London close: French downgrade rumours sink Footsie

Markets turned south in afternoon trade on rumours of imminent action by ratings agency Standard & Poor's (S&P) to downgrade the ratings of several Eurozone countries. A senior Eurozone government official has been cited as saying that both France and Austria could have their ratings downgraded by one notch by S&P. French news website Agence France Presse has reported that France has already been informed of the downgrade. Germany and the Netherlands are expected to be safe.The Footsie - along with most of other European benchmarks - sank into the red by the end of trade. While the index finished at the 5,637 level, it reached its intraday low of 5,587 in the final hour, a massive 118 points off its daily high of 5,705.In other news, talks over a debt restructuring in Greece have collapsed, according to the Financial Times. The paper says that negotiators for the country's bondholders have said that the latest offer made by Athens "has not produced a constructive consolidated response from all parties", the newspaper writes.Earlier in the day, Italy issued €4.75bn in medium-term debt, the top of its €3-4.75bn target range. The borrowing costs of July 2014- and November 2014-maturing notes fell while the yield on the August 18 bill rose slightly. Meanwhile, JP Morgan Chase & Co's results stateside came in slightly weaker than expected.BANKS RISE, INVENSYS PLUMMETS AFTER PROFIT WARNING Royal Bank of Scotland rose strongly, extending gains from yesterday after it revealed a massive shake-up to its investment banking and wholesale businesses, including a mass employment reduction of 3,500. Seymour Pierce fuelled gains after upgrading the stock from reduce to buy. Sector peers Barclays, Lloyds and Standard Chartered were also in demand. The big news on the corporate front today was on the FTSE 250 with engineering and software group Invensys issuing a profit warning. The company said that a number of operational issues relating to certain projects within Invensys Operations Management and Invensys Rail will put a dent in operating profits. Shares dropped nearly 20%. Among the risers on the mid-cap index was instrumentation and controls company Spectris which notched up record sales and operating profit in 2011, helped by useful contributions from recent acquisition, while Balfour Beatty and WS Atkins rose after securing contracts with Network Rail. Broker round-up: Vodafone fell after Morgan Stanley said it sees "potential weakness due to top line in Europe", reports Reuters ; Bunzl was lower after UBS downgraded it from buy to neutral; Citi downgraded RSA Insurance from buy to neutral; Tesco was lower feeling the effects of a Credit Suisse downgrade from outperform to neutral; while BT was in demand after Nomura upgraded the firm from reduce to buy. SMALL CAP MOVERS Falkland Oil and Gas, one of the firms hoping to discover substantial oil resources around the Falkland Islands, tumbled 7% despite raising £48.5m to fund an enhanced drilling programme. Fashion brand Ted Baker said it had a very good Christmas trading period despite, as usual, not embarking on any significant promotional activity. Shares rose 5%. Non-woven industrial materials group Fiberweb dropped after its 2011 profit and loss account swung into the red and revenues slumped. Education software firm Tribal Group surged after unveiling a strong performance in the final quarter of the year, saying adjusted pre-tax profit for 2011 will be 'significantly' ahead of the board's previous expectations. Hot Tuna, the troubled surf wear retailer, tumbled after announcing that it is selling itself to Brand Holdings for £950,000. Shares were down 22%.BCFTSE 100 - RisersRoyal Bank of Scotland Group (RBS) 24.10p +4.78%ICAP (IAP) 336.70p +4.37%Barclays (BARC) 201.20p +4.01%Schroders (Non-Voting) (SDRC) 1,116.00p +2.48%Vedanta Resources (VED) 1,085.00p +1.97%BT Group (BT.A) 203.40p +1.85%Ashmore Group (ASHM) 347.00p +1.82%IMI (IMI) 870.50p +1.34%Standard Chartered (STAN) 1,466.00p +1.31%Cairn Energy (CNE) 292.20p +1.25%FTSE 100 - FallersFresnillo (FRES) 1,687.00p -2.65%Vodafone Group (VOD) 175.00p -2.51%International Power (IPR) 334.50p -2.19%Tesco (TSCO) 316.80p -2.06%Smiths Group (SMIN) 935.50p -2.04%Tate & Lyle (TATE) 685.50p -1.93%RSA Insurance Group (RSA) 110.00p -1.70%Randgold Resources Ltd. (RRS) 7,115.00p -1.66%Amec (AMEC) 976.00p -1.66%ARM Holdings (ARM) 575.00p -1.63%FTSE 250 - RisersTullett Prebon (TLPR) 292.00p +5.34%Misys (MSY) 261.20p +5.15%Hays (HAS) 64.70p +5.12%Spectris (SXS) 1,482.00p +5.11%Afren (AFR) 110.50p +4.64%Taylor Wimpey (TW.) 41.12p +4.00%F&C Asset Management (FCAM) 64.00p +3.90%Ferrexpo (FXPO) 321.00p +3.78%Jupiter Fund Management (JUP) 201.60p +3.65%Dairy Crest Group (DCG) 326.40p +3.62%FTSE 250 - FallersInvensys (ISYS) 183.20p -19.33%Renishaw (RSW) 1,065.00p -4.57%Imagination Technologies Group (IMG) 538.00p -4.01%Cape (CIU) 376.00p -3.17%Allied Gold Mining (ALD) 158.50p -2.76%Rightmove (RMV) 1,318.00p -2.66%Premier Farnell (PFL) 185.60p -2.57%Ocado Group (OCDO) 72.35p -2.23%Yule Catto & Co (YULC) 177.00p -2.16%BTG (BGC) 319.60p -1.93%