Oil spill settlement lifts BP as Imperial Tobacco falls on price war reports

FTSE: 5,948 (- 7.50) Mid-250: 11,992 (+ 5.67) Small Cap: 3,270 (+ 3.70):WEAK BANKS pushed Britain's top shares lower yesterday, with the financial sector taking a knock after ratings agency Fitch downgraded Greece's credit rating, further fuelling fears the country will have to restructure its debt.

On the upside, BP rose 2.7 per cent in heavy trading, boosted by a contribution to cost of the Gulf of Mexico oil spill and upbeat broker comment.

The FTSE 100 ended down 7.50 points, or 0.1 per cent, at 5,948.49, having hit a session high of 6,017.56.

Fitch Ratings cut Greece's credit rating to "B+", and put the country on rating watch negative.

"[ The index's decline is] basically down to the downgrade on Greece," Manoj Ladwa, senior trader at ETX Capital, said.

"There are rumours going around that they could be restructuring this weekend."

BP limited the FTSE 100's losses after it said Japanese trading house Mitsui & Co, a partner in the Macondo well, had agreed to pay $1.1 billion to the oil major towards the cost of the spill clean-up.

Banks were out of favour. Lloyds Banking Group fell 2.9 per cent after Goldman Sachs cut its rating on the stock to "neutral".

Standard Chartered bucked the weak sector trend, climbing 1.1 per cent, bolstered by a UBS upgrade to "buy".

Mining stocks gave back early gains to end in negative territory, reflecting a deterioration in investor risk appetite.

Randgold Resources, however, firmed 0.7 per cent as Citigroup raised its target price for the precious metals miner.

Elsewhere, engine maker Rolls Royce fell 1.9 per cent as a Qantas Airways flight returned to Bangkok after pilots were forced to shut down one of the aircraft's engines.

Imperial Tobacco shed 1.3 per cent as newspapers reported the group's Altadis unit is set to reduce the price of brands in Spain, one of its biggest markets, to compete with a price cut by rival Phillip Morris International.

Clothing retailer Next shed 1.9 per cent, with traders citing a read-across from US peer Gap Inc, which slashed its full-year profit outlook on rising cotton costs.

Meanwhile, Associated British Foods climbed 3.1 per cent as Exane BNP Paribas raised its rating to "outperform". - (Reuters)