Britain's leading share index closed 3.1 percent lower on Tuesday, led down to fresh six-year lows by heavyweight oil shares that fell on demand concerns as BP scaled back its growth plans. At the close, the FTSE 100 was down 113.74 points at 3,512.09, after tumbling 5.3 percent the previous session.
The index is down over 20 percent so far this year having tumbled more than 31 percent in 2008 its worst year since the index was launched in 1984. "Any enthusiasm for risk taking has disappeared as sentiment once again turns bleak. Rather like the housing market, no one is willing to stick their neck out and buy equities when they know there is a good chance they will be cheaper in a few month," said David Evans, market analyst at BetOnMarkets.com. Energy stocks took the most points off the blue chip index as gloom on prospects for oil demand tarnished the sector.
BP said it was scaling back its near-term oil and gas production growth target, as falling oil prices prompt the company to rethink investment plans. BP shares - downgraded earlier by Bernstein to "market perform" - shed 4.3 percent, while Royal Dutch Shell, BG Group, Tullow Oil, and Cairn Energy fell between 5.3 percent and 7.4 percent. Banks were also in the red again as jitters on the sector continued, with the FTSE 350 banking index losing 1.0 percent. It has tumbled 43 percent this year after having slumped by almost 57 percent in 2008.
Lloyds Banking Group fell 8 percent as nationalisation fears continued to swirl, while Barclays shed 6.7 percent with Nomura suggesting a short position in the stock on concerns about how the bank will fund joining the United Kingdom's asset purchase scheme.
Royal Bank of Scotland lost 4.4 percent with WestLB downgrading the stock, and HSBC fell 1 percent after Monday's $17.7 billion cash call. However, Standard Chartered was the biggest blue chip gainer, adding 7.3 percent after reporting a 19 percent rise in full year profits before tax to $4.8 billion.
"These results appear the best we have seen this (UK banking) results season. However, trends into 2009, especially in consumer banking and corporate asset quality are weakening," said Alex Potter, analyst at Collins Stewart. US blue chips reversed early gains, losing 0.6 percent, following cautious comments from Federal Reserve Chairman Ben Bernanke on the economy's prospects and a report that showed further deterioration in housing.
International Power was the biggest FTSE 100 faller, down 8 percent, with utilities, which had gained recently, now getting the cold shoulder from investors as sector results start to flow in. Generating peer Drax Group lost 2.5 percent after a narrowing in margins was highlighted in results that showed full-year core earnings that beat consensus.
Insurers managed to eke out some gains, with Admiral adding 2.3 percent after it reported an 11 percent increase in 2008 profits, and Amlin gaining 4.2 percent to top the list of large-cap winners after Citigroup raised its price target following the company's results the previous day. DIY retailer Kingfisher rallied 4.4 percent higher, while Next added 0.7 percent.