Banks and telecoms drag FTSE down

A strong performance from Marks & Spencer was not enough to stop the London markets heading into the red today as a string of financial stocks came under pressure.

Shares in M&S surged 4% after its sales growth since January smashed expectations in the City to extend the recovery led by chief executive Stuart Rose.

The good news from M&S grabbed the headlines today but losses elsewhere, particularly from banks as well as telecoms firm BT, dragged the FTSE 100 Index down 9.6 points to 6057.4 by mid-morning.

A dashing performance from M&S sent it to the top of the blue-chip risers board with gains of 20.5p to 584.5p after the retailer said same-store sales were up 6.8% in the first three months of 2006.

Enthusiasm among M&S investors was mirrored in the mining sector where a host of stocks stood at record highs on the back on soaring metal prices.

Xstrata led the way with a 45p gain to 2019p, while Rio Tinto lifted 63p to 3178p and BHP Billiton ticked 23.5p higher to 1165.5p.

And oil majors BP and Royal Dutch Shell were also on the move as tensions between the United States and Iran pushed oil prices close to record levels. Shares in BP were up 9p to 702.5p while its rival gained 25p to 1995p.

But news that Scottish & Newcastle intended to raise £210m (€302.1m) through a placing of new shares to fund its acquisition of the Foster’s brand in Europe was weighing on the brewer’s shares.

S&N was the heaviest faller of the morning session in the top flight, down 3% or 16.5p to 515p, even though analysts thought the deal was a good move.

It was joined on the way down by a string of banks and insurers, including Alliance & Leicester, down 29p to 1126p, and Friends Provident, 4.75p lower at 194.25p.

Elsewhere, Carphone Warehouse was unchanged at 313.5p following strong gains earlier in the week after plans to offer a low-cost broadband service leaked out. But shares in rival broadband provider T came under pressure, falling 3% or 5.75p to 212.5p.