house plunged by 20% during May to 27,968 – less than half this time last year.

The data accelerated losses in the retailing sector after FTSE 250 member and Comet owner Kesa Electricals issued a gloomy trading outlook. The group was off 16.75p to 157.75p. A downgrade for Domino’s Pizza also saw the company’s shares lose 14%, or 30p to 186p.

Back in the top flight, Next was off 35.5p at 959.5p, with Tesco and Sainsbury’s down 12.9p at 365.1p and 10.5p to 314.75p respectively after figures revealed recent market share losses for the duo.

Housebuilders were also on the back foot, with new FTSE 250 member Persimmon down 17.25p at 337.75p and Barratt Developments 9p off at 74.75p.

In contrast, Debenhams rose 6% after the company brought forward a trading statement to counter recent speculation about its finances. The update showed a surprise rise in like-for-like sales, lifting shares 2.5p to 44.75p.

And the lending figures failed to halt the rally by embattled lender Bradford & Bingley, which saw shares jump more than 17% on news that major investors are planning to sidestep the company’s current rights issue plan.

The alternative proposal, revealed last night, would see B&B drop the planned sale of a 23% stake to TPG Capital, in favour of a £400 million cash injection led by investment group Resolution. The move was welcomed by the lender’s shareholders, with B&B shares up 11.25p to 77.25p.

Among blue-chip banks, Royal Bank of Scotland benefited the most from the afternoon rally, rising 4.75p at 219.25p, with Lloyds TSB ahead 7p at 325.75p.

But Halifax Bank of Scotland lost early trading gains to fall back below its 275p rights issue price – down 4.5p at 274.75p.

One of the biggest gains in the top flight came from Thomas Cook after the tour operator said trading for the summer remained strong in “all major markets”. The stock rose 7.25p to 241.5p, with rival TUI Travel lifting 2.5p to 208.25p.

The biggest Footsie risers were Ferrexpo up 16.75p at 416.75p, Barclays up 11p at 310.75, Wood Group ahead 15.5p at 478.75p and Thomas Cook up 7.25p at 241.5p.

The biggest Footsie fallers were Eurasian Natural Resources down 71p at 1412p, Wolseley down 20.25p at 410.25p, WPP Group off 21.75p at 498.25p and Amec down 38.5p at 901.5p.

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