FTSE's late fall on Irish banking woes

The banking sector dragged the London market into the red in the closing auction yesterday as stress tests revealed the full scale of the Irish bank bailout.

Four banks need an extra €24 billion (21.2bn) to survive the financial crisis, taking the final bill for the Irish bailout to an eyewatering €70bn.

The figures saw the FTSE 100, which had managed to stay ahead for most of the session, close 39.54 points or 0.7 per cent lower at 5,908.76. Markets across Europe were also down on the news.

Michael Hewson, an analyst at CMC Markets, said: "We saw equity markets suddenly slide very rapidly towards the close with the banking sector slipping back quite considerably. What we saw in the closing auction is an early indication of what the market thinks of it."

HSBC led falls, down 2 per cent or 15p to 641p, while Barclays was down 6.2p to 277.5p. Lloyds and Royal Bank of Scotland, which are both heavily exposed to the Irish economy, were down 0.4p at 58p and 0.3p at 40.79p respectively.

High inflation in the eurozone saw the single currency strengthen on the prospect of an interest rate hike at the European Central Bank. The pound was consequently down against the euro at €1.13. It also fell against the dollar, to $1.60.

Elsewhere, retailers suffered after babycare specialist Mothercare and Laura Ashley, the furnishings and clothing group, became the latest store chains to reveal disappointing results.

The lacklustre figures came on top of bad news from Dixons Retail, which issued its second profit warning in as many months on Wednesday.

Mothercare fell 9.5 per cent in the FTSE 250, down 42p to 400p, after it said UK sales remained in the red and revealed profit margins were taking a bigger-than-expected hit as it struggles amid stiff competition. Laura Ashley fell nearly 15 per cent, down 3.75p to 21.5p as a 4.2 per cent drop in recent UK like-for-like sales overshadowed a near-doubling in full-year profits.

Dixons dropped a further 8 per cent, following an 18 per cent plunge the day before when it announced that sales declines in the UK and Ireland had worsened to 11 per cent since Christmas. Shares were down 1.12p at 12.57p yesterday.

Top-flight retailers also continued to suffer as fears mounted over the challenges facing the sector this year.

Next was down 31p to 1,980p. B&Q parent Kingfisher fell 8.5p to 245.9p and Marks & Spencer was off 4p to 336.7p.

Outside the retail sector, First Choice and Thomson parent TUI Travel said trading had been affected by the political crises in Egypt and Tunisia, as it reported a 6 per cent slide in recent summer bookings from the UK. The travel giant confirmed a 25 million to 30m hit from the unrest. Shares fell 2.3p to 227p despite a stronger performance outside the UK.

Scots milk firm Robert Wiseman Dairies was down after an update revealed it faces rising costs that will be hard to pass on to customers.Shares were off 2.6 per cent or 9.25p to 343.25p.

On Aim, Aberdeen-based SeaEnergy was down 2.9 per cent to 36.75p after it once again extended its loan facility while negotiations on the sale of its renewables subsidiary drag on.