Bank anxiety nudges Footsie down

BANKS led the FTSE 100 Index into the red yesterday amid fears that more capital will need to be raised to comply with European regulations.

Standard Chartered had surprised the market on Wednesday by launching a 3.3 billion investor cash-call to meet the requirements of the Basel III regulations - and raised fears that other banks will follow suit.

Early gains on the Footsie yesterday - inspired by the prospect of further quantitative easing in the United States - were lost and the market closed 20.14 points or 0.35 per cent lower at 5,727.21.

Woes were compounded by weak US economic data, which revealed a rise in unemployment claims last week and a widening of trade deficit in August.

The figures added weight to the argument for further monetary stimulus from the US Federal Reserve, which in turn weakened the dollar, which fell against the pound at $1.59.

Banks were also hit by a ruling by the Competition Commission, banning them from selling payment protection insurance at the point of sale, which analysts said could hit earnings.

Among the banks to suffer were Royal Bank of Scotland, which slipped 2.2p to 45.3p, Barclays, which fell 12p to 279.6p, and Lloyds, which lost 2p at 70.5p. Standard Chartered gained 12p to close at 1,888p.

A note by JP Morgan said HSBC was the best positioned among the UK banks to deal with new capital requirements, but shares still fell 8.8p to 662.3p.

Mining giant African Barrick Gold fell to the bottom of the Footsie after it revealed it had uncovered "organised and systematic" fuel theft at one of its plants in Tanzania.

The company said criminal gangs had "widely infiltrated" the mine, forcing it to suspend scores of staff and cut production targets. Shares fell 9 per cent or 59.5p to 564p.

Other commodities were more attractive, with miner Xstrata topping the London market after shares advanced 42p to 1,342p. Silver miner Fresnillo lifted 29p to 1,311p and Rio Tinto added 52p to 4,090p after a positive report on its iron ore operations.

Vodafone rose near the top of London's risers board after Nomura upped its price target on the stock and said cost reductions should boost earnings prospects. Shares were 2.6p higher at 166.5p.

In corporate earnings in London, second-tier stock WH Smith jumped 5 per cent or 25p to 480p after it increased its full-year dividend by 18 per cent in the wake of a 9 per cent rise in annual profits.It is also returning 50 million of cash to shareholders.

Mothercare moved in the opposite direction - down 14.5p to 502p - after another difficult quarter in the UK was accompanied by slightly slower growth overseas due to the impact of August's heatwave on sales in Russia.

Numis lowered its forecast for full-year like-for-like sales in the UK and is now expecting pre-tax profits of 39.8m in the year to March, against 43m previously forecast.

Cash-and-carry firm Booker rose 4.2p to 53.6p, or 4 per cent, after recent growth continued with a 24 per cent jump in half-year profits and the acquisition of two suppliers to the catering and pub sectors.