Bank fears and mining tax hold FTSE down

The FTSE 100 was down this morning with fears over European banks stoked by a Wall Street Journal report claiming banks had understated risky debt holdings in stress tests. The index was down 0.6% at 5374 points.

Barclays shares were the worst hit, down 3.3% at 303.5p. The bank’s appointment of Bob Diamond created political waves after business minister Vince Cable criticised the decision, but the price falls are likely to stem from general European bank debt worries and a downgrade by analysts.

Miners were still feeling the effects of the Australian threat to impose a 30% tax on mining profits. BHP Billiton shares were down 1.6% at £18.62 and Vedanta Resources down 2.3% at £10.77.  

BP was the biggest gainer, up 5.5% at 410p. The company said it would publish the findings of an internal report into the Gulf well leak at midday today.

Real estate investment trusts Hammerson, Land Securities and British Land were amongst the top ten gainers. British Land was up 0.67% at 478p, while Hammerson was up 0.64% at 376p. The rises followed a positive sector outlook from Barclays Capital and house price data from Halifax.   

In the FTSE 250 house builders Barratt Developments, Taylor Wimpey and Redrow were amongst the biggest losers.  Barratt highlighted concerns about the economy and lack of mortgage finance as a challenge for the housing market.  The company’s full-year profits were better than expected but its share price was down 4% at 100p this morning. Redrow was down 2.91% at  123p and Taylor Wimpey was down 2.8% at 28p.

The demise of property and environmental services company Connaught has raised concerns about the sector in the face of government cuts. Trading in the company's shares was suspended on Tuesday. With 10,000 employees and 180 maintenance contracts with local councils and housing associations it could be the biggest company bankruptcy in the UK since Woolworths.

The Office of National Statistics published the Index of Production and Index of Manufacturing today. Both showed 0.3% month on month growth.

David Kern, Chief Economist at the British Chambers of Commerce, said: ‘These figures are better than expected and show that the manufacturing recovery is on the right track. The new data reinforces the view that GDP as a whole will record positive growth in the third quarter, albeit at a slower pace than the unusual growth seen in the second quarter.’

He said: ‘Although the manufacturing sector’s performance this year is pleasing, there is no room for complacency. The recovery is not yet secure, particularly as there are worrying signs of a slowdown in the global economy. While UK manufacturers are currently enjoying the benefits of a competitive exchange rate, capitalising on these benefits may be much harder in the months ahead.’