FTSE on the back foot

Banking stocks ended the final full trading session of the year on the back foot today as fears over the sector’s fortunes sent shares down.

Barclays, Alliance & Leicester and Halifax Bank of Scotland were among those dragging on the FTSE 100 Index, which closed down 20.9 points at 6476.9.

But the market clawed back losses seen earlier in the session after geopolitical concerns were fuelled by the assassination of Pakistan’s former Prime Minister Benazir Bhutto.

The market had dropped by as much as 61 points at one stage, with further disappointing housing market data in the US adding to the volatility.

The banks endured losses as investors in America continued to speculate about further fall-out from the credit crunch.

A report in the Wall Street Journal suggested that European and US banks such as Citigroup were looking at major disposals to boost finances.

On the Footsie, Barclays dropped 5.5p to 506.5p, mortgage group A&L fell 6.5p to 640p and HBOS lost 5p to close at 729.5p.

Beleaguered mortgage bank Northern Rock, recently relegated to the FTSE 250, dropped 2.75p to 83p amid reports that hedge fund RAB Capital had upped it stake in the group for the second time in two days to 7.5% ahead of a January shareholder meeting.

Corporate news was thin on the ground, but housebuilders were initially unnerved after the Nationwide building society said house prices eased 0.5% in December.

Taylor Wimpey was down 2% at one stage but recovered to close unchanged at 207.5p, while Charles Church owner Persimmon hauled itself into positive territory with a gain of 10.5p to 801p.

One of the session’s fallers was Intercontinental Hotels Group, down 5p to 884p after warning that fears of overcrowding and high prices might scare off regular tourists from London during the 2012 Olympics.

Retail stocks made mixed progress with Argos owner Home Retail Group reversing a fall of 4p to put on 2p to 325.75p. Marks & Spencer also featured highly on the gainers board, up 1% or 5.5p to 555.5p.

Comet owner Kesa Electricals featured high up in the FTSE 250 Index risers league after it said it was in exclusive talks to sell its French furniture business for €550m (£404m).

MFI’s private equity owner Merchant Equity Partners is one of the three-strong consortium bidding for BUT, causing Kesa shares to jump 5%, or 11.25p to 234p.

Supermarket giant Morrisons managed a rise of 1.75p to 319.5p, although rival Sainsbury’s shed 1p to 426p.

Meanwhile, commodity stocks dipped after copper prices fell on speculation over the US economy.

Xstrata lost 33p to 3593p and Kazakhmys dropped 11p to 1368p.

The biggest Footsie risers were Cairn Energy up 90p at 3090p, Reed Elsevier ahead 13.5p at 682p, BSkyB up 9p at 627p and Persimmon up 10.5p at 801p.

The biggest Footsie fallers were Schroders down 34p at 1318p, BT Group off 6.25p at 273.25p, Standard Life down 4.5p at 253p and Severn Trent down 23p at 1559p.