FTSE 100 stalls as traders nerves fail on banking sector

RENEWED jitters over the health of the financial sector hit banks and offset gains by heavyweight oils yesterday, sending the FTSE 100 0.7 per cent, or 28.69 points, lower at 4,387.54.

Banks were the worst performing large caps, with Barclays, HSBC, Standard Chartered, Lloyds Banking Group and Royal Bank of Scotland down 0.8 per cent to 4.6 per cent.

The Financial Services Authority disclosed details of its “stress tests” for banks saying it had based them on the assumption that GDP would shrink 6 per cent – causing many traders to reassess their assumptions about the UK banking sector’s ability to weather a sustained economic downturn.

The biggest blue chip loser was Man Group, the world’s largest listed hedge fund firm, which shed 6.9 per cent after it said assets under management had fallen over six per cent.

Oil majors were higher with the crude price after OPEC ministers meeting in Vienna decided to leave the group’s crude output unchanged. BP and Royal Dutch Shell gained 0.6 and 1.0 per cent respectively.

Oil explorer Cairn Energy added 3.5 per cent after its Cairn India unit said it was ready to start producing from its Rajasthan fields.

Tullow Oil rallied 2.5 per cent after recent falls.

Miners were mixed as base metal prices stayed weak while and gold and silver prices rose. Mexican silver miner Fresnillo was a top riser, up 3.4 per cent, while gold producer Randgold Resources gained 3.1 per cent and platinum miner Lonmin added 1.2 per cent.

But BHP Billiton, Vedanta Resources, Kazakhmys and Xstrata lost 0.2 to 1.7 per cent.

Commercial broadcaster ITV was the top mid-cap riser, up 17.5 per cent to take its two-day rally to around 30 per cent as another broker, Merrill Lynch, upgraded its rating.

News that Mike Ashley’s Sports Direct had offloaded its 4.8 per cent stake in struggling rival JJB Sports, which dropped 2.68 per cent to 36.25p, led to a flurry of speculation over who the new owner might be.

Some traders mused that JD Sports may have picked up the shares, having been linked with a bid for its troubled peer earlier this month. While others speculated on the intentions of activist hedge fund Crystal Amber which last week raised its JJB investment to 13.75 per cent.

After a pretty quiet, shortened week, many will look forward to seeing more direction next week.