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Banks lead FTSE 100 lower on ringfencing and Moody’s downgrade fears

Banks are bearing the brunt of another market sell-off, as investors continue to fret about the possibility of a global recession and an escalation of the Eurozone debt crisis.

The UK’s financial heavyweights are facing problems on a number of fronts, as they await the outcome of the Independent Commission on Banking’s final report due in a week. This is widely expected to recommend ringfencing the bank’s retail arms from their riskier investment banking operations, prompting ratings agency Moody’s to say it was reviewing several UK banks for possible downgrades.

On top of that came news at the end of last week that the US authorities were planning to sue a number of banks – including ones in the UK – over the sale of toxic mortgages which lead to the sub-prime crisis. International Monetary Fund chief Christine Lagarde warning that European banks needed to be recapitalised because of their exposure to sovereign debt has not really helped matters, either.

So Royal Bank of Scotland is down 1.52p at 23.32p, Barclays has fallen 8.15p to 157.05p and Lloyds Banking Group is 1.145p lower at 31.975p.

Overall the FTSE 100 has lost 76.31 points to 5215.72, following Friday’s 126 point decline.

Miners are, as usual, another key influence on the index, losing ground as metal prices dip on demand worries. Eurasian Natural Resources Corporation has fallen 24p to 634.5p while Xstrata has lost 32.7p to 985.8p. Rio Tinto is down 109.5p at 3564.5p and Anglo American is 45.5p lower at 2412.5p as both miners said they planned to sell their stakes in South African copper producer Palabora Mining, saying there was limited opportunity for significant expansion there. Rio’s stake is worth around 5m while Anglo’s is valued at 5m.

But with gold surging once more, Randgold Resources is the only FTSE 100 riser, up 10p at £66.80.

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