Mortgage misery dampens FTSE efforts

Disappointing results and news of hefty write-downs from Bradford & Bingley sent the London market into the red today as fears grew over the banking sector.

The FTSE 100 Index closed down 29.9 points at 5880.1 after mortgage lender B&B sparked heavy losses among financial stocks.

A positive start to trading on Wall Street helped limit the declines, with American investors buoyed by news of an unexpected increase in retail sales last month.

However, in London, second tier firm B&B plummeted by 23% after revealing a near-halving in annual profits after bad debts spiralled in 2007 and the credit crunch led to write-downs of £144.1m.

Its blue chip counterpart Alliance & Leicester suffered a 7% decline as investors feared a similar shock in store from the lender.

Most of the UK’s biggest banks saw declines with worries over the extent of the losses that will be revealed in the results season over the next two weeks.

Barclays slipped 2p to 453.75p, Halifax Bank of Scotland dropped 8p to 665p and Lloyds TSB was off 5.5p at 416p.

Today’s gloomy trading also reflected the Bank of England’s latest inflation report indicating that interest rate cuts this year will be below market hopes, as well as profit-taking after yesterday’s strong end to trading.

Also among the fallers were housebuilders as the market digested the interest rate outlook from the Bank of England. Taylor Wimpey was off 4.8p to 173.1p, and Charles Church owner Persimmon lost 19.5p to 726p.

Other fallers included high street giant Marks & Spencer, which dipped 9p to 411p after news of a discount voucher scheme for its staff fuelled fears over current trading.

The fall affected other retailers including Tesco, down 6p at 400p and B&Q owner Kingfisher, down 0.7p at 135.6p.

Heavily weighted miners, who were among the big winners during yesterday’s 3.5% Footsie surge, also lost ground amid today’s sentiment. Vedanta Resources lost 68p to 1954p, and BHP Billiton was off 13p at 1542p.

Drinks giant Diageo, which makes Guinness and Bailey’s liqueur, fell 25p to 1034p, or 2% ahead of results tomorrow despite analyst expectations for a strong set of interim figures.

The leading Footsie riser was nuclear power group British Energy, which gained 9%, or 44p, to 533p after unveiling a bumper dividend and offering reassurance on progress with repairs at Hartlepool and Heysham.

Consumer products group Reckitt Benckiser also gained 68p to 2723p after strong growth from its recently-acquired Nurofen and Strepsils brands helped it deliver a 15% rise in full-year profits.

In the second tier, embattled Northern Rock fell 9.5p to 95.5p as reports suggested that both rescue deals on the table failed to match up to Government expectations, heightening the prospect of nationalisation.

The biggest Footsie risers were British Energy up 44p at 533p, Experian Group ahead 18.25p at 453.75p, Man Group up 22.5p to 579.5p and International Power up 10.5p to 416.5p.

The biggest Footsie fallers were Alliance & Leicester down 42p at 559p, BG Group off 50p at 1137p, Vedanta Resources down 68p at 1954p and Taylor Wimpey off 4.8p at 173.1p.