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FTSE Deep in the Red

MONDAY MARKET UPDATE: The benchmark FTSE 100 index fell by 100 points as investors worried about UK banking regulations and rumours swirled about government corruption in Spain

Alanna Petroff 4 February, 2013 | 6:30PM

The UK markets took a dive on Monday after chancellor George Osborne gave a speech about tough new banking regulations. Osborne outlined how regulators may soon be given the power to break-up banks if they fail to sufficiently separate their retail and investment-banking operations.

"My message to the banks is clear: if a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether – full separation, not just a ring fence," said Osborne, according to a text released by his office. "We’re not going to repeat the mistakes of the past."

By the close of the day, shares in all of the big banks had taken a tumble. Shares in the Royal Bank of Scotland (RBS) had fallen by 3.5%. Shares in Barclays (BARC) also dropped by nearly 3%.

"It is hardly surprising that the banking sector is looking soft across the board, after the chancellor outlined actions that could be taken if banks fail to meet his [bank segregation] criteria," said Alastair McCaig, a market analyst at IG. "Many will be worried that the strict guidelines being set out will prevent the investment arms from turning around the fortunes of these banks."

Pain in Spain

Investors were also in "risk-off" mode because of corruption rumours that are plaguing top government officials in Spain.

There are allegations that the Spanish Prime Minister Mariano Rajoy and other leaders of his party took secret payments. Rajoy has vehemently denied accepting payments. Spain's opposition party has called on Rajoy to resign.

FTSE 100 Deep in the Red

Concerns emanating from Spain and the UK banking sector contributed to a sharp drop on the FTSE 100 and FTSE 250. The FTSE 100 index dropped by 100 points, or 1.6%, to close at 6,247. The mid-cap FTSE 250 index declined by 99 points, or 0.7%, to close at 13,177. Nearly all London-traded large-cap stocks were in the red on Monday. 

Despite the bearish mood, one particular company bucked the downward trend. Shares in Randgold Resources (RRS) pushed up by 3% after the miner reported a huge surge in full-year profit and announced plans to boost its dividend.

To see the top winners and losers on the FTSE 100 each day, check out Morningstar's Heat Map.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Barclays PLC225.70 GBX-1.18-
Randgold Resources Ltd5,120.00 GBX-0.39-
Royal Bank of Scotland Group (The) PLC355.30 GBX-2.09-
About Author Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.