Britain's leading share index fell on Friday, breaking a six-day stretch of gains as concern about the impact of the credit crunch and a slowing economy weighed on banks. The FTSE 100 index fell 20.9 points, or 0.3 percent to 6,476.9 on its last full trading session before the end of the year, but still rallied for a second week in a row.
The UK benchmark index, which will have shorter trading hours on New Year's Eve on Monday, has gained 4 percent this year, compared with a nearly 11 percent gains in 2006, making 2007 its weakest year since 2002. Banks were the top negative weight on the index after another round of weak US data and warnings from Goldman Sachs on Thursday of more big writedowns on Wall Street heightened investor concern for this sector.
Financials have ranked among the worst performing sectors this year as the meltdown in the US housing market triggered one of the worst global liquidity squeezes in years and hit banks' balance sheets. "As far as the markets are concerned, 2007 will be remembered for the collapse of a bubble in financial sector valuations. Without that, the year would have been a pretty good one," Jacques Chahine at Factset said in a note.
A sharp drop in interbank lending rates offered little support to the broader market. One-month sterling Libor rates have now fallen to their lowest in a month, while three-month rates have dropped back to the pre-credit crisis levels of this summer.
Barclays, Royal Bank of Scotland, HSBC, HBOS, Standard Chartered and Alliance & Leicester were down between 0.3 and 1.1 percent. The Wall Street Journal said on its Web site that US and European banks including Citigroup and HSBC were mulling sales of parts of their businesses, from branches to entire units, to prepare for crunch times ahead.
Among other decliners was AstraZeneca, which fell by 0.8 percent after a Finnish court dismissed the Anglo-Swedish drugmaker's request for precautionary measures against Finnish rival Orion over infringement of its patents. Oil shares were mixed despite firmer crude prices. BG Group, Cairn Energy and Tullow Oil were up, while BP and Royal Dutch Shell eased.
A state judge ruled that the state of Alaska acted property when it rejected as inadequate a development plan for the long-languishing Point Thomson oil and gas field on the North Slope.
That 2005 rejection led to the state's December 2006 revocation of the Point Thomson unit's lease to operator Exxon Mobile Corp and its partners - BP, Chevron Corp and ConocoPhilips. Miners also had mixed fortunes, with Anglo American, Vedanta Resources and Antofagasta trading higher, while Xstrata, Kazakhmys and Rio Tinto fell.
Scottish & Newcastle rose 0.3 percent after the Times said John Dunsmore, the chief executive of the brewer, had hinted that he could open talks with suitors Carlsberg and Heineken. Scottish & Newcastle had earlier rejected the approach and refused to meet the consortium for take-over talks.