London close: BSkyB, financials provide a drag

The Footsie dropped over 1% lower on Monday as satellite broadcaster British Sky Broadcasting (BSkyB) and European debt-contagion fears weighed on sentiment.Shares of BSkyB took a tumble as the potential takeover by Rupert Murdoch's News Corp hangs in the balance. The UK government said it was preparing to ask telecoms regulator Ofcom for additional advice. The very latest on the situation is that Culture Secretary Jeremy Hunt has now referred the bid to the Competition Commission, following the move by News Corp to withdraw its plans to spin off Sky News from BSkyB should it gain control of BSkyB. This is thought to deal the transaction with a six month delay at the least, if it is to be approved.Shares of rival Daily Mail and General Trust, the owner of Daily Mail, slumped 5.5% on the FTSE 250.Meanwhile, the debt contagion rumour cannon has switched its sights from Portugal and Spain, and is now pointing in the direction of Italy, causing panic in the banking community. How to avoid Italy getting caught up in the sort of debt crisis that has engulfed Greece is likely to be number one item on the agenda at this afternoon's meeting of Eurozone finance ministers in Brussels. In London, banking peers Royal Bank of Scotland, Lloyds and Barclays were unwanted, along with insurers Aviva, Admiral and Legal & General.In other company news, the Australian government's proposal on climate change stoked International Power's share price as the electricity-generating company said the plan is expected to be cash flow positive and earnings neutral in the first five years. Mining giant Rio Tinto, however, fell lower after voicing its disappointment over Australia's carbon tax proposal of A$23 a tonne on the 500 heaviest emitters as of 1 July 2012, joining the sector's warning that the plan would hinder investment and jobs growth in the nation's mining industry. Sector peer Xstrata was also in the red after slamming the scheme, saying that it is disappointed at the government's "lack of genuine consultation". The merger proposal for UK water and waste management group Northumbrian Water from Hong Kong infrastructure group Cheung Kong failed to lift the FTSE 250, which was bogged down by growing fears of the Eurozone debt contagion spreading to Italy and Spain. Investors shunned riskier equity assets and took solace in safer assets like gold. Also adding to the plunge in the index were shares of Laird, which tumbled more than 7% after U.S. based Cooper Industries threatened to walk away from merger talks at a time when the British company's investors were expecting a sweetened offer. BCFTSE 100 - RisersARM Holdings (ARM) 627.50p +2.70%International Power (IPR) 309.10p +2.59%Shire Plc (SHP) 2,002.00p +1.11%Reckitt Benckiser Group (RB.) 3,495.00p +0.81%Fresnillo (FRES) 1,434.00p +0.70%SABMiller (SAB) 2,324.50p +0.28%BP (BP.) 459.10p +0.13%Standard Chartered (STAN) 1,627.50p 0.00%Tesco (TSCO) 410.60p -0.22%British American Tobacco (BATS) 2,839.50p -0.26%FTSE 100 - FallersEssar Energy (ESSR) 376.30p -5.43%British Sky Broadcasting Group (BSY) 715.50p -4.60%Royal Bank of Scotland Group (RBS) 35.72p -4.00%Aviva (AV.) 419.10p -3.83%Barclays (BARC) 233.95p -3.82%Resolution Ltd. (RSL) 281.20p -3.80%Lloyds Banking Group (LLOY) 44.84p -3.68%Wolseley (WOS) 1,974.00p -3.61%Legal & General Group (LGEN) 119.00p -3.41%Vedanta Resources (VED) 1,910.00p -3.19%