London snaps three days of gains after Barclays and Lloyds stocks tumble

FTSE:5,214.65 (–125.73) Mid-250:10,151.43 (–213.62) Small Cap:2,930.63 (–29.19)

UK STOCKS retreated yesterday, halting three days of gains for the FTSE 100 Index, as financial companies declined amid growing concern the European debt crisis is spreading.

The FTSE 100 lost 125.73, or 2.4 per cent, to 5,214.65 in London, bringing this week’s slide to 1.5 per cent.

“The banking sector is weighing on sentiment today,” said Ben Critchley, a sales trader at IG Index in London.

“Although there have been signs of some bottom fishing among bank shares in recent days, investors still remain very nervous and it seems unlikely this will be changing in the short term,” he said.

Stocks extended declines as the European Central Bank said that Juergen Stark resigned from its Executive Board, suggesting policymakers are divided over the best way to combat the euro area’s sovereign-debt crisis.

UK stocks climbed on Thursday after a rally in retail shares helped offset the Bank of England’s decision to resist extending stimulus measures and the ECB said that economic threats had “intensified”. The FTSE 100 has lost 14 per cent from its high this year on February 8th.

Barclays, the UK’s second-largest lender by assets, dropped 9.4 per cent to 144p, the lowest since March 2009.

Lloyds slid 5.7 per cent to 31.04p.

Royal Bank of Scotland slipped 5.5 per cent to 21.5p.

The rate at which banks say they pay for three-month loans in dollars, or the London interbank offered rate, climbed to its highest level since 2010.

Admiral sank 4.2 per cent to 1,307p after Britain’s Ministry of Justice banned referral fees in personal injury cases to stem rising insurance costs. Referral fees account for 9 per cent of Admiral’s UK ancillary income and 6 per cent of profit, according to Shore Capital.

Tullow Oil surged 15 per cent to 1,413p after the oil and gas explorer said its Zaedyus exploration well encountered 72m of so-called net oil pay. Exploration director Angus McCoss said the field may hold 700 million barrels in gross reserves.

Northern Petroleum, which has an interest in the French Guiana oil discovery, rallied 29 per cent to 93p.

JD Wetherspoon retreated 4.3 per cent to 398p. – (Bloomberg)