By Rebekah Curtis
LONDON, March 6 (Reuters) - Britain's top share index slid
on Thursday, with banks on both sides of the Atlantic hit by
fears of more losses, while weak U.S. housing data fuelled
concerns for a U.S. economy flirting with recession.
The Bank of England kept interest rates on hold at 5.25
percent earlier on Thursday, as expected, but is widely expected
to cut them by the middle of the year to aid an economy buffeted
by a global credit crunch.
The European Central Bank held interest rates at 4 percent.
The FTSE 100 <> ended a volatile trading session down
1.5 percent, or 87.1 points at 5,766.4 as shares slid across
Europe. The index has lost nearly 11 percent so far this year on
fears of a U.S. recession and further credit-related losses at
financial institutions.
Banks took a beating as U.S. bond insurer Ambac's <ABK.N>
move to shore up its balance sheet proved a disappointment.
U.S. stocks fell, led down by financials after news of a
default at a home lender and a report showing U.S. mortgage
foreclosures reached a record high.
FTSE 100 banks all fell and together took about 28 points
off the index, with Barclays <BARC.L> down 4.6 percent, Royal
Bank of Scotland <RBS.L> down 3.9 percent and Alliance &
Leicester <ALLL.L> down 3.6 percent.
"There's no reason why you'd want to look at financials for
a long time," said Peter Dixon, an economist at Commerzbank.
"Why would you even want to think about it?" he added.
Also in the financial sector, investment bank Lehman
Brothers <LEH.N> suspended two London-based traders but said the
move was not linked to fraud. A spokesman said it had suspended
the traders after identifying "issues" with some of their
transactions.
Financial concerns also circled Switzerland's UBS <UBSN.VX>.
CNBC cited bond manager Pimco denying market talk that it had
bought $24 billion of Alt-A investments from the Swiss bank.
Pimco officials were not immediately to comment on the CNBC
report, while UBS declined to comment.
"It's like a jigsaw, you've got all the little bits and
they're all coming together to make a pretty poor picture,"
Dixon said of the combination of investor concerns on Thursday
regarding Ambac, UBS, Lehman, and the housing data.
BA PREDICTS HEADWINDS
British Airways <BAY.L> lost 7.6 percent to top the losers'
list after it warned that airlines were entering a downward
cycle due to global economic weakness and that rising fuel costs
would put next year's margin target of 10 percent out of reach.
Drugmakers were weaker after Britain looked to strengthen
the law on disclosing drug trial results following a four-year
inquiry into GlaxoSmithKline's <GSK.L> delay in reporting data
linking its antidepressant Seroxat to suicide risk in teenagers.
GlaxoSmithKline shares fell 1.9 percent.
Leading the upside, electricity firm International Power
<IPR.L> added 6.7 percent after it posted a rise in 2007 profit
and said it expected further growth this year. []
Peers Scottish & Southern Energy <SSE.L> and Centrica
<CNA.L> rose 1 and 1.3 percent, respectively.
Shares in nuclear power firm British Energy <BGY.L> added
3.3 percent after Britain said it was making 18 more sites
available for the next generation of nuclear power stations and
gave operators four weeks to pick the ones they wanted.
[]
Among midcaps, insurer Catlin <CGL.L> added 6.2 percent
after it posted a forecast-beating 4 percent rise in 2007 pretax
profit, despite a subprime-related hit announced last year, and
increased its estimate for synergies from the takeover of rival
Wellington.
(Additional reporting by Dominic Lau and Michael Taylor;
Editing by Erica Billingham)
