Financials take hit amid renewed fears over euro zone debt contagion

FTSE: 5,259.56 (–108.85) Mid-250: 10,229.01 (–199.16) Small Cap: 2,895.97 (–36.85)UK STOCKS declined yesterday, ending a four-day rally on the benchmark FTSE 100 Index, amid speculation European officials will not be able to contain the region's sovereign debt crisis.

The UK’s top banks lost more than 5 per cent as banks across Europe declined.

The FTSE 100 slid 108.85, or 2 per cent, to 5,259.56 in London, paring some of last week’s 3 per cent advance. The benchmark measure has lost 12 per cent since the start of July amid mounting concern that Europe’s debt crisis is worsening and global economic growth is slowing.

The FTSE All-Share Index fell 2 per cent yesterday.

“Another week begins and the same old stories continue to vie for attention, with Greece struggling to convince the rest of Europe it can meet its obligations,” said Michael Hewson, a markets analyst at CMC Markets in London.

Greece’s ability to avoid default hangs in the balance this week as international monitors prepare to assess whether prime minister George Papandreou can meet the conditions of rescue loans.

European Union and International Monetary Fund inspectors are holding a teleconference with Greece’s finance minister, Evangelos Venizelos, to judge whether the government is eligible for an aid payment due in October.

Royal Bank of Scotland, the biggest government-owned lender, sank 5.7 per cent to 22.88p. Lloyds declined 6.7 per cent to 33.42p and Barclays fell 6.6 per cent to 152.7p.

Britain’s business secretary Vince Cable is to look at ways to help shareholders curb excessive executive pay at under performing companies, calling the present system “dysfunctional” and a failure of corporate governance.

Rio Tinto, the world’s second-biggest mining company, lost 3.3 per cent to 3,505p.

Antofagasta declined 8.2 per cent to 1,194p, the largest drop since May.

Copper, lead, nickel, tin and zinc fell on the London Metal Exchange.

Ocado tumbled 11 per cent to 118.4p as the biggest UK online-only grocer reported a slowdown in sales growth and said profitability would be “slightly lower” than it had expected.

Meggitt rose 3.6 per cent to 331.5p, for a fourth day of gains, as Goldman Sachs named the company on a list of potential European defence and aerospace takeover targets. – (Bloomberg)