BP and bank tax fears hit the Footsie

LONDON FTSE 100 CLOSE 5,028.15 -40.91

INVESTORS endured another see-saw session yesterday as heavyweight BP took more punishment and worries over a bank tax hit financial stocks.

The oil major was the FTSE 100 index's leading casualty with a 5 per cent slide as US President Barack Obama promised in a television interview to "kick ass" over the Gulf of Mexico crisis.

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The FTSE 100 made early ground but twice fell below the 5,000 mark before eventually closing at a two-week low, down 40.91 points at 5028.15 amid increasing prospects of a European Union bank levy.

David Morrison, market strategist at GFT Global, said: "It has been a bit miserable again today, with the bad news over the past few days for BP, and the banks holding sway. With the FTSE testing the psychologically and technically significant level at 5,000… it's all a little bit worrying."

Wall Street also moved into positive territory by the time the London closed after initial falls, helping blue-chip stocks to recover some of the slide.

Despite positive comments on prospects for the US from Federal Reserve chairman Ben Bernanke lifting Asian markets early on, a fresh warning from ratings agency Fitch over the deficit challenge faced by the UK hit sentiment.

The Fitch report sent the pound tumbling, giving up ground recently won against the euro as well as falling below $1.44 against the dollar at one stage before pulling back.

BP took more punishment with shares down 21.4p to a 20-month low at 408.9p as the group came under renewed political pressure from Obama, who said BP chief executive Tony Hayward should be sacked.

Meanwhile, at Tesco, Sir Terry Leahy's retirement as chief executive of the retail giant damaged its shares, which fell more than 2 per cent, or 9.7p, to 397.4p.

Investors were disappointed at plans for Leahy – who has overseen a long period of dominance for the supermarket chain – to depart after 14 years in March.

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He will hand over the reins to another lifelong Tesco employee – operations and IT director Philip Clarke, whose career with the firm dates back to 1974 and who already oversees nearly two-thirds of the group.

Banks and miners joined Tesco on the fallers' board as the Footsie endured another difficult session. Markets worried over sovereign debts as well as calls for new taxes on the sector by European finance ministers.

Royal Bank of Scotland and Lloyds Banking Group fell 1.6p to 41.45p and 2.2p to 51.76p respectively, while Barclays was 9.35p cheaper at 276.55p. But power generation rental group Aggreko rose almost 4 per cent – up 53p to 1,407p – after the Glasgow-based company said that its full-year performance would be better than expected, helped by contract wins for the World Cup.

In the FTSE 250 index, shares in power supply firm Chloride jumped 18 per cent after Zurich-based ABB received the backing of the UK firm's board for a takeover offer worth 325p a share, or 864 million.

US firm Emerson Electric, which failed with a 275p a share approach in April, said it was considering its options, fuelling hopes of a new offer. Chloride shares rose 55.9p to above the ABB offer price, at 344.5p.