Fall in exports hits the pound

BRITAIN'S top share index closed a shade lower yesterday, but remained above the 5,600 level, as a weakening in banks following a cautious broker note slightly outpaced buoyant oil stocks and drug makers.

The main focus was in the currency markets after the pound tumbled following figures showing that UK exports took their biggest plunge in more than three years during January.

Warnings by rating agency Fitch also hurt sterling. The firm said the UK – along with Spain and France – should outline "more credible" plans for public finances in the face of mounting debts or face pressure on their sovereign ratings.

The benchmark FTSE 100 ended down 4.42 points, or 0.1 per cent, at 5,602.30, having closed up marginally on Monday, its highest close since 2 September 2008 – before Lehman Brothers collapsed. The index has rallied almost 60 per cent since hitting a low on 9 March last year.

James Hughes, market analyst at CMC Markets, said: "It's yet again been a quiet session for the economic and corporate calendar, so the major indices have struggled for any meaningful direction.

"Despite the slip lower, the big talking point has been the overall strength in equity markets. Over the last couple of sessions, the FTSE has managed to break through the key highs from January. It's exactly a year on since the lows on 9 March, 2009, when the FTSE traded at 3,460."

Banks took the most points off the top-flight index after Crdit Suisse issued a cautious note on British institutions, saying the sector "is at best fair value for now".

Lloyds Banking Group, Royal Bank of Scotland, HSBC and Standard Chartered fell between 0.7 and 2.8 per cent. Barclays was 0.2 per cent higher after Crdit Suisse said the lender was its favourite UK bank.

On the currencies front, the pound fell to below 1.50 against the dollar and 1.10 against the euro at one stage.

Joshua Raymond, market strategist at City Index, said Greece's debt crisis and a potential hung parliament in the UK meant markets were "not out of the woods just yet" despite the strong rally seen over the past year.

Certain firms have recovered particularly well over the last 12 months.

Barclays has seen shares rise almost 620 per cent from a low of 47.3p reached in January last year, while miner Kazakhmys has rallied nearly 560 per cent.

International Power was among the risers during yesterday's muted session after it declared an improved full-year dividend and said profits rose to 718 million. Shares were 3.3p higher at 332p.

Property firm Liberty International moved in the opposite direction, topping the fallers board with a 20.5p drop to 486p, as it confirmed plans to split its central London and shopping centre divisions into separately listed businesses. Analysts said shares were under pressure due to disappointment over its net asset value figure in annual results also out yesterday.

Imperial Tobacco dropped 2.5 per cent after UBS cut its rating on the stock to "sell" from "neutral". British American Tobacco shed 0.7 per cent.

Energy stocks rose as crude traded above $81 a barrel for much of the day, after hitting an eight-week high in the previous session. Royal Dutch Shell, Cairn Energy and BP rose 0.5 to 0.8 per cent.

Outside the top flight, waste disposal group Shanks slid 15 per cent – off 18.2p to 102.2p – after it said it had rejected a revised takeover approach from private equity firm Carlyle worth 120p a share, or 475m.