Markets: City treads water as banks share suffer

Moody's put the UK's credit rating on "negative outlook". Picture: Getty

Royal Bank of Scotland was more than 5 per cent lower at 26.65p, while Lloyds shed nearly 3 per cent to 34.28p after agency Moody’s put both the UK and France on negative outlook.

The wider market shrugged off news that Moody’s had also downgraded the ratings of countries including Italy, Spain and Portugal. Traders were also hoping that Greece will receive agreement in principle that it can have the next tranche of its bailout funds at today’s meeting of euro finance ministers in Brussels.

The Greek parliament approved more austerity measures over the weekend, which are expected to pave the way for the next instalment of the funds – although there are still question marks over a number of other conditions.

The FTSE 100 index closed 5.83 points lower at 5,899.87. Chris Beauchamp, market analyst at IG Index, said there was a lack of Valentine’s Day spirit on the trading floors.

“There is a clear lack of love between the FTSE and the 5,900 mark, as the market ends its brief sojourn above this level and drops lower once again,” he said. “It is looking as if all the wooing in the world will not succeed in pushing the FTSE higher from here, and growing skittishness regarding the rally suggests that a major turn in sentiment might well be on its way.”

Cairn Energy was lower, despite yet another “buy” note from brokers. Investec was the latest to recommend the firm following the re-rating of its shares as it pays a special 160p dividend. It said an increase in the value of the Edinburgh-based firm’s Cairn India stake accounted for the upgrade. But shares were 1.6p lower at 346.4p.

US stocks closed little changed, erasing losses in the final 20 minutes of trading after a Greek government source said the conservative party leader would make a written commitment sought by international lenders.

The Dow Jones industrial average was up 4.24 points at 12,878.28. The Standard & Poor’s 500 index was down 1.27 points at 1,350.50. The Nasdaq Composite index was up 0.44 points at 2,931.83.