The FTSE 100 Index closed down 8.6 points at 5477.5 after more bad news on the US economy.

A poor start to trading on Wall Street drove the market into the red after US unemployment claims jumped to a six-year high.

Banks made initial gains after half-year profits from Barclays came in at the top end of expectations.

Barclays shares rose 2 per cent as a result, up 6p to 375p, with rival Lloyds TSB also enjoying an 4.5p gain to 318.75p. Halifax Bank of Scotland cheered 1.75p to 334.75p.

But Royal Bank of Scotland was not doing so well as investors kept their powder dry ahead of the group's interim results on Friday. Shares closed down 1.25 to 233p.

Medical devices firm Smith & Nephew was near the top of the risers board after beating forecasts with its second quarter results.

Shares jumped more than 5 per cent, or 29.5p to 597p. It was pipped to the top spot by metals producer Eurasian Natural Resources, which consolidated gains seen after strong ore production figures. The group's shares were up 10 per cent, or 100p to 1117p.

Elsewhere, oil prices creeping back up around the $120 a barrel level saw British Airways shares slip 13p to 255p. Low-cost carrier easyJet also saw its stock fall 8p to 338p.

Retailers were off across the board, with supermarket declines led by Sainsbury's, down 10.25p at 341p, and B&Q parent Kingfisher also down 3.6p at 131.2p.

Winners: Eurasian Natural Resources up 100p at 1117p, Smith & Nephew ahead 29.5p at 597p, G4S up 9.1p at 205p and Antofagasta up 24p at 566.5p.

Losers: Liberty International down 48.5p at 851.5p, Friends Provident off 4.5p at 87.2p, British Airways down 13p at 255p and Carnival down 84p at 1850p.

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