Footsie down as banks take a tumble

Footsie down as banks take a tumble

Banking shares were the subject of heavy selling as grim American housing data raised fresh concerns about the health of the US economy.

The Dow Jones Industrial Average tumbled by more than 2% on Thursday night, prompting Asian markets to follow suit and leading to a fall of 42.2 points to 5320.1 for London's FTSE 100 Index in the first hour of business.

The latest blow to confidence came after a sharp drop in US house sales and speculation that regional US bank Washington Mutual faced a funding squeeze.

Banks littered the fallers board after recent gains, with Royal Bank of Scotland down 11.25p at 208p and Barclays off 16.75p at 331.25p.

Marks & Spencer was also lower - down 14.75p at 244.75p - following Thursday's 3.9% fall in retail sales volumes for June.

In the FTSE 250 Index, Rentokil Initial tumbled by more than 28% after the business services group issued its fourth profits warning since December.

Rentokil said full-year profits were now expected to be £35 million lower after seeing sales decline further in its troubled delivery arm City Link. Shares fell 29p to 72.5p, giving back modest gains seen since March.