Miners and banks drag down Footsie

Britain's leading share index closed sharply lower yesterday, hurt by banks and commodity stocks as initial upbeat sentiment over Ireland's bailout subsided.

The benchmark FTSE 100 Index closed down 52 points, or almost 1 per cent, at 5,680.83, its lowest since 29 October, retreating from 5,783.14 earlier in the session after Ireland agreed to a bailout by European partners and the International Monetary Fund.

Bank, also up earlier in the session, went into reverse. Royal Bank of Scotland, which traders said is the most exposed to Ireland through its Ulster Bank business, topped the blue-chip fallers' list.

Will Hedden, sales trader at IG Index, said: "The welcome news about the Irish bailout has well and truly subsided into worries over UK banks' exposure to the problem.

"The risk of contagion still lingers over European markets, with traders now eyeing up the next sacrificial lamb."

There was also a decline on the Cac 40 in France, as well as early session losses on Wall Street's Dow Jones Industrial Average.

Royal Bank of Scotland fell nearly 5 per cent, down 1.9p to 39.8p. Shares in fellow taxpayer backed Lloyds Banking Group dropped 2.8p to 63.9p and Barclays eased 4.2p to 270p.

The latest bout of uncertainty forced investors to shelter in defensive stocks such as National Grid, which lifted 2.5p to 581p, while Severn Trent was 20p higher at 1,549p ahead of half-year results.

Financial Times publisher Pearson advanced as the market reacted well to news of its deal to buy a 75 per cent stake in CTI Education, a South African higher education company, for 31 million. Analysts at UBS estimated the acquisition could add to Pearson's earnings in 2011 and shares in the group lifted 8.5p to 939p.

In the FTSE 250 Index, outsourcing firm Mitie made progress after it announced a 12 per cent rise in half-year profits before exceptional items and said it was hopeful of snapping up contracts as public sector clients look to cut costs.

Shares jumped 4 per cent at one stage before closing 2.1p higher at 203.1p.

It was joined on the way up by housebuilder Taylor Wimpey, which rose 0.8p to 25.3p after announcing further progress in its refinancing.

Defence technology firm Qinetiq was another second-tier riser, up 1.4p to 113.7p, thanks to its success in securing a contract with Nasa to provide engineering work at its Kennedy Space Station. The win is worth a potential $2 billion (1.2bn), according to Qinetiq.

Dundee-based 3D Diagnostic Imaging had a decent session in its first day's trading on Aim, having moved from the Plus market.Shares closed at 8.75p, well ahead of the 6p placing.

Some 2.7m was raised by 3D via the share placing to finance its immediate growth plans.

Mining stocks slipped, as metals prices dipped, on nagging fears of further tightening of monetary policy in China, the world's biggest consumer of metals.

Integrated oil stocks, the top blue-chip performers in the opening couple of hours trading in London, fell, with BG Group down 1 per cent.