Footsie loses ground as financial stocks fall on French debt concerns

FTSE: 5,007.16 (–157.76) Mid-250: 9,890.76 (–199.54) Small Cap: 2,895.86 (+8.11)UK STOCKS resumed their retreat yesterday, led by a sell-off in banks as the cost of insuring French debt rose to a record, renewing concern that Europe's sovereign-debt crisis may spread to its larger economies.

The FTSE 100 tumbled 157.76, or 3.1 per cent, to 5,007.16 at the close in London, reversing yesterday’s 1.9 per cent rally.

“The market has gone back to focusing on debt,” said David Jones, chief market strategist at IG Index in London. “There is still that risk of contagion; last week there was concern about Spain, this week potentially France.”

Stocks rallied earlier yesterday after the Federal Reserve pledged to keep interest rates low until the middle of 2013.

“Yesterday the market was looking for an excuse to rally and the Fed gave them that excuse. It provided a short bit of relief, but it doesn’t change the bigger picture,” Mr Jones said.

RBS paced a sell-off in European banks as the cost of insuring French debt climbed. The shares plunged 7.3 per cent to 24.3p, while HSBC declined 5.3 per cent to 516.2p.

Lloyds Banking slid 4 per cent to 30.8p.

France’s Société Générale plunged 15 per cent, while BNP Paribas tumbled 9.5 per cent. Credit-default swaps on French debt rose to a record 171 basis points, according to CMA.

France’s borrowing costs are climbing as Europe’s debt crisis makes investors wary of lending to any nation other than Germany.

A gauge of mining shares swung to a loss in afternoon trading as copper erased gains in London, falling as much as 2.1 per cent.

Kazakhmys dropped 7.7 per cent to 918p, Antofagasta lost 5.1 per cent to 1,144p and Anglo American retreated 4.4 per cent to 2,314p. Essar Energy fell with oil-related companies, tumbling 13 per cent to 262.1p.

Cairn Energy dipped 4.5 per cent to 293.9p, Tullow Oil lost 2.6 per cent to 974p and Royal Dutch Shell retreated 2 per cent to 1,901p.

Standard Life paced advancing shares, jumping 5.7 per cent to 184.1p.

Man gained 3.2 per cent to 187.2p after the hedge fund manager’s chief executive officer Peter Clarke and other directors bought a total of 150,000 shares in the company.

Weir rose 1.9 per cent to 1,735p. – (Bloomberg)