By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- U.K. shares dropped sharply Wednesday, with most sectors moving well into the red, as worries about the global economy continued to undermine investor sentiment.
The country’s benchmark FTSE 100 index (UK:UKX 5,544, -32.32, -0.58%) slipped 0.8% to 5,529.95.
Banks were among the biggest fallers as bond spreads on peripheral European government debt widened and as regulators and politicians continued their war of words over the sector.
Lloyds Banking Group (UK:LLOY 75.81, -1.09, -1.42%) (LYG 4.78, -0.04, -0.83%) dropped 2.4% and Royal Bank of Scotland Group (UK:RBS 47.62, -0.96, -1.98%) (RBS 15.18, -0.15, -0.98%) fell 1.8%.
The falls came after the U.S. Federal Reserve said Tuesday that it was ready to further support the economy if needed. They also followed reports that U.K. Business Secretary Vince Cable is stepping up his criticism of the banking sector and would call for a tax on bonuses if banks don’t show restraint with their pay packages.
HSBC Holdings (UK:HSBA 665.10, -5.90, -0.88%) (HBC 52.59, -0.47, -0.89%) was also down 1.2% after reports of a boardroom spat. Chief Executive Michael Geoghegan has threatened to quit the lender if the board doesn’t appoint him as the next chairman, the Financial Times reported, citing two people familiar with the matter.
Oil stocks also added to the pressure on the benchmark index. BP (UK:BP. 408.35, -6.45, -1.56%) (BP 38.59, -0.09, -0.23%) dropped 1.4% and Tullow Oil (UK:TLW 1,269, -24.00, -1.86%) fell 2%.
There were only around a dozen stocks in the FTSE 100 trading in positive territory Wednesday.
Among them, Imperial Tobacco Group (UK:IMT 1,918, +25.00, +1.32%) rose 1.3% after it said strong pricing helped drive growth in revenue in the current fiscal year, offsetting weaker cigarette volumes.
Xstrata (UK:XTA 1,193, +25.50, +2.18%) rose 0.7%, leading a modest gain for the mining sector, after it successfully negotiated a new loan facility. The company said it had increased the size of the revolving credit facility to $4 billion from $3 billion after strong demand from banks wanting to take part.
