London slides into the red over banking sector losses

Standard Chartered surprised the market on Wednesday by launching a 3.3bn investor cash-call to meet the requirements of the Basel III regulations – and raised fears that other banks will follow suit.

Earlier gains seen in the Footsie, inspired by the prospect of further quantitative easing (QE) in the US, were lost and the market closed 20.14 points lower at 5727.21.

Woes were compounded by weak economic data in the US that revealed an increase in unemployment claims last week and a widening of the US trade deficit in August.

The figures added weight to the argument for further monetary stimulus from the US Federal Reserve and the increased likelihood of further QE, which in turn weakened the greenback, which fell against the pound to 1.5983 dollars.

Banks were also hit by a ruling by the Competition Commission, banning them from selling payment protection insurance (PPI), which analysts said could hit earnings.

Among the banks to suffer were Royal Bank of Scotland, which slipped 21/4p to 451/4p, Barclays, which fell 12p to 280p, and Lloyds which lost 21/8p to 701/2p.

A note by JP Morgan said HSBC was the best positioned among the UK banks to deal with new capital requirements, but shares still fell 83/4p to 6621/4p.

Mining giant African Barrick Gold fell to the bottom of the Footsie after it revealed it had uncovered "organised and systematic" fuel theft at one of its plants in Tanzania.

The company said criminal gangs had "widely infiltrated" the mine, forcing it to suspend scores of staff and cut production targets. Shares fell 9 per cent, or 591/2p to 564p.

Other commodities were more attractive, with miner Xstrata topping the London market after shares advanced 42p to 1342p. Silver miner Fresnillo lifted 29p to 1311p and Rio Tinto added 961/2p to 41341/2p after a positive report on its iron ore operations.

Vodafone rose near the top of London's risers' board after Nomura upped its price target on the stock and said cost reductions should boost earnings prospects. Shares were 25/8p higher at 1661/2p.

In corporate earnings in London, second-tier stock WH Smith jumped by 5 per cent, or 25p to 480p, after it increased its full-year dividend by 18 per cent in the wake of a 9 per cent rise in annual profits. It is also returning 50m of cash to shareholders.

Mothercare moved in the opposite direction – down 141/2p to stand at 502p – after another difficult quarter in the UK was accompanied by slightly slower growth overseas due to the impact of August's heatwave on sales in Russia.

Numis lowered its forecast for full-year like-for-like sales in the UK and is now expecting pre-tax profits of 39.8m in the year to March, against 43m previously forecast.

Cash-and-carry firm Booker advanced 41/4p to 535/8p, or 4 per cent, after recent growth continued with a 24 per cent jump in half-year profits and the acquisition of two suppliers to the catering and pub sectors.

The biggest Footsie risers were Xstrata, Johnson Matthey ahead 50p to 1892p, Rio Tinto, and Fresnillo.

The biggest Footsie fallers of the session were African Barrick Gold, RBS, Barclays and Lloyds.