UK's blue chip index falls

Britain's blue chip index ended lower on Monday during a choppy session as funding concerns pulled banks down, while US crude oil prices at near-record levels helped support heavyweight oil shares. The FTSE 100 index closed down 29.2 points, or 0.5, percent at 5,877.6.
Data showing UK factory gate inflation for May hit a record, which could prevent the Bank of England from cutting interest rates, raised concerns about consumer spending and brought down retail stocks. Banks were broadly lower, with HBOS, Alliance & Leicester and HSBC shedding 0.8-7.2 percent. The negative sector sentiment was partly due to a quarterly loss at US investment bank Lehman Brothers and a newspaper report on possible losses at Swiss bank UBS.
Royal Bank of Scotland slipped 4.8 percent after it sold shares not subscribed for in its record rights issue for 230 pence apiece, or about 690 million pounds ($1.4 billion) for the whole "rump", the bank said. RBS said that 95.1 percent of investors subscribed for the rights issue and its underwriters Merrill Lynch, Goldman Sachs and UBS had sold the remaining 299.4 million shares.
Barclays lost 5.7 percent after the Daily Telegraph reported on Sunday that the British bank was in advanced talks with overseas government-backed funds to secure a capital injection of more than 3 billion pounds. "News out of the US that Lehman have unveiled a $2.8 billion second-quarter loss and its own fund raising efforts has meant that UK banks have been under the cosh again," said Anthony Grech, a market analyst at IG Index.
"Most of the UK blue chip banks are a good 50 percent, if not more, off last years highs - but this still does not seem to be convincing investors that the current levels are bargain- basement prices."
On the upside, oil shares rose as US crude stayed just shy of $137, though it was off a record of $139 a barrel on Friday. BP advanced 2.4 percent, Royal Dutch Shell gained 4.8 percent, gas producer BG Group added 1.9 percent and Cairn Energy put on 1.2 percent.
But British Airways dropped 2.5 percent, bus and train operator FirstGroup lost 1.7 percent and cruise operator Carnival slipped 2.2 percent, as the high energy price weighed.
"Financial stocks are weighing on the FTSE like a flabby paunch that refuses to shift as summer approaches," said David Evans, a market analyst at BetOnMarkets.com. "With oil spiking higher on Friday and testing the $137 level today, it is no surprise that oil and gas stocks are among the best performers."
A Reuters poll showed that Britain's FTSE 100 index is expected to end the year slightly lower than where it started and strategists see only a small upturn by mid-2009 as a sharp economic slowdown is increasingly likely. Nuclear operator British Energy Group dipped 1.9 percent to 721.42 pence after it said take-over proposals for the company so far were below Friday's 735 pence closing share price and did not represent value for shareholders.
Retailers felt the pinch of low consumer spending. The Financial Times reported that a British Retail Consortium survey showed that consumer confidence has fallen to its lowest level in the survey's five year history.
Marks & Spencer shed 2.6 percent, Kingfisher lost 2.2 percent and Home Retail dropped 2.8 percent. Among midcaps, Informa jumped 13.3 percent and United Business Media climbed 2.1 percent after they confirmed that they were in early stages of talks about an all-share merger to create a 3 billion-pound-plus media group.