Banks lead FTSE 100 lower

  • Published

(Close): An early rally in London's leading shares soon fizzled out, with attention focused on banking stocks following the publication of Europe-wide stress tests on Sunday.

Shares in Lloyds Banking Group fell 1.8% after the European Banking Authority's results showed the bank only narrowly passed the test.

Barclays was down 2%, RBS fell 1.4%, while HSBC ended the day 1.3% lower.

Overall, the FTSE 100 index was down 25.27 points, or 0.4%, at 6,363.46.

"The news will weaken Lloyds' position as it negotiates with the FCA about restarting dividend payments, and the share price fall reflects a hasty recalculation among investors about the chances of an income stream from the bank in the future," said Chris Beauchamp, market analyst at IG.

The biggest reaction to the stress tests was seen in Italy, where shares in Monte dei Paschi sank more than 15% and were then suspended. The stress test revealed it had a capital shortfall of €2.1bn (£1.65bn, $2.6bn).

Travel shares were having a better day as oil prices fell and worries about the impact of the Ebola virus eased.

Travel company TUI Travel rose 2.5% and Intercontinental Hotels Group climbed 2.3%.

The price of Brent crude oil dipped after Goldman Sachs cut its oil price forecasts.

Goldman now expects Brent to be about $85 a barrel in the first quarter of 2015, compared with its previous forecast of $100.

It has also cut its forecast for the price of US crude to $75 a barrel from $90.

Brent crude for December delivery fell 81 cents to $85.42 a barrel, while US light crude was down $1.38 at $80.68 a barrel.

On the currency markets, the pound rose four-tenths of a cent against the dollar to $1.6129 and was almost unchanged against the euro at €1.2687.