ENERGY and mining shares fell on further concerns over global demand yesterday, knocking the FTSE-100 lower for the fourth straight session.
Crude oil dropped below $75 a barrel as fears persisted that China may move towards tighter monetary policy to rein in its economic growth.
The fears hit shares in oil companies. Cairn Energy, which will deliver an update on current trading on Thursday, dropped 4.7p to 337.3p, while BG Group fell 10p to 1,174p and BP eased 1.1 per cent to 599p.
Mining companies also fell on fears of a fall in demand for commodities. Eurasian Natural Resources, which closed down 22p at 932.5p, and Rio Tinto, which dropped 72p at 3,220p, were both among the biggest fallers.
The wider FTSE-100 index of Britain's leading listed companies closed down 42.68 points at 5,260.31. The midcap FTSE-250 closed down 32.1 at 9293.12.
While much of the falls in recent days have stemmed from concerns over president Barack Obama's move to cut risk-taking in the financial sector, banks were among the strongest performers. Last week the UK banking sector posted its biggest weekly loss since May 2009.
CMC Markets analyst Michael Hewson said: "The market has found it difficult to gain traction on the upside, especially given the fact that Obama's reforms are light on detail at the moment."
Mike Lenhoff, a strategist at Brewin Dolphin, said the Obama proposals "may get modified but I think the overall thrust of what he is trying to do is going to hang over the markets for a while and hang over the banks for a while".
Barclays rose 2 per cent, or 4.65p, to 276p, RBS climbed 0.68p to 35.36p, and Asian-focused group Standard Chartered climbed 17p to 1,445p.
Insurers were also benefiting from the cheerier sentiment in the top tier.
Legal & General was the biggest gainer in the index, up 4 per cent 2.8p to 78.95p. RSA Insurance and Edinburgh-based Standard Life followed not far behind, ahead 2.6p at 128.4p and 2.1p at 201.5p respectively.
Pharmaceuticals, which fared relatively well last week, lost ground. AstraZeneca, GlaxoSmithKline and Shire Pharmaceuticals all fell between 0.1 per cent and 2.1 per cent.
Outside the top flight, housebuilders were in the spotlight after Morgan Stanley raised its target price on Persimmon and a survey from Rightmove said more than half of people expect house prices to continue increasing in the next 12 months.
Redrow climbed 0.8p to 129.7p, but Persimmon failed to hold on to early rises, closing down 2p at 451p.
Meanwhile, Hornby shares were on the right track with a 3p rise to 145p as the Airfix and Scalextric firm allayed recent fears over prospects by delivering a strong Christmas sales update.
Transport giant Firstgroup rose 2.3p to 371.3p despite analysts at Merrill Lynch cutting their target price on the shares by 30p to 450p, retaining a "buy" rating.
On the Aim, five-a-side football pitch operator Goals Soccer Centres was unchanged at 147.5p, as WH Ireland analyst John Cummins trimmed his forecasts as a result of the recent snow, thought to have closed a number of its sites.
Cummins forecasts that the snow will have cut Goals' revenue by around 600,000 – the equivalent to eight full days trading – cutting the company's underlying earnings by 500,000.
Craneware, which provides software to audit medical billing in the US, continues to rise after a bullish trading statement a week ago.
Shares in the Aim-listed group rose 8.5p, or 2.3 per cent, to a record closing high of 372.5p.