FTSE close: RBS, Lloyds, BG, BP, Pru down

By Adrian Lowery
Updated: 13:06 EDT, 28 October 2009

London shares fell sharply today amid a disappointing session for European corporate earnings.

And a negative open on Wall Street, where the Dow Jones was 36.4 points down at 9,845.7, did little to help the Footsie. The FTSE 100 index closed 120.5 points lower at 5,080.4.

'Everybody is on tenterhooks ahead of the US third-quarter GDP numbers tomorrow afternoon,' said Jim Wood-Smith, head of research at Williams de Broe.

'After we got the very weak UK number on Friday, if we get that backed up by a disappointing US number it's going to put some serious question marks over the viability of the perceived recovery,' he said.

Banking shares declined as Banco Santander said third-quarter profits were flat despite a sharp improvement in its UK arm, which owns Abbey, Alliance & Leicester and the savings arm of Bradford & Bingley.

Royal Bank of Scotland fell by as much as 5% at one stage amid continued fears over harsher than expected sanctions from European regulators as the price of state support. RBS shares were later down 3% or 1.21p to 39.6p, while Lloyds Banking Group was off 3.84p at 80.0p.

Elsewhere in the financial sector, shares in Prudential slumped 10% or 60p to 550.5p after the insurer reported a 22% decline in UK sales for the third quarter.

Other insurers were spooked by the UK update, as Aviva shares fell 22.7p to 397.8p and Legal & General declined 4.85p to 77.7p.

Miners were among the other casualties in the sell-off, with Xstrata down 9% or 91.5p to 882p and Kazakmhys off 111p at 1,113p.

Oil and gas exploration firm BG Group was another faller - down 37.5p to 1,095p - after it posted a 44% drop in third-quarter earnings due to lower oil prices.

Elsewhere, British American Tobacco, the world's second-biggest cigarette maker, slipped 33.5p to 1,957p after posting a 3% dip in underlying nine-month sales volumes as it said trading conditions had deteriorated.

A shortened risers' board featured British Gas owner Centrica after it announced plans to invest £275m to build a new offshore windfarm off the coast from Skegness. It has also raised more than £400m from the sale of half its stake in the Lynn and Inner Dowsing wind farm off the Lincolnshire coast. Shares rose 2.1p to 246.3p.

There was positive broker sentiment for BT Group, which nevertheless lost 0.1p to 133.4p, as Barclays Capital initiated coverage on the telecoms carrier with an 'overweight' rating as it started the European telecoms sector with a positive view.

In the FTSE 250 Index, retailer Carpetright struggled to make headway, despite revealing a jump in sales in the past 12 weeks and forecasting better than expected first half profits. Analysts were concerned by a fall in UK margins, causing shares to dip 14p to 886p.