FTSE snaps 6-day rally, banks suffer Irish stress

By Simon Falush

LONDON (Reuters) – British bank shares fell on further concerns about the state of finances in the peripheral euro zone countries, dragging the country’s top shares lower by the close on Thursday and ending a six-day winning run.

Ireland said its four remaining banks require another 24 billion euros ($34.1 billion) to enable them to withstand potential losses from a worsening of the economy.

The blue chip index (.FTSE: Quote, Profile, Research) closed down 39.54 points, or 0.7 percent, at 5,908.76 by 1050 GMT, having risen 0.3 percent on Wednesday.

After a week of low volumes, trading was robust at 126 percent of the average of the last 90 trading days.

The Irish announcement came as markets closed, but the index fell sharply at the closing auction where traders settle outstanding trades for the day.

“We saw equity markets suddenly slide very rapidly toward the close with the banking sector slipping back quite considerably,” said Michael Hewson, market analyst at CMC Markets.

“What we have seen in the closing auction (in the FTSE 100) is an early indication of what the market thinks of it.”

Fears about the state of finances in some poorer euro zone countries had already been heightened when it was revealed that Portugal’s deficit was more than a percentage point above target at 8.6 percent of GDP.

Europe’s largest banks HSBC (HSBA.L: Quote, Profile, Research) fell 2.3 percent while Barclays (BARC.L: Quote, Profile, Research) fell 2.3 percent and insurer Prudential (PRU.L: Quote, Profile, Research) fell 2.1 percent.

Firmer commodity prices lifted some miners and energy firms, preventing heavier losses.

West African-focused gold miner Randgold Resources (RRS.L: Quote, Profile, Research) was the top gainer, up 8.8 percent after it said it is sticking with the production forecast for 2011 which it gave early last month, even though the unrest in the Ivory Coast, home to its newest mine, has since worsened.

Shares in Vedanta Resources (VED.L: Quote, Profile, Research) added 2.8 percent after a press report raises hopes of a green light for its planned buy of a stake in Cairn Energy’s (CNE.L: Quote, Profile, Research) Cairn India unit (CAIL.BO: Quote, Profile, Research).

Chip designer ARM Holdings (ARM.L: Quote, Profile, Research) climbed 2.2 percent , boosted by a Bank of America Merrill Lynch upgrade.

RETAILERS REVERSE

Retailers continued a poor run, with a profit warning from mid-cap Mothercare (MTC.L: Quote, Profile, Research) further shredding sentiment on the sector. Kingfisher (KGF.L: Quote, Profile, Research) slipped 3.3 percent.

ITV, whose biggest source of revenue is advertising from retailers was the top faller, down 3.9 percent.

“The domestic situation is difficult and the consumer-oriented part of the market will be a feature weighing on the market,” said Tim Rees, manager of the 270 million pound ($434.6 million) Insight equity income fund.

However, he added that the internationally focused index is supported by its exposure to commodity stocks which should continue to benefit from robust global demand.

Vodafone (VOD.L: Quote, Profile, Research), the world’s largest mobile operator by revenue, shed 1.9 percent after it said it would pay $5 billion to buy out Essar Group from its Indian joint venture.

International Power (IPR.L: Quote, Profile, Research) slipped 2.3 percent after JPMorgan expressed concerns over potential downgrades in the consensus market forecast for earnings and limited newsflow.

Technical indicators were seen as constraining potential future strength in the market.

“On a more long term scale the 5,975 level remains the area capping any gains on the upside, and has done since early in March,” James Hughes, senior market analyst, at Alpari UK, said.

(Editing by Greg Mahlich)

FTSE snaps 6-day rally, banks suffer Irish stress