Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Royal Bank of Scotland leads fallers as £49bn is wiped off FTSE 100

Banking shares were the leading fallers as the market retreated once more on growing worries about global recession and the Eurozone crisis.

Royal Bank of Scotland slumped 12%, down 3.06p to 21.78p, while Lloyds Banking Group lost 2.47p to 30.65p, Barclays dropped 11.05p to 154.15p and HSBC fell 20p to 504.5p. The declines came ahead of next week’s report by the Independent Commission on Banking, which is expected to recommend banks’ retail operations should be ringfenced from their riskier trading operations. Adding to the uncertainty were comments from Moody’s repeating that it was reviewing several UK banks for possible downgrades to their credit ratings.

On top of that, RBS, Barclays and HSBC are also among a number of global banks facing US lawsuits relating to their roles in the subprime mortage scandal.

Overall, poor service sector surveys pointed to a continuing slowdown in the global economy, while concerns about Italy’s austerity programme amid a looming national strike prompted talk of a possible downgrade of the country’s credit rating by Moody’s. The agency has had Italy on review for a downgrade since 17 June, and a decision usually comes around 90 days later. Greece’s debt problems were also in the spotlight again, ahead of a court decision this week on whether Germany was right to back the EU’s emergency financing packages. The loss of another regional election by German chancellor Angela Merkel and a court decision this week about the country’s participation in the European financial rescue package added to the uncertainty.

So the FTSE 100 finished 189.45 points lower at 5102.58, a 3.58% decline which saw £49bn wiped off the value of Britain’s top companies. This makes a two day loss of £82bn. But with Wall Street closed for the Labor Day holiday, dealers reported thin trading volumes.

As metal prices fell back on worries about slowing demand, miners lost ground. Xstrata fell 61.1p to 957.4p while BHP Billiton lost 78p to £19.54. 8p. Rio Tinto dropped 185.5p to 3488.5p and Anglo American was 89.5p lower at 2368.5p 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 as investors continued to look for safe havens, gold’s remorseless rise continued, up more than an ounce to 99 having edged above 00 at one point. So it was no surprise that the only gainer in the leading index was Randgold Resources, up 65p at £67.35.

Lower down the market Kofax led the mid-cap fallers, down 56.5p to 274.5p after the software group reported slowing revenues in the second half.

Enquest fell 11.15p to 96.55p. After the market closed on Friday the oil company issued a disappointing update due to lower than expected production at the Conrie and Don Southwest fields in the north sea.

De La Rue dropped 12p to 798p following reports it had lost an Indian contract due to recent production problems. UBS said:

The formal contract loss, if confirmed would not be a big surprise. It ends the uncertainty and means that De La Rue does not have to hold back any of its capacity any longer although we suspect it had only held back limited amounts anyway more recently. That on its own shouldn’t impact the shares too much since most had given up on India, in our view.

There is also a chance French group Oberthur could return with a second bid attempt.

Finally marketing group Fuse 8 fell 32% to 15.5p after its chief executive was relieved of his duties following a worse than expected trading performance, and it said it was considering a number of options, including delisting from Aim or selling its operating business to leave a cash shell. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds