FTSE: 5,423.14 (-85.88) Mid-250: 10,150.28 (-125.28) Small Cap: 2,782.26 (-14.95)BRITAIN'S TOP share index retreated yesterday, with nervous investors ditching riskier assets such as banks and retailers, as corporates showed signs of stress in the face of the intensifying debt contagion in Europe.

London’s blue-chip index shed 85.88 points, or 1.6 per cent to 5,423.14, with the FTSE volatility index, up 10.2 per cent showing investors were more pessimistic about the economic outlook.

Banks fell 2.3 per cent as funding stress grew in the sector, with the euro zone sovereign debt crisis seeping deeper into countries such as France and markets looking to the European Central Bank to take more dramatic action.

Banks were under pressure from the start of the day after Ratings agency Fitch voiced concern over US banks’ European exposure. That pressure intensified as Spain’s bond yields rose to unsustainable levels long-term following a bond auction.

French bond yields rose after its own bond auction, while Italian yields remained dangerously high on fears Europe’s debt crisis could spell the end of the euro.

Miners and integrated oils fell too, in tandem with weakening commodity prices as the uncertainty surrounding Europe’s debt crisis threatened demand in the sector.

BHP Billiton, the world’s biggest miner, fell 2.8 per cent as it turned more wary on the outlook for commodity markets in the face of tighter access to credit, but said conditions are not as bad as during the global financial crisis.

Commodities group Glencore, however, bucked the weak trend, rising 1.9 per cent as the firm said third-quarter activity in its closely watched marketing arm was solid, despite slowing global growth.

With debt contagion sweeping through Europe and governments around the world implementing austerity measures, consumers are feeling the pinch.

FTSE small cap fashion retailer French Connection, down 15.5 per cent, echoed Wednesday’s announcement from video games retailer Game Group, and issued a profit warning.

Mothercare shed 17.9 per cent after the FTSE 250 mother and baby products retailer reported first-half pretax losses. Investors, wary that the signs are not promising for retailers in the build-up to the important Christmas trading period, sold out of positions in blue-chips Marks & Spencer, Kingfisher and Next, which fell up to 1.7 per cent. – (Reuters)