Banks and tobacco help lead FTSE down

By Dominic Lau

LONDON (Reuters) - The top share index fell for the fifth straight session on Tuesday, led by banks on worries over the impact of the economic downturn on their earnings, while cigarette makers eased after a broker downgrade.

The FTSE 100 .FTSE closed down 27.04 points, or 0.6 percent, at 4,399.15, after losing 0.5 percent on Monday. The index is down 0.8 percent this month and had lost more than 31 percent last year, its biggest annual drop since its launch in 1984.

Banks were the main drag on the index on Tuesday. Barclays (BARC.L) was the biggest faller, shedding more than 10 percent after rising for eight straight sessions.

Royal Bank of Scotland (RBS.L), HBOS HBOS.L, Lloyds TSB (LLOY.L) and Standard Chartered (STAN.L) lost between 3.7 and 7.1 percent.

"It's understandable given that we had this 18 percent rally between the low point in November and the week or so back. Short-term profit taking is the order of the day," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.

"Plus the acceptance that the recession is a very long and protracted affair ... corporate earnings forecasts are going to be massaged down in the next three months," Whitehead said, adding that he would pick up some stocks if the index headed towards the 4,000 level.

Insurers also languished, with Friends Provident (FP.L) down 8.9 percent and Aviva (AV.L) off 8.2 percent.

The market was also hurt by more glum news on the British economy. A trio of surveys showed the UK went into steep decline at the end of last year when consumers tightened their belts, businesses slashed jobs and the housing market ground to a virtual standstill.