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Markets fret over US central bank meeting

The FTSE-100 Index was dragged 15.6 points lower to 6507.7 with the fall following the trend on New York's Dow Jones Industrial Average where, despite a deal struck by politicians in Washington on the US budget, next week's all-important meeting of America's central bank cast a shadow.

Defensive stocks such as BT Group, United Utilities and British American Tobacco outperformed the wider London market by rising, however cyclical stocks such as banks and insurers fell, dragging down the blue-chip index,

Markets in France and Germany were also in the red at the end of the session.

The pound fell as remarks by Bank of England policy maker Martin Weale about a sharp fall in inflation made it seem less likely that interest rates would need to be lifted to bring the rate down.

Sterling dropped a cent against the greenback to 1.64 US dollars and a cent against the single currency to 1.19 euros.

The Capitol Hill budget agreement did help some London stocks with US government defence contracts - notably BAE Systems, which climbed more than 2%, or 10.6p to 426p, and Rolls-Royce, up 12p to 1204p. On the FTSE-250 Index, Chemring rose 3.2p to 209.6p.

But mining stocks were hurt by the uncertainty over whether next week's US Federal Reserve meeting will see it start to ease back on the country's multi-billion dollar monthly programme of quantitative easing.

Randgold Resources finished the session 90p lower at 4051p and Anglo American dipped 22.5p to 1293.5p.

RBS fell 9.8p to 326.9p and was joined on the fallers board by part-nationalised rival Lloyds Banking Group, which was down 0.8p at 77.4p after it was fined £28 million by regulators for serious failings in its staff bonus schemes.

The Financial Conduct Authority said a lack of control of incentives for advisers within Lloyds TSB, Bank of Scotland and Halifax risked customers being sold products that were unsuitable or not needed.

The biggest FTSE-100 risers were easyJet, up 41p to 1481p, BAE Systems, up 10.6p to 426p, Sports Direct up 14p to 771p and Petrofac up 19p to 1189p.

The biggest FTSE-100 fallers were Mondi, down 34p to 941p, Royal Bank of Scotland down 9.8p to 326.9p, Randgold Resources down 90p to 4051p and Anglo American down 22.5p to 1293.5p.

Meanwhile newly-privatised Royal Mail Group will join Britain's top share index following a strong price performance since its stock market debut two months ago.

The postal firm is to be joined in the FTSE-100 by industrial firm Ashtead, which will also make its debut after a reshuffle in the index.

The companies are replacing Indian miner Vedanta and specialty chemicals maker Croda.

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