Renewed selling in banking sector puts additional pressure on equities

LONDON REPORT: FTSE:4,096.40 (-70.61) Mid-250:7,155.18 (-124.75) Small Cap:2,105.87 (-17.10)

LONDON EQUITIES were not immune yesterday to the worries about the economic implications of the swine flu outbreak, and fresh selling in the banking sector added to the pressure.

The benchmark index fell 71 points, or 1.7 per cent, to 4,096.40 having thrown off pressure from airline and travel stocks to rise 11 points over the previous session.

It was unable to recover, in spite of early gains on Wall Street markets, following better than expected US data. Reports that Bank of America and Citigroup could be required to raise new capital to strengthen their balance sheets, hit London-listed banks.

Lloyds Banking Groupfell 4.9 per cent to 95.6p, Royal Bank of Scotlandwas 4.7 per cent lower at 32.7p and HSBCshed 2 per cent to 457p. There was a series of earnings reports from top-tier companies for investors to consider.

The collapse in oil prices dented profits at BP, but not by as much as analysts had feared. The UK's most valuable company by market capitalisation said its first-quarter earnings fell by 62 per cent, in line with crude's drop from $150 a barrel to $40. A cost-cutting programme provided some shelter to its bottom line. Its shares climbed 0.1 per cent to 483½p.

Friends Provident, the insurer, was hit by news of a 40 per cent fall in first-quarter sales, sending its stock down 4.8 per cent to 59.3p. WPP, the advertising agency, fell 3.9 per cent to 424¼p after a 6 per cent fall in sales.

Shares in Whitbread, the leisure group behind the Costa Coffee chain and Premier Inn budget hotels, turned around to register closing gains after its annual profit met forecasts. Although it revealed the deficit on the triennial valuation of its pension fund rose to £388 million, the stock rose 0.6 per cent to 903p.

Drax, operator of Britain's biggest coal-fired power station, said margins were under pressure over low wholesale electricity rates. It was 3.9 per cent weaker at 505½p.

The shadow of swine flu lingered over airlines and travel stocks. Tour operators started cancelling package holidays to Mexico and their shares fell further. Tui Travel, which pulled trips to Cancun, fell 3.6 per cent to 253¼p. Thomas Cook, which took the same decision, was 1.7 per cent weaker at 265¾p.

British Airwayslost 5.4 per cent to 143.1p and Carnival,the cruise operator, was 2.5 per cent lower at £17.62. – Copyright 2009 Financial Timesservice