Banks prove drag despite better news

LONDON'S top share index fell into the red yesterday despite figures confirming a stronger-than-expected economic recovery in the final quarter of 2009.

Positive economic news in America also failed to lift shares, with bank stocks acting as a drag on both sides of the Atlantic.

The FTSE 100 index closed down 38.3 points at 5,672.3, with little cheer offered from news that the UK's gross domestic product (GDP) grew by 0.4 per cent in the final quarter of 2009, up from the previous estimate of 0.1 per cent.

Banks weighed on the Footsie after it was revealed that Royal Bank of Scotland was facing a 28.6 million fine from the Office of Fair Trading for revealing some if its loan prices to rival Barclays two years ago.

Market experts said the sector was also coming under pressure following Monday's announcement that the US government is looking to sell its massive holding in Citigroup.

Joshua Raymond, a market strategist at City Index, said: "The fear is that the UK government, having seen equities rally enormously since the low of March in 2009, may now also be tempted into cashing in their stakes in Lloyds or RBS."

On Wall Street, stocks fell during early trading in spite of economic data showing that US house prices saw their smallest annual decline in three years during January, while consumer confidence also grew more than expected in March.

But mining stocks were among those making gains in London as a weaker dollar pushed up commodity prices. Sterling edged near $1.51 against the greenback. The pound also rose to 1.13.

Engineering and project management company Amec topped the Footsie risers board after it announced the acquisition of environmental consultancy firm Entec Holdings for 61.2m. Amec's shares rose 24.5p to 790.5p, a gain of more than 3 per cent.

Mobile phone giant Vodafone also continued to rise on speculation that it may soon gain dividends from its stake in US firm Verizon Wireless. Shares closed up 1.1p at 152.2p having hit a 21-month high earlier in the day.

The fallers' board was littered with banks, led by RBS with a 1.5p drop to 43.3p after details of its OFT fine. Barclays, which avoids a fine for being the whistleblower, was 8.9p down at 358p.

British Airways meanwhile shed 6p to 245p after it revealed a 5.5m a day loss at the weekend due to the latest cabin crew strike, which ends today.

Outside the top flight, Domino's Pizza continued to impress investors after it reported like-for-like sales growth of 10.5 per cent in the 13 weeks to 28 March, despite many stores being forced to close by the winter weather. Shares lifted 10.5p to end the day at 345.5p.

Meanwhile, Punch Taverns shares were 3 per cent higher – up 2.75p to 84p – after the company announced the departure of chief executive Giles Thorley following nine years at the helm of the UK's biggest pubs chain.

Among the Scottish stocks, shares in Aim-listed investment bank Quayle Munro stayed flat despite the Edinburgh-based company buying up the remaining stake in the company held by Uberior Investments, part of Bank of Scotland.

Between them, Quayle Munro and its Employee Benefit Trust bought shares representing 9.5 per cent of the company.