Osborne sends bank shares into decline

The Chancellor confirmed he had accepted the key recommendations of the Independent Commission on Banking’s (ICB) report, which includes requiring banks to ring-fence their retail and investment arms.

Lloyds fell 1p to 23.5p and Barclays was off 5.5p at 166p after the Treasury estimated that the reforms could cost the banking sector £8 billion in total.

Shares in Royal Bank of Scotland, which is 83 per cent owned by the taxpayer, were also hit as the Chancellor announced it would further scale down its investment banking arm and focus more on the UK. Its shares were down 0.6p at 19.4p.

The wider FTSE 100 index closed down 22.35 points, or 0.4 per cent, at 5,364.99 amid very thin trading, with volumes hitting just 67 per cent of their already weak 90-day average.

Oliver Wallin, director at Octopus Investments, said: “Most active market participants seem to have had enough of 2011 and are prepared to sit tight and wait and see what 2012 brings. The likelihood of another seasonal ‘Santa rally’ is diminishing.”

Miners were dragged down by falling copper prices as traders worried about a slowdown in China’s massive construction industry. Vedanta fell 3.6 per cent or 39p to 1,046p.

Investors headed for perceived safe havens, putting defensive stocks in demand.

Drugs giant Shire and cigarette maker Imperial Tobacco jostling for the top positions on the Footsie risers board.

Imperial was up 30p to 2,355p while Shire added 40p to end the day at 2,150p.

Glasgow-based temporary power supplier Aggreko was the second-biggest riser on the Footsie – up 1.7 per cent or 31p at 1,848p – as investors concentrated on its third profits forecast upgrade of the year and ignored cautious comments on the outlook for 2012.

Markets were also hit by uncertainty over whether eurozone leaders would reach agreement on how to raise money for its bailout fund.

The pound was up at €1.19 against the euro after the single currency was knocked by European Central Bank president Mario Draghi saying the continent’s economic outlook is subject to “high uncertainty”.

Asian stocks fell early in the morning as news of the death of North Korea’s leader Kim Jong Il added to uncertainties facing markets in the region.

South Korea’s Kospi index dived by more than 4 per cent at one point while the threat of increased instability meant the Korean won slumped against the traditional safe haven of the dollar. Sterling was also down at $1.55 against the greenback.

Among the Scottish stocks, Edinburgh-based oil explorer Bowleven dipped 1.25p to 63.75p despite finance director John Brown buying 33,225 shares to take his holding to 300,000.

NEW YORK: Banks dragged Wall Street lower last night, with losses accelerating late in the session after Bank of America fell through $5 a share for the first time in nearly three years.

The Dow Jones industrial average dropped 99.90 points, or 0.84 per cent, to close at 11,766.49 while the broader S&P 500 Index fell 14.31 points, or 1.17 per cent, to finish the day at 1,205.35. The Nasdaq Composite closed down 32.19 points, or 1.26 per cent, at 2,523.14.