Footsie slides into the red over US economic concerns

The Wall Street titan kicked off the results season for US banks with net income of 11.7 billion dollars (7.2bn) for the year – more than double that of the previous year.

But the firms' caution over rising bad debts at its retail arm also spooked investors and put the Dow Jones Industrial Average under pressure, losing 1 per cent.

The Footsie followed suit, closing 42.83 down at 5455.37.

Sentiment on Wall Street was also knocked by weaker than expected consumer confidence data, while commodity prices were dented by a stronger dollar.

The pound stood at 1.62 against the greenback after managing to reach a session high of 1.636 earlier.

David Jones, chief strategist at IG Index, said: "The turnaround by shares in London could be seen as a sign of the lack of momentum that shares have in the short-term at least.

"It may take another significant positive event – like the latest UK GDP figures due out before the end of January – to inject some real enthusiasm."

JP Morgan's results came in the wake of US President Barack Obama's announcement of a stringent new tax on banks yesterday to claw back "every dime" for the US taxpayer.

Europe's leading economies showed no sign of adopting President Obama's proposal for a levy but vowed to press on with their own ideas to target the sector. The president of the Eurogroup of euro zone finance ministers, Jean-Claude Juncker, said Obama was right to propose the plan, which foresees Wall Street banks paying up to $117bn to reimburse taxpayers for bailing them out.

"We have to see now in Europe... whether we proceed in the same way," Jean-Claude Juncker, who is also Luxembourg's prime minister, said.

British banks Barclays, Royal Bank of Scotland and HSBC are thought to be exposed to the 90 billion dollar (55bn) levy through their US arms, amid reports they could face a combined 10 billion US dollar (6bn) bill over 10 years. Barclays took a hit following speculation that it could be the worst affected, with shares falling 71/2p to 3111/4p.

HSBC, meanwhile, was off 121/8p to 7021/2p, although RBS shook off concerns over the tax liability as its shares advanced 2 per cent, or 3/4p, to finish the day at 363/4p.

The fallers' board was headed by hedge fund giant Man Group with a near 7 per cent decline, down 213/4p to 2923/4p, after it said assets under management were down 4 per cent in the third quarter.

Retailers Next and Argos owner Home Retail Group were also on the back foot once more after a punishing week and concerns over the trading outlook for 2010.

Next fell 47p to 1961p, while Home dropped 43/4p to 2611/8p.

In a choppy session the leading top flight risers were both defensive stocks.

International Power was 125/8p up to 322p, with Imperial Tobacco 41p dearer at 2000p.

In the FTSE 250, defence firm Qinetiq was suffering hefty falls – down 12 per cent, or 195/8p, to 143.3p – after issuing its second profit warning in two months.

Housebuilder Bovis Homes was also in the red, off 161/4p to 4377/8p, as it forecast a "subdued" property market in 2010.

The biggest Footsie risers were International Power, Imperial Tobacco, RBS, and Tullow Oil up 24p to stand at 1339p.

The biggest Footsie fallers were Man Group, Old Mutual off 4p to 1081/2p, Cobham down 71/4p to 239p and Kazakhmys, which ended the day down 40p to stand at 1410p.