Blue-chips struggle to shake off debt fears

The London market struggled to make gains yesterday despite a rally among banking stocks, as the eurozone debt crisis continued to worry investors.

Traders snapped up banking shares after ratings agency Fitch restored some confidence to the sector by saying it does not expect to downgrade any German banks as a result of their exposure to Greece.

This helped the FTSE 100 index close up 11.73 points at 5,870.14, while in America, the Dow Jones industrial average rose by a similar 0.2 per cent in early trading.

But David Jones, chief market strategist at IG Index, said most gains during the day were offset by reactions to disappointing economic data, with US durable goods orders coming in below expectations.

Banking stocks moved higher as bargain-hunters took advantage of recent falls in shares caused by worries over the economic future of Greece and other struggling eurozone countries. Barclays was up 6.2p at 271.8p, a rise of 2 per cent, while Royal Bank of Scotland was ahead 0.9p at 41.3p, and Lloyds was up 1p to 50.7p.

The resources sector also gave some support after an analyst said pressure for interest rate hikes in China - which would stifle demand - was likely to dwindle amid hopes that inflation has peaked.

The mining and energy sectors rebounded from earlier falls as Essar Energy rose 9.6p to 427.1p and Kazakhmys lifted 21p to 1,256p.

But the London market was held back by concerns over the possibility of a Greek default and its potential impact on other indebted countries such as Spain, Portugal and Italy.

The pound was up at €1.16 against the euro, which was weakened by the eurozone debt crisis. Sterling was also up against the dollar, at $1.63, after being buoyed by trade figures that showed an increase in exports.

Retailers also weighed on the top flight after administrators announced DIY chain Focus was closing down and a number of broker downgrades hit the sector.

Next topped the fallers board, losing more than 2 per cent or 53p at 2,195p.

There was a slight recovery in the travel sector as flights at UK airports returned to normal after high levels of volcanic ash from the recent Icelandic eruption had earlier cleared UK skies.

TUI Travel was ahead 1.4p 230.7p and British Airways parent International Airlines Group was up 3.5p at 234.3p.

But airlines, including British Airways, had to axe some German services as the ash cloud moved over northern Europe.

Blue-chip newcomer Glencore fell 2.8p to 522.2p. The stock, which has been promoted to the top flight at the expense of Invensys, is still below last week's starting price of 530p.

Outside the top flight, shares in sportswear retailer JJB Sports were back under pressure after it reported a full-year loss of 181 million and said its recovery may take up to five years to complete.Shares, which touched 166p last year, fell 1.8p to 24.5p.

Among the Scottish stocks, online dating firm Cupid saw shares gain 26 per cent on its latest positive update and upgraded forecasts. Shares were up 34p to 162.5p.