FTSE: Goldman bombshell bashes Footsie

LONDON'S market tumbled into the red yesterday after shock news that US investment bank Goldman Sachs had been accused of fraud by America's Securities and Exchange Commission (SEC).

Stocks worldwide plummeted after the SEC announced it was filing a civil fraud charge against Goldman over allegations that it defrauded investors in its disclosures about securities it sold which were tied to sub-prime mortgage securities.

The FTSE 100 Index – which had traded stably for much of the day – dropped by as much as 1.7 per cent at one stage in late afternoon trading before recovering slightly to close down 81.1 points or 1.4 per cent at 5,744.

Royal Bank of Scotland was the only blue chip bank to hold on to gains in London, with its counterparts hit after the Goldman announcement. RBS clung on to end the day up 2.35p – or 5.1 per cent – at 48.3p, boosted by a broker upgrade and strong results from US rival Bank of America.

But Barclays closed 3 per cent, or 9.8p, lower at 373.4p, while HSBC fell 2 per cent, down 14.5p at 698p, and part-nationalised Lloyds Banking Group finished down 0.7p at 64.7p.

Lloyds non-executive director Sir Julian Horn-Smith splashed out nearly 130,000 on shares in the bank, pocketing 200,000 at 64.87p each.

Until the Goldman bombshell, the banking sector had been the star performer of the session after better-than-expected first-quarter profits from BoA.

Oil prices were also affected, falling below $83 a barrel, although the news had little effect on the dollar on foreign exchange markets. The pound fell to $1.54 as the greenback gained strength, although sterling rose to 1.14.

A stronger dollar also dented miners, which littered the fallers board, with sector declines led by Xstrata, down 56.5p at 1,236.5p.

Airline stocks were likewise on the back foot as air traffic control company Nats said UK flight restrictions in England and Wales because of the cloud of volcanic ash from Iceland would remain in place until at least 7am today, with some but not all services operating out of Scotland.

British Airways shares fell 7.6p to 235p and budget rival easyJet was 5.9p lower at 477.8p.

The Lambert & Butler cigarette maker Imperial Tobacco was down 36p at 1,951p, after it was one of a number fined after an Office of Fair Trading (OFT) inquiry into tobacco product pricing.

Rival cigarette maker British American Tobacco – which was not fined by the OFT – ended the day down 35.5p at 2,150p.

The leading Footsie faller was software firm Autonomy, which dropped 6 per cent or 110p to 1,740p despite saying first quarter results would be in line with market expectations.

In other corporate news, fund manager Hargreaves Lansdown rose 3 per cent, or 11p, to 373.5p, in the FTSE 250 Index after it reported that it had experienced "unprecedented" volumes in the run-up to the individual savings account (Isa) deadline.

Among Scottish stocks, Glasgow-based temporary power supply company Aggreko closed down 27p or 2.3 per cent at 1,162p despite posting a 5 per cent rise in underlying revenues during the first quarter.

Axis-Shield, the Dundee-based medical testing kit company, closed up 3.5p at 407p after saying it would hold its annual meeting in London on 19 May.