BP down 3.4 percent on lower oil prices

The oil sector declined in London Tuesday as crude oil prices dropped sharply, helping send the FTSE 100 1.31 percent lower to 5,440.5 while the FTSE 250 dropped 1.66 percent to 8,480.1

The 100 entered a bear market briefly before earning back some losses by dropping 20 percent from its high point last year.

Among oil producers, BP (LSE: BP; NYSE: BP; TYO: 5051) was down 3.4 percent while Royal Dutch Shell (LSE: RDSA, RDSB; NYSE: RDS.A, RDS.B) dropped 2.3 percent, while miners saw declines on lower base metals prices.

Most retailers were up in London, but most in the real estate sector were lower on the session.

In Europe, equities were lower as banks saw declines on credit market concerns after the news that the two largest US mortgage lenders, Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) might have to raise as much as $75 billion in new capital to compensate for writedowns.

The FTSE Eurofirst 300 was down 1.47 percent to 1,161.38 while the Dax fell 1.43 percent to 6,304.41, the CAC-40 was 1.54 percent lower to 4,275.61 and the IBEX dropped 1.56 percent to 11,794.7.

Both the CAC-40 and Dax had airlines at the top of their gainers lists, with Air France-KLM (Euronext: AF; NYSE: AKH) up 2.84 percent and Lufthansa (FWB: LHA) gaining 2.91 percent.

The telecommunications sector, food processors and the retail sector had gainers but utilities, steel makers, and the semiconductors sector saw declines.

Equities markets in the Asia-Pacific region saw declines as investors remained worried about losses in credit markets.

The main exception to the declines was in China, where the Shanghai Composite added 0.81 percent to 2,814.95.

In Tokyo, the Nikkei 225 was down 2.45 percent to 13,033.1 while the Topix index fell 2.23 percent to 1,283.51 and the Mothers market dropped 1.92 percent to 533.14.

Banks declined in Tokyo on the news about Fannie Mae and Freddy Mac and on the possibility that Merrill Lynch (NYSE: MER) could report a loss for the second quarter.

Also hurting Tokyo’s markets were a rise in corporate bankruptcies and a government report showing that business sentiment is down in Japan.

Elsewhere in the region, the Sensex was down 1.3 percent to 13,349.65 while in Australia the Sydney Ordinaries fell 1.36 percent to 5,022.4 and the S&P/ASX200 was 1.39 percent lower to 4,932.9.

The Straits Times Index dropped 1.62 percent to 2,886.62, the Kospi was down 2.93 percent to 1,533.47, the Hang Seng fell 3.16 percent to 21,220.81 and the Taiex was 3.94 percent lower to 7,051.85.

In afternoon trade in New York, the Dow Jones Industrial Average was up 0.23 percent to 11,257.52 while the Nasdaq Composite had added 0.54 percent to 2,255.34 and the S&P 500 had gained 0.25 percent to 575.2.

The gains were helped by a decline in oil prices which raised expectations of better profits for the retail and transport sectors, while banks gained on comments from Federal Reserve Chairman Ben Bernanke that the Fed could extend access to direct loans to securities dealers into 2009.

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