London’s top flight index swung into the red after investors soured to Lloyds Banking Group’s plans to hive off another £1 billion for the mis-selling of payment protection insurance (PPI).
The FTSE 100 Index crashed back below the psychological 7,000 mark, down 63.19 points to 6,954.39, after the banking giant said extra money for compensation claims had caused statutory pre-tax profits to drop 15% to £811 million in the third quarter.
Shares in Lloyds were down more than 3%, or 1.8p to 53.6p, with the fresh round of PPI funds bringing its total compensation bill to £17 billion.
Neil Wilson, markets analyst at ETX Capital, said investors had cooled on Lloyds and the results “won’t make them love it any more”.
“It’s not just PPI – Lloyds is hugely exposed to the UK economy and there is a worry post-Brexit that this will crimp earnings going forward.
“Lower interest rates aren’t helping either, as they suppress net interest margin, which fell to 2.69% from 2.74% in second quarter.”
Despite Lloyds’ woes on the London market, mining giant Antofagasta was leading the biggest fallers after saying that production would come in shy of expectations this year and could fall further in 2017.
Shares were down more than 7% following its third quarter update, dropping 41.8p to 498.7p.
Negative sentiment also spread to its biggest rivals, with Anglo American falling 24.5p to 1089.5p and BHP Billiton off 24p to 1237p.
Across Europe, Germany’s Dax was down 0.7% and the Cac 40 in France slipped 0.6%.
On the currency markets, the pound was making gains against the US dollar after enduring a tumultuous day’s trading on Tuesday.
Sterling had dropped 1% to 1.20 US dollars in the previous session, before recovering its losses when Bank of England governor Mark Carney told a House of Lords committee that the market reaction to Brexit could be “mistaken”.
On Wednesday, the pound was up 0.2% against the US dollar at 1.22 US dollars, but was 0.1% lower against the euro at 1.11 euro.
The price of oil dropped 1.2% to 50.17 US dollars a barrel after concerns over a global supply glut re-emerged amid growing production in Nigeria and reports of rising US crude stocks.
In UK stocks, Vodafone was in the red after it was stung by a £4.6 million fine by the telecom’s watchdog.
The fine is a result of two investigations by Ofcom which found Vodafone was mishandling customer complaints and failed to credit the accounts of more than 10,452 pay-as-you-go customers who topped up their accounts.
Shares were down 0.5p to 225.5p.
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