FTSE declines at concerns over debt crisis and Italian borrowing costs

FTSE 100: 5,460.38 (-106.96) Mid-250: 10,268.87 (-150.47) Small Cap: 2,809.32 (-28.89)BRITISH STOCKS tumbled yesterday, led by a sell-off in banks, after surging Italian borrowing costs raised concern Europe's debt crisis is deepening.

HSBC Holdings fell 5.8 per cent after Europe’s largest lender reported lower profit at its investment bank and an increase in bad loans. Admiral Group slumped 26 per cent after the insurer’s personal injury claims rose. Tullow Oil dropped 5.3 per cent after cutting its full-year output target.

The benchmark FTSE 100 fell 1.9 per cent at the close in London after Italian bond yields rose to euro-era records, near to levels that drove Greece, Ireland and Portugal to seek bailouts.

The yield on Italian 10-year bonds expanded to 7.21 per cent, or 549 basis points above benchmark German bunds, for the first time since the euro was created in 1999. Italy’s credit-default swaps also jumped to a record.

HSBC fell 5.8 per cent to 506.3 pence after the lender posted a 53 per cent drop in third-quarter pretax profit at its investment bank to about $1 billion. Bad loan provisions climbed to $3.89 billion from $3.15 billion, mainly related to its US unit. HSBC also reported a drop in net trading income to $106 million from $1.39 billion.

Barclays retreated 4.9 per cent to 172.05p and Royal Bank of Scotland fell 5.6 per cent to 21.09p. Standard Chartered, which makes most of its revenue in Asia, lost 2.6 per cent to 1,377 pence.

Admiral Group sank 26 per cent to 887.5p after the car insurer said higher-than-expected personal injury claims would lower its reserves in 2011. Pretax profit would be toward the lower end of the range of analysts’ estimates, the company said.

Tullow Oil tumbled 5.3 per cent to 1,360p. The London-based explorer with the most licences in Africa cut its full-year output target because of a slower-than-expected production increase from the Jubilee field in Ghana.

Great Portland Estates slid 2 per cent to 363p after the developer, which focuses on London’s West End, reported a 31 per cent drop in first-half net profit to £79.1 million after the company’s redevelopment programme left buildings vacant.

Kesa Electricals declined 2.8 per cent to 99p as Europe’s third-largest electronics retailer said it would pay £50 million to exit the money-losing Comet chain in the UK , enabling it to focus on its profitable Darty unit. – (Bloomberg)