Japan quake shakes investor sentiment to pull back earlier gains in financials

FTSE: 6,007.37 (–33.76) Mid-250: 11,659.42 (–121.95) Small Cap: 3,271.77 (–4.20):UK STOCKS retreated in the last hour of trading yesterday, as Japan was hit by a 7.1-magnitude earthquake, overshadowing gains in banks after Portugal sought a bailout from the European Union.

The benchmark FTSE 100 Index lost 33.76, or 0.6 per cent, to 6,007.37 at the close in London after an earthquake hit 215 miles (345km) northeast of Tokyo, resulting in warnings of a possible tsunami.

Stocks fluctuated earlier as the Bank of England left interest rates at a record low for a 26th month.

The FTSE All-Share Index and Irelands Iseq Index also dropped 0.6 per cent.

Stocks gained for most of the day in Europe as Portugal’s request for an EU bailout bolstered optimism that the region’s sovereign-debt crisis may be contained. A measure for bank shares jumped 1.1 per cent.

Spain yesterday sold three-year bonds at lower borrowing costs than at its previous auction.

“The markets are taking it well because it clears some of the uncertainty in the short term,” Chris Turner, head of strategy at Lombard Street Research in London said. “Longer term we are still concerned about the sustainability of the Spanish fiscal position given the lack of growth there.”

Cairn Energy declined 2.3 per cent to 445.9p and Vedanta dropped 2.6 per cent to 2,431p.

Bwin.Party, which was formed from last month’s combination of PartyGaming and Bwin Interactive Entertainment, fell after German states’ prime ministers yesterday proposed a 16.7 per cent tax on sports-betting stakes. The shares dropped 15 per cent to 142p, extending the previous day’s 16 per cent decline.

HSBC advanced 1 per cent to 667.2p.

Carpetright declined 5.9 per cent to 632p. The UK’s biggest carpet retailer lowered its earnings outlook for the second time in two months as faltering consumer confidence deters people from renovating their homes.

Halfords slid 5.1 per cent to 350p as the retailer reported 13-week same-store sales fell 6.8 per cent and said cost pressures are increasing.

Hays lost 4.5 per cent to 114.1p. The UK’s largest recruitment company said net fees in its home market dropped 2 per cent in the fiscal third-quarter, with fees for public projects in Britain plunging 37 per cent due to government spending cuts. – (Bloomberg)