Weak banks drags FTSE into red

Britain's top shares ended just in the red on Friday, with banks weaker after Federal Reserve Chairman Ben Bernanke stopped short of signalling more action to boost US growth, disappointing those betting on fresh stimulus. The FTSE 100 closed down 1.18 points at 5,129.92, having recovered from a low of 5,014.79 shortly after the remarks, as UK investors wound down for a three-day holiday weekend.
For the week, the index ended up 1.8 percent, having oscillated between about 4,990 and 5,250 as investors second-guessed Bernanke and the likelihood of a third round of "quantitative easing", loose money policies dubbed QE3 by the market. "I don't know why markets have got a bee in their bonnet about QE3. I think it's going to be very, very difficult for it to happen, and as such I think markets' topside will be very, very limited," said Michael Hewson, analyst at CMC Markets.
Steep declines were seen among the banks, with Royal Bank of Scotland the top blue chip faller, off 5.2 percent, while Lloyds Banking Group lost 4.1 percent. While Bernanke said he was prepared to use tools to spur economic growth, he announced no new policies. "I think the Federal Reserve certainly believe that they and the authorities in the United States have done enough already with stimulus packages ... and they've vowed to keep interest rates on hold for two years at record low levels," said Henk Potts, market strategist at Barclays Wealth.
"Eventually you've got to see if the patient can stand on its own. They've pumped a lot of drugs into it, and I guess you wait to see the results. I don't think they're at panic stations yet, (and) I don't think they're in crisis mode." US blue chips in the Dow Jones industrial average were up 0.6 percent at the London market's close. AMEC fell 3 percent after Societe Generale cut its rating for the British oil services engineer to "hold" from "buy" following the group's first-half results on Thursday.
Negative broker sentiment also weighed on Resolution, off 1.5 percent, with Deutsche Bank downgrading its rating for the closed-book life insurer to "hold" from "buy" as part of a review of the European insurance sector. But motor insurer Admiral bucked the trend, up 3.1 percent, after the same broker upgraded it to "buy" from "hold". National Grid, up 2.1 percent, got a boost from broker Arbuthnot Securities, which said it had "broken out of relative bases (suggesting) further outperformance", adding that it was looking to buy the stock on dips.