BP plunges again on dividend threat

LONDON FTSE 100 CLOSE 5,132.5 +46.64

BATTERED oil giant BP was hit by a further sell-off yesterday as 5 billion was wiped off the value of the company.

Shares in the firm fell by as much as 12 per cent as the political storm over the Gulf of Mexico spill showed no signs of abating and investors worried over a US threat to force a dividend cut.

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BP eventually closed 6.6 per cent, or 26.05p, lower at 365.5p despite a second successive day of gains for the FTSE 100 index, which ended 46.64 points up at 5,132.5, a rise of about 1 per cent.

Tim Whitehead, investment manager at Redmayne-Bentley, said: "It will be hard for the Footsie to make much headway above 5,200 over the summer and I wouldn't be surprised if we test 5,000 again."

BP was forced to put out a statement saying it was not aware of any reason for a plunge in its New York-listed shares overnight on Wednesday, although the stock bounced back strongly yesterday during early trading on Wall Street.

The Bank of England's decision to keep interest rates and its quantitative easing programme unchanged was widely expected by the market and had little impact on trading.

But positive US jobs data and promises of short-term help for the banking sector from the European Central Bank (ECB) lifted sentiment.

With no surprises on rates coming from the ECB either, the pound saw a steady day, trading at $1.46 against the dollar and 1.21 against the euro.

Banking stocks had been under early pressure after the Office of Fair Trading (OFT) announced a study into some of their fees and services, although they recovered as the session wore on. Royal Bank of Scotland rose 1.08p to 43.16p while Lloyds Banking Group gained 2.44p to 55.91p and Barclays was up 5.15p to 287.85p.

In the consumer sector, Home Retail Group – which owns Argos and Homebase – followed BP lower with a 4 per cent drop after it posted a disappointing trading update.

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The Argos catalogue chain said like-for-like sales were down 8.1 per cent in the first quarter of its financial year, offsetting a solid performance at DIY arm Homebase.

The shares, which have recently been helped by rumours of bid interest from Asda, were 9.7p lower at 228.3p.

Supermarkets were also on the back foot with Morrisons down 2p to 264.7p, Sainsbury's off 1.5p to 323.1p and Tesco down 0.9p to 401.55p. Analysts expect food inflation to weigh on sales figures from Tesco and Sainsbury's next week.

The leading Footsie riser was chip designer ARM Holdings, which surged 6 per cent, or 6.1p, to 290.1p amid further rumours that US computer giant Apple was considering a potential bid for the firm.

In the FTSE 250, consoles and games retailer Game Group was down 4.4p to 85.65p ahead of a looming trading update while Daily Record-owner Trinity Mirror – whose relegation from the second tier was confirmed on Wednesday – was 1.5p lower at 84.9p.

But Centrica, which owns Scottish Gas, rose 2.5 per cent or 6.9p to 284.8p after reaching an agreement to buy US-based plumbing and heating outfit Clockwork Home Services in a 126 million deal.