Blue chips drag FTSE down

Falls among blue chip banks pulled the FTSE 100 Index into negative territory today after warnings of a possible ratings downgrade for debt-laden Spain.

Blue chips drag FTSE down

Falls among blue chip banks pulled the FTSE 100 Index into negative territory today after warnings of a possible ratings downgrade for debt-laden Spain.

Barclays led the sector lower - down 4% - on fears over its exposure to Spain following a move by Moody's to put the country's credit rating under review.

Despite a late session boost from Wall Street after positive US manufacturing data, the Footsie still closed in the red, off nine points to 5882.2.

The Dow Jones was up 0.3% after the Federal Reserve announced factory output rose 0.3% in November, its fifth successive monthly rise.

This buoyed the FTSE 100 briefly, but it failed to maintain gains - ending the rally that yesterday saw the top tier hit its highest close for two-and-a-half years.

Sentiment was not helped by less cheery economic news as figures revealed UK unemployment climbed to 2.5 million in the quarter to October.

This sent the pound down sharply, 1% lower at 1.56 dollars and 0.6% down at 1.17 euros.

Barclays was down 10p to 262p as investors fretted over its exposure to Spain's economy after the gloomy Moody's report.

The credit ratings agency may downgrade Spain's debt because of the country's high financing needs in 2011 and its shaky banking sector, fuelling worries over the sovereign debt exposure of UK banks, with Barclays seen as being one of the most exposed.

Other banks also suffered as HSBC dropped 10.6p to 661.1p, part-nationalised Royal Bank of Scotland lost 0.6p to 40.8p and Lloyds Banking Group declined 0.8p to 68.5p.

The biggest rise in the top flight came from Lakeside shopping centre owner Capital, which climbed 5% or 19.3p to 415.6p after US firm Simon Property Group wrote to the company outlining its plans for a £2.9bn (€3.4bn) takeover.

Capital's board rejected the proposal and adjourned the vote on the proposed takeover of the Trafford Centre in Manchester from Monday to early next year.

Outside the top flight, the rapid ascent for shares in fashion firm Supergroup juddered to a halt after the company posted maiden interim results.

Half-year profits rose 68%, but shares slumped 11% after the Superdry owner warned rising raw material prices could hit earnings next year. Shares fell 178p to 1450p.

Elsewhere, Spode and Royal Worcester ceramics group Portmeirion soared 14% or 60p to 495p after it said demand from overseas buyers would ensure 2010 was a record year for sales.

Seymour Pierce analysts raised 2010 profit forecasts from £4.5m (€5.3m) to £5m (€5.9m) on the back of Portmeirion's bullish trading update.

The biggest Footsie risers were Capital Shopping Centres up 19.3p to 415.6p, Autonomy Corporation ahead 68p to 1475p, Rexam up 11.7p to 322.6p and Experian up 21p to 812.5p.

The biggest Footsie fallers were Barclays down 10p to 262p, Fresnillo off 40p to 1555p, British Airways down 5.6p to 272.4p and Randgold Resources down 115p to 5655p.

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