FTSE down 1.8%
By Michael Taylor
LONDON (Reuters) - The blue-chip index ended almost 2 percent lower on Wednesday after banks and builders took a pummelling on funding concerns, while retailers headed south on negative broker comment.
The FTSE 100 .FTSE slumped 104 points, or 1.8 percent to 5,723.3 to notch a fourth consecutive session of losses and fall to their lowest close in over two months.
"It might not be the end of the world, but in some respects we don't seem to be too far from it," said Jimmy Yates, a dealer at CMC Markets. "The FSTE has broken below the 5,800 level and this really has the potential to open up the way for a slide right down to around 5,400." Banks fell sharply as cautious comments from Royal Bank of Scotland raised concern about its growth prospects, while HBOS came out with a statement saying its rights issue is proceeding "according to plan" after its shares fell below the price of the new stock.
RBS shares lost 9 percent after it said trading was in line with previous guidance, but it was taking a more cautious stance towards risk in the light of jittery markets. Its focus on rebuilding capital was likely to restrain profits, analysts said, and could be mirrored elsewhere.
HBOS fell 11.6 percent, while Alliance & Leicester tumbled 8.4 percent, Lloyds TSB shed 5.3 percent and Barclays slipped 4.7 percent. The DJ Stoxx European banking index was down almost 3 percent.
A two-day battering for housebuilders also added to banks' gloom as mortgage market prospects and funding concerns dragged.
Both Merrill Lynch and Goldman Sachs issued negative research note on stocks in the sector on an uncertain market outlook.
Persimmon , Taylor Wimpey , Barratt Developments , Redrow and Bovis Homes slid by between 3 and 20.8 percent.
Barratt, responding to the sharp fall in its shares, confirmed the guidance for its full year given that it gave to the market at the time of its trading update on May 14.
Persimmon is among four companies to leave the FTSE 100 later this month according to index compiler FTSE.
On the economic front, jobless numbers rose for a fourth month in a row in May, while earnings growth in the three months to April was weaker than expected.
The National Institute of Economic and Social Research said British GDP growth is estimated to have slowed to 0.2 percent in the three months ending in May, from 0.4 percent in the three months to April.
In other decliners, retailers fell, led by electrical group Kesa , department store chain Debenhams and fashion group Next , as brokers take an axe to earnings forecasts amid signs the consumer downturn is deepening.
Miners also dragged after Antofagasta said its major challenge is maintaining its profit margins amid higher costs on oil and energy. Antofagasta dropped 5.1 percent.
Xstrata , Rio Tinto , Vedanta Resources , BHP Billiton , Kazakhmys , Anglo American and Lonmin were down between 1.9-6.9 percent.
Cable & Wireless and Johnson Matthey were both negative after going ex-dividend.
"It's been a relentless unwinding of this rally that started in mind-March," said David Jones, chief market strategist at IG Index. "There has been an absolute chunk of downgrades today -- property and retail stocks... that's not helped."
"We've come into today on a bit of a wave of doom and gloom. We are not seeing any positive news flow at the moment."
Oil shares offered some support as crude prices climbed toward $136 a barrel. BP rose 1.5 percent and BG Group added 0.4 percent.
Centrica climbed 3 percent on positive broker comment, traders said, while engineer and project manager AMEC added 2.2 percent after UBS upped its price target to 1,030 pence from 935 pence.
(Additional reporting by Dominic Lau, Steve Slater and Atul Prakash; Editing by Richard Hubbard)