Banks slide as London ends record September in the red

The FTSE, which has added 6.7 per cent over the month, dipped in and out of the red throughout the day and finally closed 20.65 points down at 5548.62.

Stock market historian David Schwartz said that it was the best

September since 1997, when the Footsie climbed seven per cent during the month.

The trading day started with concerning European news, as rating agency Moody downgrading Spain to Aa1, while the Irish government said the total cost of bailing out Anglo Irish Bank was 34bn euros (29bn).

But improved United States data lifted the mood later in the day, with the final second quarter gross domestic product revision coming in slightly better than expected at 1.7 per cent, while weekly jobless claims fell to 453,000 from 465,000 the previous week.

Wall Street opened higher on the final day of what is expected to be the best September in 71 years for US markets.

In the face of strong US data, the pound was down against the dollar at 1.57, while it was lower against the euro as well, at 1.15.

Fears over the European debt crisis hit the banking sector, with

Barclays down 5.6p at 299.6p and HSBC down 4p at 645p.

With the dollar under pressure amid concerns that the US Federal Reserve will reopen its quantitative easing programme, the price of gold set a new high above $1,300 an ounce as investors continued to see the precious metal as a safe haven.

Mining stocks were cheered as Lonmin added 2p to 1669p and Eurasian Natural Resources lifted 141/2p to 9181/2p.

The oil and gas sector helped to push up the market earlier in the day with BP leading the charge and Royal Dutch Shell not far behind. Shares closed the session up 6.8p at 427.8p and 101/2p at 1857p respectively.

BP leapt ahead after Wednesday's move by new chief executive Bob Dudley to set up a safety division as part of efforts to rebuild the company's shattered reputation following the Gulf of Mexico disaster.

The new boss also hinted in an interview that dividend payments to shareholders could be restored in the new year.

On the downside, shares in catering giant Compass dropped 21p to 5301/2p, making it the FTSE's biggest faller, despite another solid sales performance in the fourth quarter.

Outside the top flight, Dairy Crest slipped 0.5 per cent despite revealing increased profits in its cheese business underpinned growth at a time of intense competition in the milk supply market.

The stock, which fell 1.8p to 370.8p yesterday, was higher on Wednesday after announcing a new five-year supply contract with supermarket Morrisons.

It reported continued strong demand for reduced-fat products, while growth for Cathedral City cheese has been accompanied by strong sales of its extra mature and mild versions.

The company's promotional drive, which recently included "Great British Butter" adverts featuring former Sex Pistol John Lydon, has helped to make Country Life the UK's fastest growing butter brand.

Panmure Gordon stockbrokers said it did not expect any impact on profits from the company's loss of volume in the middle ground milk market.

The four biggest Footsie risers of the session were Man Group up 5.9p at 219.1p, Burberry Group ahead 20p at 1040p, Smiths Group up 23p at 1219p, and BP which closed 6.8p higher at 427.8p.

The biggest Footsie losers were Compass Group down 21p at 5301/2p, Standard Chartered off 55p at 1826p, ARM Holdings down 10.6p at 392.2p, and Tesco which finished the session 9.3p worse off at 424p.