FTSE close: Banks dip on reforms; Sainsbury up

 

15.15: The Dow Jones has tumbled in the latest session as disappointing US manufacturing data and worries about Greece's debt crisis undermine sentiment.

Trading screens

Eye on the market: banks are setting the agenda.

Inflation across the Atlantic also rose by more than expected, while housebuilding data undershot forecasts.

The leading index is 72.8 points lower at 12,002.4.

The FTSE is also in the red, down 35.7 points at 5,767.4.

12.45:

At lunchtime, the FTSE 100 is 9.8 points lower at 5793.30.

The prospect of the most radical changes to the banks for decades unsettled share prices, with Barclays off 3.3p at 261.1p, Royal Bank of Scotland 0.2p lower at 41.4p, HSBC 6p lower at 610p and Lloyds Banking Group flat at 48p.

Chancellor George Osborne is expected to confirm tonight that he will endorse the Independent Commission on Banking's recommendation that UK banks erect a protective firewall between their retail and investment arms.

The four bosses of the main high street banks seemed to have accepted some form of split was coming when they gave evidence to MPs recently, but the move by the chancellor could bring it into force much earlier than had been suggested.

Mr Osborne may also say the retail banks will have to hold more capital than demanded by international regulators.

It has been another tough day for commodities trader Glencore as analysts expressed disappointment with yesterday's trading update and sent its shares a further 13.75p lower to 486.25p compared to its recent IPO price of 530p.

Away from the leading index, outsourcing company Mouchel tumbled 12%, or 8p, to 60.5p as it warned it has been forced to negotiate new contracts with higher costs and lower margins following public spending cuts.

11.25:

Unemployment has fallen by 88,000 but official figures showed the fall came after thousands of young people were classed as 'economically inactive' rather than unemployed.

The total unemployed was cut to 2.43m and the unemployment rate to 7.7%, according to the Office for National Statistics.

We have more here.

Sainsbury's share price has been dipping in and out of the red this morning as investors assess its quarterly sales update.

The supermarket giant reported 1.9% sales growth excluding fuel and the impact of new stores but including VAT in the 12 weeks to June 11. Tesco yesterday reported an equivalent figure of 1% growth.

Sainsbury is up 0.2p at 327p while Tesco is 0.3p lower at 407p.

We have more here on Sainsbury's, including City reaction.

The FTSE 100 is down 20.8 points at 5,782.4.

09.15:

The FTSE 100 Index drifted lower on worries about the impact that the ring-fencing of investment banking operations will have on the sector.

Chancellor George Osborne is expected to confirm tonight that he will endorse the Independent Commission on Banking's recommendation that banks erect a protective firewall between their retail and investment arms.

The Chancellor is also expected to say the retail banks will have to hold more capital than demanded by international regulators.

All of the main high street banks were lower, with Barclays down 3.8p at 260.7p, Royal Bank of Scotland off 0.6p at 41p, Lloyds Banking Group 0.5p lower at 48p and HSBC down 4p at 611p.

The banks' influence sent the FTSE 100 Index down by 13.42 points to 5,789.71, despite a good showing by blue chips on Wall Street overnight after better than expected economic data, although Asian markets were mixed.

Supermarket giant Sainsbury's hailed a solid sales performance in a challenging environment as it benefited from Easter, the royal wedding and record-breaking weather.

The UK's third biggest supermarket recorded 1.9% sales growth excluding fuel and the impact of new stores but including VAT in the 12 weeks to June 11, which sent its share price up 1.8p to 328.6p, though Tesco, which reported similar sales growth yesterday, fell back 1.2p to 406.1p.

Away from the leading index, outsourcing company Mouchel tumbled 7% to 61.3p as it warned it has been forced to negotiate new contracts with higher costs and lower margins following public spending cuts.