Britain's top share index slipped 1.4 percent on Thursday as anxiety over the global financial sector once again pummelled banks, while energy and mining stocks retreated, gnawed by demand worries. The global crisis prompted the European Central Bank to cut interest rates by 0.5 point to 2 percent, but a flurry of activity by major governments has failed to calm investor nerves on the banking sector and the wider economy.
The FTSE 100 index closed down 59.53 points, to its lowest close in over a month, at 4,121.11, extending its decline to a seventh straight session. Lloyds TSB topped the blue chip losers, tumbling 11.7 percent, but Barclays and HSBC were also heavy fallers, sliding 8.2 percent and 7 percent respectively.
The British banking index has fallen 15.8 percent this week after plunging nearly 60 percent last year. Sentiment about banks was further depressed by news of a plea by Bank of America for more government aid, sending its and rival Citigroup's shares tumbling.
"There is concern over the severe losses incurred by not only the UK banking sector but also by Citi Group and Bank of America which has obviously affected the Dow and obviously made sentiment very negative. That's the story at the moment," said David Buik, partner at BGC.
"It looks like many banks now are considerably going to need fresh capital if not access to quantitative easing, and the sooner it happens the better." Investors were also reviewing positions on the embattled sector ahead of the ending of the short-selling ban on financial stocks on Friday. Standard Chartered, however, rose 2.8 percent as traders noted switching to the Asian-oriented bank from peer HSBC.
But Royal Bank of Scotland slid 4.3 percent adding to its 18.4 tumble the previous session. Energy stocks were also a big drag on the index, as gloom over deepening recession and its impact on fuel consumption sent crude sliding below $35 per barrel.
The uncertain global economic outlook prompted Opec to forecast a fall of 180,000 barrels per day in world oil demand this year, 30,000 bpd more than its previous forecast. Royal Dutch Shell, BP and BG Group fell between 0.8 and 2.4 percent.
Miners were mixed. Rio Tinto gained 1.5 percent after it reported one of its biggest quarterly falls in iron ore output after demand from Chinese steel mills slumped late last year, but sales met its own reduced target.
Antofagasta, gained 4.1 percent but Vedanta slid 0.9 percent and BHP Billiton, lost 0.9 percent. Home Retail lost 2.7 percent after the household goods retailer reported a steep deterioration in gross profit margins in a trading update.
Also on the high street, mid-cap electrical retailer DSG International shed 2.5 percent after a weak Christmas trading statement. But music and books retailer HMV Group bucked the gloomy sector trend, adding 2 percent after its trading update, delivered late on Wednesday, proved less bad than feared. Bookmaker William Hill climbed 8.9 percent, also after a resilient trading update.