FTSE slides into the red on US cash injection concerns

The prospect of the central bank taking a cautious approach to a possible second bout of quantitative easing prompted traders to take money off the table and retreat to more defensive stocks.

Mining stocks were the worst hit and dragged the FTSE 100 Index 1 per cent, or 61.28 points lower to 5646.02. Kazakhmys led the fallers' board, down 70p to 1321p, while Vedanta Resources was off 103p to 2066p and Xstrata shed 501/2p to 1264p.

The prospect of less ambitious quantitative easing saw the greenback rise in value – up against the pound at 1.58 and euro at 1.38.

The Footsie's oil giants were hit by the strength of the dollar as crude prices dipped to 81.80 US dollars a barrel. BP was off 71/4p to 419p, while Reading-based oil and gas explorer BG Group was down 12p to 1181p.

Three major retailers were hit by a note from Goldman Sachs downgrading their shares to neutral from buy. Debenhams dipped 23/8p to 75p, Morrisons lost 21/4p to 2931/2p and Signet Jewellers dropped 33p to 2167p.

On the risers' board in London, shares in British Airways were higher as the airline took a further step towards its merger with Iberia by publishing shareholder documents relating to the deal. The tie-up should be completed on January 21.

BA, which is due to publish half-year results on Friday, rose 17/8p to 278p. The banking sector was spurred on by better-than-expected results from Germany's Deutsche Bank. Barclays topped the risers' board, adding 5p to 2821/4p, with Lloyds Banking Group not far behind after it advanced 11/8p to 691/8p.

Defensive stocks such as United Utilities and Severn Trent moved to the top of the leaders' board as investors sought lower-risk opportunities.

Their shares rose a penny to 5991/2p and 5p to close at 1364p respectively.

In corporate news, British American Tobacco reported a 3 per cent drop in underlying sales volumes in the nine months to September 30. The world's second largest tobacco group sold 526 billion cigarettes and said it expected volumes to be soft in the months ahead. The update saw shares lose 37p to 2401p.

Outside the top flight, shares in flooring firm Carpetright were down more than 7 per cent after a deterioration in UK like-for-like sales prompted analysts to lower their forecasts for full-year profits.

Chairman and chief executive Lord Harris of Peckham said he expected the current market conditions to continue into next year. He added: "The further reduction in mortgage approvals along with fragile consumer confidence has produced a difficult market."

Carpetright has continued to roll out more Sleepright departments in its stores, bringing the current total of bedding outlets to around 170 stores with a further 50 expected to open before the year end.

It has also sought deals with insurance firms and housebuilding groups to offset the weak retail conditions. The stock dropped 53p to 677p.

Elsewhere on the FTSE 250, bike and car chain Halfords jumped more than 4 per cent or 161/4p to 4253/4p after brokers at Morgan Stanley advised buying into the recent weakness in shares.

The four biggest Footsie risers of the session were Barclays, Lloyds, Schroders up 18p to 1525p and Amec ahead 8p

to 1061p.