Barclays drags down FTSE

Barclays shares dived 9% today during another rollercoaster session for investors.

Barclays shares dived 9% today during another rollercoaster session for investors.

Rumours of a US$10bn (€6.8bn) write-down rocked the company’s share price, as the City continued to fret about the fall-out from the US sub-prime mortgage crisis. Barclays insisted the speculation had no substance, causing its shares to recover and close 2% lower, or 11.75p down at 474.5p.

But market jitters continued to affect the rest of the London market, with the FTSE 100 Index down 77 points at 6304.9 at the end of another volatile session.

Across the week, the top flight ended more than 200 points lower as uncertainty over the financial sector’s exposure to sub-prime loans returned to haunt markets worldwide.

The downward pressure came despite another powerful session for shares in miner Rio Tinto, which put on another 6% following news of a multi-billion pound takeover approach from BHP Billiton. Rio lifted 328p at 5624p, but others in the sector – including BHP – lost gains seen yesterday.

The much-needed merger and acquisition activity initially propped up the London market, with the Footsie ahead 61 points at one stage.

However, the Barclays rumours caused the financial sector to lead a retreat. Royal Bank of Scotland fell 12.25p to 402.75p, while HSBC dipped 11.5p to 840.5p and Lloyds TSB fell 9p to 474.5p. Troubled mortgage lender Northern Rock continued to fall, with its shares down 5p at 145p.

Friends Provident was 11.5p lower at 148.7p after broker UBS trimmed its price target and traders questioned the company’s strategy following the failure of its merger with closed funds firm Resolution.

Norwich Union owner Aviva and Prudential were both 3% lower, off 23p and 21p at 674p and 678p respectively.

BAE Systems fell by 1%, or 7p at 502.5p, after two pressure groups won permission to bring a High Court challenge over the decision to end investigations into alleged bribery and corruption involving the company and Saudi Arabia.

BG Group was stronger as investors piled into the stock for a second successive session, after a major oil discovery at a Brazilian field in which BG has a 25% stake. Shares were 16p higher at 1005p, but the stock was off record highs seen earlier in the session.

Elsewhere, shares in media group Emap were up 3p to 840p, after it reported encouraging progress on the possible break-up of the business.

Lower down the market, model maker Hornby rose in the wake of improved sales numbers, particularly from Scalextric after demand was boosted by the success of Formula One driver Lewis Hamilton. Shares closed 3% higher or 7p at 250p.

The biggest Footsie risers were Rio Tinto up 328p at 5624p, Icap ahead 28.5p at 625p, Mitchells & Butlers up 30p at 660p and British Energy ahead 10p at 521.5p.

The biggest fallers were Vedanta Resources down 161p at 2044p, Friends Provident off 11.5p at 148.7p, Antofagasta down 38p at 745p and Cable & Wireless off 9.1p at 180p.

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