The FTSE 100 Index was mired in the red yesterday as investors showed pre-Budget nerves and banking stocks continued their slide.

Lloyds Banking Group, Royal Bank of Scotland and Barclays all suffered as inflation figures gave investors a timely reminder of dire economic announcements expected tomorrow.

The FTSE 100 closed down 3.4 points at 3987.5 despite upbeat results from Primark owner Associated British Foods and Tesco.

Trading was laced with caution ahead of today’s Budget with poor results from the US also weighing.

News that the Retail Prices Index (RPI) measure of inflation fell to minus 0.4 per cent last month – the first negative reading since March 1960 –also gave the market pause for thought.

Banks extended Monday’s slide in the wake of concerns over rising bad debts following Bank of America’s results. Lloyds led the fallers’ board with a near nine per cent slump, down 9.5p at 95p.

It was closely followed by the Royal Bank of Scotland, which shed 1.9p to 30.6p, and Barclays, off 10p to 199p.

Market talk of a possible plan to scrap high-rate tax relief on pensions – hitting the flow of cash into the financial industry also undermined insurers.

Several leading players were in the red, led by Aviva, down 20.5p to 253.5p. Standard Life fell 8.7p at 178.2p and Prudential lost 17.25p at 363.25p.

But AB Foods stormed the risers’ board with a gain of almost five per cent or 32p to 686p, after hailing a “first-class performance” from Primark and a ten per cent rise in operating profits.

Sainsbury’s gained 5p to 311.25p, while Morrisons was up 1.5p to 243p.

Homebase and Argos owner Home Retail Group also shared in the retail rise, up 5p to 256p.