Weakness in banks and miners pulls FTSE lower

Weakness in miners and losses in selected banks pulled the UK blue chip index lower in opening deals.

The FTSE 100 was down 23.5 points, or 0.42%, at 5679.6.

The pound and the euro were one cent lower against the dollar at $1.5868 and $1.3876 respectively, as the recovery in the world's reserve currency from recent lows continued.

Michael Hewson, market analyst at CMC Markets, said that while Federal Reserve chairman Ben Bernanke seemed to confirm that more so-called quantitative easing is inevitable on Friday the sell-off in the dollar came to a halt amid worries that the next round of policy stimulus will not be as big as hoped.

'The Fed chairman’s comments about the difficulties in determining the pace, size and costs of any purchases are weighing on the FOMC committee with respect to how aggressive they should be at their November meeting. This has given the markets pause for thought and may give the US dollar some respite,' said Hewson.

And with the dollar bouncing off recent lows, metals are pulling back from recent dollar driven highs ( see chart above) with gold down $11 at $1360 and silver down 35 cents at $24 per ounce.

Future dated Brent oil was 62 cents lower at $81.83.

That in turn dragged mining stocks lower with copper group Antofagasta down 2.83% at £12.70 after HSBC downgraded it and Xstrata to 'underweight' and Vedanta to 'neutral' saying that the upbeat prospects for copper are already reflected in copper and share prices.

Xstrata shares fell back 37.5p to £12.74 and Vedanta shares were 66p lower at £22.22.

Rio Tinto and BHP Billiton were also lower, down 82p and 40.5p at £40.61 and £21.59 respectively after the pair ditched plans to forge an iron ore venture faced with criticism by regulators in Europe and Asia.

Banking stocks were also lower tracking losses by their US peers on Friday. Banks have been under the cosh for a number of days amid concern that a new crisis is emerging in the US housing market after claims banking staff have been signing off foreclosure documents without checking they are legal.