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THE FTSE 100 Index shed more than 2% yesterday as cautious economic forecasts from the Bank of England dealt a blow to market sentiment.

The benchmark index lost 94.2 points, to 4331.4, after the Bank said a slower than expected resumption of bank lending could hamper a UK recovery.

Shares also came under pressure late in the session, as worse-than-expected retail sales figures in the US sent Wall Street's Dow Jones Industrial Average down by more than 2% in early trading.

The Bank's forecasts, meanwhile, hinted that further boosts to the money supply may be necessary to hit the inflation target. This put the pound on the back foot against the dollar and the euro.

Banking stocks also took heavy punishment, as the Bank's caution brought the recent rally in the sector firmly to a halt.

The decline was led by part-nationalised Royal Bank of Scotland, which slid almost 13%, or 5.5p to 38p.

Meanwhile, Barclays lost nearly 10%, or 25.75p, to 242.75p, HSBC slid 29p to 530.5p, while Lloyds Banking Group - another firm part-owned by the taxpayer - fell 4.5p to 84.6p.

The biggest Footsie risers were Compass, up 20.25p at 353p, Shire, up 23.5p to 878.5p, Unilever, up 35p at 1506p and Royal Dutch Shell, up 36p to 1637p.

The biggest Footsie fallers were Land Securities, down 71p at 468p, Xstrata, down 87p at 594.5p, RBS, off 5.5p at 38p and Eurasian Natural Resources, down 76.5p, at 564p.

FTSE-100 4331.37 94.17 ..
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Publication:Daily Post (Liverpool, England)
Date:May 14, 2009
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