FTSE 100 close: More fears for US banks

By This Is Money
Updated: 06:14 EDT, 1 May 2009

Fears over the spread of swine flu combined with poor performance from miners and banks to push the FTSE 100 index 2% lower today.

Fears: More bad news for US traders.

London's slump into the red mirrored other world markets as concern that the virus could hurt economies escalated after the World Health Organisation (WHO) said it was too late to contain the outbreak. The Footsie closed down 70.6 points at 4096.4.

Shares on Wall St were a mixed bag during the morning session, leaving the Dow Jones Industrial Average 2.71 points down at 8,022.3.

Reports last night said regulators had told US banks Citigroup and Bank of America they may need to raise more capital, causing a slump for financial shares today in London.

Chancellor Alistair Darling is also expected to announce next month that 'too-big-to-fail' UK banks such as HSBC, Lloyds Banking Group, Royal Bank of Scotland and Barclays should hold more capital than others.

The speculation caused Royal Bank of Scotland to fall more than 4% - or 1.6p - to 32.7p and Barclays to drop 2p to 232.25p, while Lloyds Banking Group was off 4.9p at 95.6p.

In the mining sector, stocks plummeted after a fall in metal prices. Xstrata led the way as the biggest loser with a 6% drop of 36.5p to 563.5p.

With the WHO raising the level of its pandemic alert, investors continued to bail out of travel-based stocks. British Airways fell another 8.1p to 143.1p, while cruise ship firm Carnival was off 45p at 1762p and Thomson owner TUI Travel dropped 9.5p to 253.25p.

Thomas Cook was also down 4.5p at 265.75p after it cancelled flights to Mexico in the wake of travel advice warning Britons against all but essential travel to the country.

GlaxoSmithKline enjoyed a second day of rises as the outbreak increased the likelihood of more drug orders. The firm was one of only a handful of names on the leader board, as shares rose 13p to 1076p in early trading. They later fell, closing 15p down at 1048p.

In a busy session for corporate updates, BP shares rose 0.25p at 483.5p after it reported better-than-expected first quarter profits of $2.39bn (£1.64bn), down 62% on a year ago.

Richard Curr, Head of Dealing at Blue Index says traders are taking profits in the oil giant. despite the fact that the group has also upped the dividend by 3.5% to 14 cents per share.

'While the numbers clearly show an increase in production, Blue Index believe the low oil price will continue to weigh on BP shares regardless of improving performance. Until this changes, we expect a round of profit taking and ongoing share price weakness.

'Accordingly we are short-term sellers with a target price of 449p.'

Friends Provident shares were under pressure, down 4.8% or 3p to 59.3p, after it detailed a worse-than-expected 40% dip in quarterly sales and said it was braced for a difficult year.

Retail property developer Liberty International was one of the the worst performing blue chips, shedding 7.75p at 425.5p, afte JPMorgan said its proposed move to raise fresh funds of between £500m and £600m will require heavy discounting.

Meanwhile in the FTSE 250, Taylor Wimpey slid 5% after an analyst downgrade of the housebuilding sector. Shares fell 2.25p to 41p.