FTSE closes 100 points down

Economic gloom and a huge jobs cull from banking giant Citigroup cast a pall over the London market today.

Citi’s plans to cut 52,000 jobs added to the downbeat mood among traders after dire surveys from UK business groups and confirmation from Japan that the world’s second largest economy is now in recession.

With Wall Street’s Dow Jones Industrial Average also down 2% in early trading, the FTSE 100 Index eventually closed 100.8 points lower at 4132.2.

The poor beginning to the week weighed heavily on banking stocks, with HBOS the leading blue-chip faller after a financier conceded defeat in his battle to broker an alternative deal to its proposed takeover by Lloyds TSB.

Jim Spowart, who founded Intelligent Finance and Standard Life Bank, blamed UK Government ministers and a series of leaks for ending his campaign to stop the Lloyds TSB deal going through.

HBOS shares sank 16% or 12p to 74p, while Lloyds TSB shed 17p to 149p and Royal Bank of Scotland eased 6.3p to 44.7p. This leaves taxpayers nursing around £8bn (€9.4bn) in paper losses as the trio are offering new shares under the British government’s £37bn (€43.6bn) recapitalisation plans, with the Treasury set to buy any not taken up by investors.

Barclays, which is battling to convince shareholders of its plans to secure additional capital from Middle Eastern investors, was down 5p at 154.1p, or 3%.

Among the miners suffering from economic worries, Kazakhmys dropped 32p to 237.75p and Eurasian Natural Resources fell 6% or 14.75p to 248p. Xstrata also slipped 71p to 876.5p as brokers at Cazenove lowered their outlook for the sector.

The leading blue-chip riser was inter-dealer broker Icap, ahead of an expected 7% rise in pre-tax profits tomorrow. Shares rose 13.5p to 251.5p, or 5%.

But some of the biggest gains of the session were seen outside the top flight, following speculation at the weekend about the future of two debt-laden companies.

Premier Foods rose more than 11% or 3.5p to 30.5p after weekend reports linking McVitie’s-to-Penguin firm United Biscuits with a secret bid to buy Mr Kipling from its rival.

Premier, which is looking to reduce its £1.8bn (€2.12bn) debt mountain, is understood to have rejected the £250m (€295m) approach.

Meanwhile, Taylor Wimpey shares rose 6% after it was reported to be in the sights of a number of private equity firms. The housebuilder is saddled with debts of £1.9bn (€2.24bn) and must renegotiate terms with lenders before early next year to avoid breaking banking covenants.

Shares were up 0.6p to 9.89p, while elsewhere in the sector Persimmon rose 7p to 247p, Bellway cheered 9.75p to 507p and Berkeley added 10p to 715p.

The biggest FTSE risers were Icap, up 13.5p at 251.5p, Petrofac ahead 7.25p at 366.75p, Legal & General up 1.4p at 71.6p and Aviva ahead 5p at 349.75p.

The biggest fallers were HBOS off 12p at 74.5p, RBS off 6.3p at 44.7p, Kazakhmys down 32p at 237.75p and Wolseley which finished down 33.25p at 271.25p.