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Initial optimism dampened as Barclays chairman warns of 'challenges'

London's top-flight index swung into the red as investors took a dim view of Barclays despite the banking giant posting a significant surge in profits.

The FTSE 100 Index was down 30.88 points to 7,271.37, as the lender saw group pre-tax profits soar to £3.2 billion, up from £1.1 billion a year earlier, thanks to a boost from its investment banking arm.

However, Barclays reversed early gains as shareholders baulked at warnings from chairman John McFarlane that "significant challenges remain" as the bank fights US authorities over allegations surrounding its part in a mortgage bond mis-selling scandal.

Shares closed down more than 2%, or 6.1p to 229.1p.

Jasper Lawler, senior market analyst at London Capital Group, said: " A near tripling of profits in 2016 and the early closure of its so-called 'bad bank' which housed its worst assets were the main reasons for the initially positive reception to Barclays results.

"The profit surge was thanks in part to lower PPI payout costs but with uncertainty over the fine it will pay the US Department of Justice, past discretions continue to be a future liability."

Across Europe, the Cac 40 in France was marginally down and Germany's Dax dropped 0.4%.

On the currency markets, the pound pushed higher after the CBI's latest quarterly Distributive Trades Survey cooled predictions of a slump in consumer demand.

Some 40% of retailers said that sales volumes were up in February on a year ago, while 31% said they were down, giving a balance of positive 9%, up from a fall in the previous survey of negative 8%.

The poll, which included 64 retailers, found retail sales volumes are expected to rise again in the year to March, albeit at a slightly slower pace.

Sterling was up 0.7% against the US dollar at 1.254 and was 0.5% higher versus the euro at 1.185.

The price of oil jumped 1.1% after data from the United States showed inventories had taken a surprise tumble.

Brent crude rose 63 cents to 56.47 US dollars a barrel as investors were encouraged that the end maybe in sight for the global oil supply glut.

In UK stocks, British Gas owner Centrica slumped after revenues for 2016 dropped 3% to £27.1 billion.

However, annual group operating profits at Centrica jumped 4% to £1.5 billion, helped in part by a 2% rise in operating profits at its energy and services arm covering the UK and Ireland to £906 million.

Shares were down 8.6p to 225.1p.

Away from the top tier, National Express rose 8.2p to 350p after notching up a 10% rise in profits last year thanks to ongoing strike action blighting rival Southern Rail.

Full-year profits rose to £120 million from £109.1 million a year earlier, with the firm's coach arm carrying an additional 25,000 customers on affected Southern routes during recent strike action.

The biggest risers on the FTSE 100 Index were Intu properties up 18.6p to 294p, RSA Insurance up 28p to 605p, Mondi up 51p to 1,888p, Randgold Resources up 160p to 7,595p.

The biggest fallers on the FTSE 100 Index were easyJet down 59.5p to 914.5p, Rio Tinto down 190p to 3,418p, HSBC Holdings down 26.9p to 652.8p, Centrica down 8.6p to 225.1p.

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