Shares in Rolls-Royce were under pressure yesterday amid fears that the enginemaker had yet to see the worst of the recession.

The engineer slid 8.6p to 443.1p after a bearish trading update, in which the group, while retaining guidance, said that global economic activity remained depressed.

Sir John Rose, the chief executive, said that although some emerging economies had shown signs of recovery, there was no evidence yet of a sustained and general return to growth across the group’s markets.

Nick Cunningham, an Evolution analyst, said that the comments reflected the late-cycle nature of much of the Rolls-Royce portfolio, which has yet to be hit by the recession, even while the early-cycle aftermarket parts of the group were passing the worst.

As such, he said, the stock, which has risen by 40 per cent so far this year, now looked expensive.

The FTSE 100 closed down 67.29 points at 5,037.21, after briefly dipping below the 5,000 barrier, as a sell-off of the banking sector sparked declines across the board.

The latest shake-up among the part-nationalised banks was by far the biggest story of the day, and Royal Bank of Scotland was the biggest faller, ending the day down 2.72p at 35.93p, after it confirmed that the Government would increase its stake in the bank to 84 per cent.

Lloyds Banking Group was the biggest riser, climbing 2.33p to 87.33p, after it confirmed that it would raise £13.5 billion in a rights issue and not participate in the Government’s asset protection scheme. Elsewhere in the sector, HSBC dropped 22½p to 667½p after it said that it would cut 1,700 jobs and Barclays fell 6.55p to 323.45p after it announced a management shake-up, which included the surprise departure of its head of retail banking.

Miners also lost ground amid weaker metal prices, with Lonmin falling 42p to £14.93 and BHP Billiton easing 39½p to £16.50½. However, Randgold Resources bucked the trend, rising 110p to £43.06, as the price of gold hit a record high.

Legal & General was among only 14 blue-chip risers, closing up 0.9p at 78p, after third-quarter results were in line with expectations. However, other insurers fell, with Aviva slipping 9.8p to 379.3p after the initial public offering of Delta Lloyd priced at the low end of its expected range.

Man Group outperformed the market, although it eased ½p to 311p, after UBS upgraded its rating on the hedge fund group to “hold” from “sell” to reflect reduced regulatory risk in the United States, increased dividend forecasts and its recent bad run.

In the FTSE 250, McBride dropped 11.8p to 208.3p after Miles Roberts, the chief executive of the own-label consumer products group, resigned to join DS Smith, the paper and packaging business, which rose 8.3p to 123.6p.

Yell fell 7.78p to 41.95p after Moody’s, the credit-ratings specialist, said that the probability of the Yellow Pages publisher defaulting on its bonds remained under review until it sorted out a proposed rights issue.

New York: Investors drew some comfort from Warren Buffett’s decision to pay $100 a share for Burlington Northern Santa Fe in a deal valuing the railroad at $34 billion (£21 billion). The Dow Jones industrial average closed at 9,771.91 points, down 17.53.

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