LONDON: Britain's top equity index fell on Tuesday, with banking stocks coming under pressure after regional election results in Spain put euro zone financials on the back foot, and energy shares tracking weaker crude oil prices.
Spanish Prime Minister Mariano Rajoy's People's Party suffered heavy losses in weekend local elections, throwing his re-election later this year into doubt and opening the door for the anti-austerity Podemos party.
British banks with the most exposure to the euro zone, such as Royal Bank of Scotland, Barclays and Lloyds were 1.1 to 2.5 percent lower.
However, Asia-exposed banks outperformed, with Standard Chartered trading 0.4 percent lower and HSBC down just 0.2 percent. The UK banking index dropped 0.7 percent.
"The news from Spain indicates that politically the country could be going in the same way as Greece. It does have implications for banks exposed to the euro zone. It's not good news for UK lenders like Barclays and Royal Bank of Scotland," David Battersby, investment manager at Redmayne-Bentley, said.
Britain's blue-chip FTSE 100 index was down 0.7 percent at 6,981.40 points by 1413 GMT on the first session after a long weekend extended by Monday's public holiday.
Traders also cited concerns over Greek debt as keeping markets on edge. Greece intends to make good on its debt obligations but needs aid urgently to be able to do so, the government said on Monday.
Oil and gas shares also weighed, with Royal Dutch Shell and BG Group both down 1.3 percent after oil prices fell due to a stronger dollar and on the possibility that U.S. shale oil producers could increase drilling activity.
The UK energy index, down 1.4 percent, also came under pressure due to a campaign for funds to divest holdings in energy companies.
Among sharp gainers, Royal Mail hit a one-year high and was up 3.3 percent after Cantor Fitzgerald upgraded the stock to "hold" from "sell".
Ryanair shares rose 4.6 percent after it announced profits rose 66 percent in the year to March. Its passenger numbers grew almost three times the targeted level on improved service and lower fares, with a more modest 10 percent profit growth forecast for this financial year.
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