Banks and oil weigh on Footsie

ENERGY and banking firms were out of favour with investors yesterday as the London market slid lower.

A dip in crude oil prices and downbeat broker comments hit the likes of Shell and BP, while a profit warning from France's Socit Gnrale frayed nerves over banking stocks.

The FTSE 100 was 25.2 points down to 5,473.5 at the close, despite early gains on Wall Street.

On the currency markets, the pound enjoyed a better day, nearing $1.63 and passing above 1.12 as a Bank of England policymaker gave a strong hint that rates could soon move higher.

But equities struggled to get out of the blocks after Asian markets were rocked by Chinese moves to cool growth by forcing banks to hold more reserves.

There were further losses for oil giants after prices retreated below $80 a barrel to a year low, on fears that the Chinese move will dampen global prospects, while markets also reacted to a sharper-than-expected rise in US stockpiles.

Shell – cut to "underweight" by brokers at Morgan Stanley – was a prominent faller, off 25.5p, or 1.5 per cent, to 1,798.5p. Rival BP dropped 7.2p to 626.6p, while BG Group was 6p cheaper at 1,229p.

James Hughes, market analyst at CMC Markets, said: "The big story of the day has been the aggressive fall in the oil price, and with the fall, the oil giants have found themselves on a number of traders sell lists."

Edinburgh-based Melrose Resources fell 2.7 per cent to 8.6p to 311p, while Dana Petroleum was down 18p at 1,254p.

Aim-listed renewable energy group SeaEnergy dropped 6.6 per cent, or 4p, to 56.5p.

But not all Scottish energy companies were hit as oil prices fell. Bowleven rose by 7.6 per cent, or 7.5p, to close at 106p, while Faroe Petroleum was up 6.2 per cent, or 8p, to 136.5p.

Meanwhile, SocGen spooked investors after saying that it would make just a "slight" fourth-quarter profit after having to make hefty asset writedowns because of "contrasted signals" from the US property market.

This knocked several banks in London, with Barclays down 2.9p to 313.7p and HSBC losing 10.7p to 717.7p.

Royal Bank of Scotland bucked the trend with a 0.82p rise to 35.6p, or 2 per cent, on comments on Tuesday by boss Stephen Hester on the faster-than-expected progress made in turning around the bank.

Cadbury was also on the front foot with a 12.5p rise to 789.5p despite reports that Italian confectioner Ferrero had pulled out of a possible bid for the business.

But property firm British Land was another top-flight faller as the stock turned ex-dividend, meaning shareholders are not entitled to the latest pay-out. Shares were down 7.6p to 466p.

In UK retail news, shares in high street baker Greggs were 10p lower at 405p, after it announced a rise of 1.1 per cent in like-for-like sales for the four weeks to 26 December. Meanwhile, video games retailer Game Group edged higher in the FTSE 250 after Tuesday's 6 per cent fall following a profit warning. Shares ended the day up 0.1p at 100.1p.

Insulation specialist SIG was the top riser in the FTSE 250 as the company held profits forecasts for 2009 despite tough markets and little clear prospect of recovery for the construction industry in 2010.

Shares in SIG were rewarded with a 10 per cent rise, gaining 11.8p to 1,28.6p.

Tesco's shares stood unchanged at 421p despite the UK government unveiling plans for a "supermarket enforcer" to regulate dealings between grocers and their supplies.

Rival Sainsbury's ended the day 1p higher at 330.5p, while Morrisons was up 2.6p at 296p.