Nerves over US knock the FTSE

LONDON FTSE 100 CLOSE 5,455.4 -42.8

LONDON'S leading share index slid into the red yesterday as jitters over the recovery of the US economy overshadowed bumper profits at JP Morgan Chase.

The Wall Street titan kicked off the results season for US banks with net income of $11.7 billion (7.2bn) for the year – more than double the previous year.

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The firms' caution over rising bad debts at its retail arm also spooked investors and put the Dow Jones Industrial Average under pressure, losing 1 per cent in early trading. In London, the FTSE 100 followed suit, closing 42.8 down at 5,455.4.

Sentiment on Wall Street was also knocked by weaker than expected consumer confidence data, while commodity prices were dented by a stronger dollar.

The pound stood at 1.62 against the greenback after reaching a session high of 1.636 earlier.

Jimmy Yates, head of equities at CMC Markets, said: "The figures stateside were certainly sobering for the markets given how far we have come and it has given those investors looking for a opportunity to sell a reason to do so."

JP Morgan's results came in the wake of US president Barack Obama's announcement on Thursday of a stringent new tax on banks to claw back "every dime" for the US taxpayer.

British banks Barclays, Royal Bank of Scotland and HSBC are thought to be exposed to the $90bn levy through their US arms, amid reports they could face a combined $10bn bill over the next ten years.

Barclays took a hit following speculation that it could be the worst affected, with shares falling 7.45p to 311.2p. HSBC meanwhile was off 12.1p at 702.5p, although RBS shook off concerns over the tax liability as its shares rose 2 per cent, or 0.74p to 36.74p.

The fallers' board was led by hedge fund giant Man Group with a near-7 per cent decline, down 21.7p to 292.7p, after it said assets under management were down 4 per cent in quarter three.

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Retailers Next and Home Retail Group – which owns Argos and Homebase– were also on the back foot once more after a punishing week and concerns over the trading outlook for 2010.

Next fell 47p to 19,61p, while Home dropped 4.7p to 261.1p.

In a choppy session, the leading top flight risers were both defensive stocks: International Power was up 12.6p at 322p, while Imperial Tobacco was 41p dearer at 2,000p.

In the FTSE 250, defence firm Qinetiq was suffering hefty falls – down 12 per cent or 19.6p to 143.3p – after issuing its second profit warning in two months.

Housebuilder Bovis Homes was also in the red, off 16.2p at 437.9p, as it forecast a "subdued" property market in 2010.

Among Scottish stocks, insulation company Superglass rose by 9.3 per cent or 2.5p to 29.5p after an upbeat trading statement at its annual general meeting.

Trading between September and January had been "in line" with management's expectations and trading was buoyed by a fresh contract with a builders' merchant buying group, broadening the company's customer base.

Aberdeen-based transport giant FirstGroup continued to slide after reporting on Thursday that its UK bus business was facing tough economic conditions. Shares closed down 9.7p at 388.8p, having lost 16.6p on Thursday.

Rival Stagecoach rose 3p to 179.5p after the Perth-based transport group revealed that its south west bus division had won a contract to provide 150 buses a day for the Ryder Cup at the Celtic Manor, in Newport.

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Oil prices fell for the fifth straight day, dipping below $79 a barrel as the dollar strengthened and forecasters saw milder winter weather ahead.

Edinburgh-based Melrose Resources was undeterred, gaining 15p or 4.9 per cent to end the day at 321p.