Banks prove a heavy drag on FTSE

By Peter Ranscombe
Published on Thursday 26 January 2012 00:00

BANKING stocks dragged the FTSE 100 index down yesterday after the UK’s economic output contracted by more than expected in the final quarter of 2011.

The Footsie fell 28.90 points or 0.5 per cent to 5,723.00 amid fresh fears Greece and Portugal will sink under weight of their debts.

Investors became increasingly jittery about the lack of progress being made by Greece and its lenders to write off a huge chunk of its debts to avoid a default, while Portugal’s borrowing costs soared to unsustainable levels.

Rupert Osborne, a futures dealer at IG Index, said: “The silence from Greece remains deafening. The bulls can take comfort from the fact that the FTSE has remained above 5,700, but it will need some good news to put it back on the strong form we saw last week.”

Lloyds Banking Group was the biggest faller in the FTSE 100, down 2.4 per cent or 0.76p at 30.92p, while Royal Bank of Scotland slipped 0.3p to 26.75p as the UK’s gross domestic product (GDP) reading was worse than consensus forecasts. GDP contracted by 0.2 per cent in the three months to 31 December, a bigger fall than the 0.1 per cent predicted by most analysts.

Mobile phone network operator Vodafone was dragged down after US firm Verizon, with which Vodafone has a wireless venture, warned it may miss analyst expectations for 2012 profits. Vodafone closed down 1.7p at 174.55p.

Commodities trader Glencore was also on the back foot – falling 8.65p to close at 418.45p – after analysts at Swiss investment bank UBS cut their profits forecasts for the firm in the face of higher costs.

But UBS maintained its “buy” recommendation and said Glencore will be the “most dynamic company in European mining over the next three years.”

NEW YORK: Big profits from Apple and a promise from the Federal Reserve to keep rock-bottom rates for at least two more years powered Wall Street higher last night.

The Dow Jones industrial average ended the day up 82.87 points, or 0.65 per cent, at 12,758.62 while the broader Standard & Poor’s 500 Index was up 11.38 points, or 0.87 per cent, to close at 1,326.03. The Nasdaq Composite Index rose 31.67 points, or 1.14 per cent, to finish the day on 2,818.31.

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