Early losses on Wall Street kept London’s FTSE 100 Index in the red today amid investor caution over a Chinese rate hike and fresh European economic woes.
The Dow Jones Industrial Average edged lower after China moved to increase interest rates again, while Moody’s downgraded Portugal’s debt rating for the second time in less than a month.
A surprise drop in US service sector activity added to the pressure, while the Footsie fell 14.7 points to 6002.6 as blue-chip banks also suffered falls.
Figures for the UK services sector were also in the spotlight after activity grew at its fastest pace in more than a year in March, reigniting concerns of an imminent interest rate hike.
Banking giant Barclays was in the red due to worries over its performance this year after a Financial Times report suggested the bank expected a key measure of its earnings to decline in 2011.
The group, which is said to be looking to increase its risk appetite to hit profitability targets, saw shares fall 3.9p to 284.4p.
Other bank shares were also lower after the Moody’s downgrade for Portugal’s, fuelling fears over the exposure of UK lenders on the Iberian peninsula,
The agency warned the debt-laden country may suffer a further cut as it battles to avoid joining Greece and Ireland in seeking a financial rescue package.
Lloyds Banking Group fell 0.8p to 59.5p and Royal Bank of Scotland was 0.4p lower at 41.4p.
Oil prices, which hit a fresh all-time high overnight in sterling terms, eased back after the Chinese rate decision led to demand fears.
Among stocks, notable risers included Argos and Homebase owner Home Retail Group in the FTSE 250 as it cheered on takeover speculation following its recent profit warning.
The group, which is regularly said to be a potential target for Asda owner Wal-Mart, is now thought to be in the sights of US private equity firm Madison Dearborn Partners.
Home Retail shares lifted 2% or 4.2p to 208.8p.
But there was more gloomy news elsewhere in the retail sector after another profits warning from embattled music chain HMV – its third this year.
Shares dropped another 16% or 2.5p to 12.8p, even though the group said lenders had agreed to put back financial tests from the end of April to the beginning of July.
It is also thought bidders for its Waterstone’s books chain are being put under pressure to make an offer, with Russian oligarch Alexander Mamut said to have been given just over a fortnight to agree a deal.