By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- British shares traded lower on Monday, with oil and gas firms under notable pressure as the fallout from Dubai debt worries continued to roil markets.
The FTSE 100 index (UK:UKX 5,212, -33.55, -0.64%) declined 0.9% to 5,198.64. Other European shares were also trading lower and U.S. stock futures were pointing to mild losses on Wall Street. See Europe Markets.
Shares of BP (UK:BP. 577.70, -6.30, -1.08%) (BP 58.11, -1.11, -1.87%) dropped 1% while BG Group (UK:TLW 1,228, -16.00, -1.29%) shares lost 2%. Tullow Oil (UK:TLW 1,228, -16.00, -1.29%) shares were down 1.9%
The move came after crude-oil futures lost more than 2% in a regular session in New York on Friday, although futures were mildly higher in electronic trading on Monday.
Asset markets were roiled at the end of last week after Dubai asked to delay debt payments by six months.
"The market reaction was savage, with risk measures blowing out and asset prices falling sharply. In one sense, the reaction is understandable. For the last six months, markets have been trading on the basis that the worst of the crisis is behind us and that there were no more big skeletons waiting to fall out of the cupboard," said strategists at Commerzbank.
"Risk measures may well remain elevated in the run up to year-end, trading volumes will be thinner and markets will struggle to maintain any upward momentum" they added.
Banks were mostly lower, with Royal Bank of Scotland (UK:RBS 33.11, -1.68, -4.84%) shares down 5.2% and Lloyds Banking Group (UK:LLOY 55.46, -3.12, -5.33%) down 5.6%.
Still, shares in Europe's biggest bank HSBC Holdings (UK:HSBA 710.00, +3.70, +0.52%) (HBC 58.46, -3.61, -5.82%) edged up 0.1% after an upgrade to buy from neutral at Bank of America's Merrill Lynch unit.
The broker said that it expects a sustained period of earnings revisions; that the lender's defensive qualities should come to the fore, and that HSBC has an attractive risk/reward profile and a "quite attractive" dividend.
It added that the market's concerns over the possible impact to HSBC Holdings from Dubai are overblown.
In the mining sector, Eurasian Natural Resources (UK:ENRC 859.00, +13.00, +1.54%) added 1.7% after it was upgraded to outperform from neutral at Credit Suisse.
The broker said the market has neglected the upside risk to the firm's earnings from recent upgrades to iron ore and a positive outlook for ferrochrome.
Elsewhere, shares of Thomas Cook Group (UK:TCG 218.60, +2.70, +1.25%) rose 1.2%.
The tour operator said that its fiscal-year net income totaled 15.8 million pounds, down from 43.9 million pounds a year ago. Revenue rose to 9.3 billion pounds from 8.1 billion pounds. The firm said that a trend of late booking is still evident but winter 2010 trading continues to improve.
"Although it is still early in the cycle, bookings for summer 2010 are also in line with our expectations," the firm said. It also named Paul Hollingworth as finance chief. See full story.
