US doubts over QE levels hit Footsie

LONDON FTSE 100 CLOSE 5,646.02 -61.28

Britain's top shares yesterday posted their biggest one-day losses in more than two months, hit by market concerns that further quantitative easing measures in the United States might be less aggressive than expected.

The prospect of the central bank taking a cautious approach to a possible second bout of quantitative easing prompted traders to take money off the table and retreat to more defensive stocks.

Mining stocks were the worst hit and dragged the FTSE 100 Index 1 per cent or 61.28 points lower to 5,646.02. Kazakhmys led the fallers board, down 70p at 1,321p, while Vedanta was off 103p at 2,066p and Xstrata shed 50.5p to 1,264p.

Michael Hewson, analyst at CMC Markets, said: "The prospect of the central bank taking an understandably-cautious approach to what is a controversial policy has weighed on sentiment and - coupled with mixed earnings reports - has prompted investors to take some money off the table and has seen stocks retreat from their recent highs."

The prospect of less ambitious quantitative easing saw the greenback rise in value - up against the pound at $1.58.

The Footsie's oil giants were hit by the strength of the dollar as crude prices dipped to $81.80 a barrel. BP was off 7.3p to 419p, while oil and gas explorer BG Group was down 12p at 1,181p.

Edinburgh-based Cairn Energy continued to slide following Tuesday's news that it had closed its first three wells off the coast of Greenland without hitting commercially-viable oil. Shares were down 3.2p at 379.3p.

Three major retailers were hit by a note from Goldman Sachs downgrading their shares to "neutral" from "buy". Debenhams dipped 2.4p to 75p, Morrisons lost 2.3p to 293.5 and Signet Jewellers dropped 33p to 2,167p.

Shares in British Airways were higher as the airline took a further step towards its merger with Iberia by publishing shareholder documents relating to the deal. The tie-up should be completed on 21 January.

BA, which is due to publish half-year results tomorrow, rose 1.9p to 278p.

The banking sector was spurred on by better-than-expected results from Germany's Deutsche Bank. Barclays topped the risers board, adding 5p to 282.3p, with Lloyds Banking Group not far behind after it advanced 1.1p to 69.1p.

Defensive stocks such as United Utilities and Severn Trent moved to the top of the leaders board as investors sought lower-risk opportunities. Their shares rose 1p to 599.5p and 5p to 1,364p respectively. British American Tobacco reported a 3 per cent drop in underlying sales volumes in the nine months to 30 September .

The world's second-largest tobacco group sold 526 billion cigarettes and said it expected sales to fall in the months ahead.The update saw shares lose 37p to close at 2,401p.

Shares in flooring firm Carpetright were down more than 7 per cent after a deterioration in UK like-for-like sales prompted analysts to lower their forecasts for full-year profits. The stock dropped 53p to 677p.

Bike and car chain Halfords jumped more than 4 per cent or 16.2p to 425.8p after Morgan Stanley advised buying into the recent weakness in shares.