Footsie falls into red over Goldman Sachs allegations

Stocks worldwide plummeted after the SEC announced it was filing a civil fraud charge against Goldman over allegations that it defrauded investors in its disclosures about securities it sold which were tied to sub-prime mortgage securities.

The FTSE 100 Index, which had seen stable trading for much of the day, dropped by as much as 1.7 per cent at one stage in late afternoon trading before closing down 81.05 points at 5743.96.

The Goldman charges also saw the Dow Jones Industrial Average on Wall Street fall by more than 100 points as investors feared there would be further fallout from the investigation.

Also in the US, permits to build new homes unexpectedly surged in March to their highest level in more than one and a half years, but a surprise dip in consumer confidence tempered optimism over the broadening economic recovery.

Building permits, which give a sense of future home construction, jumped 7.5 per cent to a 685,000-unit pace last month, the Commerce Department said. Markets had expected a 630,000 unit-pace.

Separately, the Thomson Reuters/University of Michigan's Surveys of Consumers index of consumer sentiment slipped to a five-month low of 69.5 in early April from 73.6 at the end of March. That was below market expectations for 75.0.

Royal Bank of Scotland was the only blue chip bank to hold on to gains in London, with its counterparts hit after the Goldman announcement.

Barclays closed 3 per cent – or 93/4p – lower at 3733/8p, HSBC fell 2 per cent, down 141/2p to 698p, and part-nationalised Lloyds Banking Group finished with a 3/4p drop to 643/4p.

Taxpayer-backed RBS remained 5 per cent up, ahead 23/8p to 481/4p, thanks to a broker upgrade and strong results from US rival Bank of America.

Until the Goldman bombshell, the banking sector had been the star performer of the session following better-than-expected first quarter profits from BoA.

Oil prices were also impacted, falling below 83 US dollars a barrel, although the news had little effect on the dollar. The pound fell to 1.54 dollars as the greenback gained strength, although sterling rose to 1.14 euros.

A stronger dollar also dented miners, which littered the fallers' board, with sector declines led by Xstrata, down 561/2p to stand at 12361/2p.

Airline stocks were on the back foot as air traffic control company Nats said UK flight restrictions would remain in place until at least 7am today due to the cloud of volcanic ash from Iceland. British Airways shares fell 75/8p to 235p and budget rival easyJet was 57/8p lower at 4773/4p in the second tier.

But cigarette maker Imperial Tobacco was in the doldrums, down 36p to 1951p, after the Lambert & Butler firm was one of a number fined in an Office of Fair Trading investigation into tobacco product pricing.

The leading Footsie faller was software firm Autonomy, which declined 6 per cent, or 110p to 1740p, despite saying first quarter results would be in line with market expectations.

In other corporate news, fund manager Hargreaves Lansdown lifted 3 per cent, or 11p to 3731/2p, in the FTSE 250 Index after it reported "unprecedented" business volumes in the run up to the Isa deadline.

Biggest risers were Royal Bank of Scotland, Capita Group ahead 14p to 810p, Intertek up 23p to 1493p and Serco Group ahead 7p to 6271/2p.

The biggest fallers were Autonomy, Xstrata, Rio Tinto down 153p to 3800p, and Kazakhmys off 59p to 1498p.