Bank sector weakness prevails as concerns bite

An early Vodafone-inspired bounce by London's equity market quickly blew itself out as the initial excitement and relief regarding the mobile phones group was replaced by lingering concerns about the bank sector.

Those concerns emerged after Barclays and Northern Rock issued the first of the banks' pre-close season trading statements.Such was the market's dislike with those factors that the banks were the worst performers in the FTSE 100, while other bank stocks such as Royal Bank of Scotland, Lloyds TSB and HBOS were also prominent among the losers.

There were other bearish factors at work in the market too, with a profits warning from IG Index, the UK's leading spread betting group, driving the stock down to a record low.

Meanwhile, the overall picture in the market remained gloomy, with the IndiaPakistan confrontation over Kashmir continuing to dissuade investors in the short term.

And while London struggled to cope with those downside influences, its real problem emerged in the afternoon when Wall Street returned from the three-day weekend break, celebrating Memorial Day, under severe pressure.

London struggled manfully during the morning before giving up the ghost around lunchtime and sliding away thereafter, with the FTSE 100 index eventually moving down through the 5,100 level and settling a net 62.1 off at 5,074.2, its lowest closing level since February 22nd. At its worst of the day, the index touched 5,062.4. Hints of a possible bid for Legal & General, the insurance group, were accompanied by heavy volume in the stock.

While London's benchmark index suffered, there were problems for the broader market where the other indices all lost ground.

The FTSE 250 ended a bad day only a fraction off its low, down 46.7 at 6,065.6, driven by substantial falls in many of the housebuilders.

The FTSE SmallCap fell 9.6 to 2,605.3, while the Techmark 100 index retreated 13.94 to a record closing low of 1,015.71, having been down to 1,013.94 at one stage.

Turnover in equities was dominated by Vodafone, which attracted volume of 787 million shares, or 27 per cent of the market total of 2.84 billion.