Banks hold FTSE back

The London market struggled to find positive momentum today amid downbeat news from the banking sector and housing market worries.

An uninspiring trading update from Lloyds TSB and predictions of little progress in the housing market conspired to send the FTSE 100 Index 3.6 points lower to 4502.2 by the end of the session.

Analysts said that while gradual rate rises would support shares, a property market crash could put London equities under significant downward pressure.

A flat performance by the Dow Jones Industrial Average – which hovered just below its opening mark by closing time in London – offered no support.

“Unfortunately the US markets have been on the drift since they opened, quite positively killing any possible momentum in London,” said David Buik of Cantor Index.

It was left to insurers to prop up the London market as Royal & Sun Alliance gained ground after confirming talks were taking place over the disposal of its life insurance operations.

The long-awaited sale drove its shares to the summit of the Footsie risers board, up more than 3% or 3p at 84p.

Aviva was up 11.5p to 574.5p, but other players in the sector retreated, with the Prudential off 4p to 463.5p and Legal & General losing 0.75p to 92.75p.

British Gas owner Centrica cheered investors with news that it is in talks over the sale of motoring organisation the AA, making its stock the third highest Footsie riser.

Centrica shares were 5p firmer at 221.25p amid speculation that the AA could fetch more than £1.5 billion. The news also helped shares in lower-tier rival RAC to accelerate 14.5p to 703p.

But a trading update from Lloyds TSB failed to impress investors as its shares retreated 0.5p to 436p.

Lloyds, which reported satisfactory progress after showing signs of benefiting from a strategic overhaul, was joined on the way down by a host of other financial stocks.

Royal Bank of Scotland weakened 2p to 1656p, HBOS lost 4.5p at 701.5p and Northern Rock fell 3p to 730p.

Oil stocks were also in lacklustre form with BP 5.75p lower at 490.25p and Shell off 2p at 411.75p.

Outside the top flight, a 14.8% rise in pre-tax profits to £16 million helped Quintain Estates advance 6p to 433p.

The company reported “exciting prospects” after sealing deals to redevelop the Millennium Dome site and land next to Wembley Stadium.

Shares in radio group UBC lifted more than 5% or 1.5p to 29p after it posted a five-fold rise in annual profits.

But stock in office provider Regus dipped more than 3% or 2p to 63p after it announced it was in talks to buy US rival HQ Global.

The highest risers in the Footsie today were Royal & Sun Alliance up 3p to 84p, Sainsbury’s ahead 6.75p to 286.5p, Centrica up 5p to 221.25p and Old Mutual ahead 2.25p to 101.25p.

The heaviest fallers were Enterprise Inns down 12p to 552p, mmO2 off 2p to 94.75p, BG down 6.25p to 349.75p and Morrisons off 3p to 237.5p.