Morning Market: Bank losses take FTSE lower

Huge losses of over £10 billion at HBOS and uncertainty surrounding Lloyds' participation in the Asset Protection Scheme combined with losses in the US to take shares lower early on.

By 08:32am, the FTSE 100 was down 1.7% or 64.71 points, to 3,850.93, with banks leading the way after Lloyds Banking Group announced its long-expected results were in-line with expectations.

Despite this, traders were left concerned after Lloyds said in a statement that it was still in talks with the Treasury regarding the Asset Protection Scheme, with shares falling as a result.

Lloyds was down 8.1% or 6.1p, at 68.9p, while Royal Bank of Scotland fell 7.6% or 2.2p, to 26.8p, having been cut to sell from hold by S&P having yesterday unveiled record corporate losses of £24.1 billion.

With sentiment poor, peer Barclays was also down 5.5%, while insurers were also reeling.

Lining up for what looks set to be another bad day for financials, Aviva was off 5.5% while Legal & General and Prudential retreated 4.9% and 3.9% respectively.

Losses overnight in the US also had an effect as investors digested the health care and banking initiatives laid out in President Obama's federal budget.

As worries continued about the state of the American economy, shares ended lower, with the Dow Jones Industrial Average 1.2% weaker and the S&P 500 1.6% lower, back near 12-year lows.

With everyone focused on the banks and plans to jump start economies in the UK and abroad, there were very few risers.

Xstrata led the way, up 0.9%, amid a rise in brent crude in the last few days of more than $3 a barrel to $45.3.

The FTSE 250 was also down around 1.3% or 80 points, to 6,043.82.