BP'S oil well woes drag down Footsie

LONDON FTSE 100 CLOSE 5,162.08 -25.13

LONDON'S top flight fought back from hefty falls yesterday, but oil giant BP remained deep in the red after it again failed to block the well that is causing the Gulf of Mexico oil slick.

BP suffered a 17 per cent slide at one stage, in its biggest one-day shares fall for 18 years, before closing down 13 per cent.

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About 12 billion was wiped off the company's shares in the sell-off, which dragged the broader Footsie down as low as 5,063.2 at one point.

But the index rebounded after positive news across the Atlantic, with the FTSE 100 closing down 25.13 points at 5,162.08.

US stocks were boosted by good news from the construction and manufacturing sectors, which raised hopes for America's economic recovery. The gains were much needed on the Dow Jones Industrial Average after the index suffered the worst May since 1962, retreating 7.9 per cent due to anxiety over the eurozone.

Yesterday's better sentiment helped the euro, which clawed its way back from a fresh four-year low against the dollar, trading at around $1.23.

Phil McHugh, senior executive dealer at Currencies Direct, said: "The recent Spanish banking fears alongside the debt downgrades have put further pressure on the euro and pushed it to a low of 1.211 against the dollar, though it later recovered to 1.22.

"If the euro falls under the psychological level of 1.2 against the dollar, a fresh barrage of euro selling will occur and the risk of debt crisis contagion spreading to Portugal, Italy and Ireland will become a reality."

The pound also gained strength against the dollar and was up on the euro, at 1.20.

BP's nosedive was sparked by news that its latest attempt to "top kill" the leaking oil well had not worked. The blue chip giant accounts for 7 per cent of the FTSE 100 Index and its woes punished the wider market.

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Embattled BP led the declines – down 64.8p at 430p – with investors fearing that the oil spill crisis will not be stopped until August.

Shares have lost a third of their value since the crisis began and one analyst at Arbuthnot said the leak had the potential to "break BP" if the well is not stopped soon and the US government takes tough action.

Fellow oil giant Shell also saw its shares dented as investors worried over new drilling regulations that are likely to emerge following the Gulf of Mexico disaster. Shares fell 10.5p to 1,741p.

Mining stocks were hit by signs of cooling growth in China, with Kazakhmys down 19p to 1,166p and BHP Billiton off 38.5p at 1,874.5p.

Prudential was the biggest riser in the FTSE 100 Index amid signs that its takeover pursuit of AIG's Asian arm AIA may have failed. Shareholders, who criticised the deal as too expensive, saw the stock rise 6 per cent or 34p to 575.5p.

Among the Scottish stocks, Aim-listed Iomart rose 2.8 per cent – or 1.5p – to 54.5p after the web hosting company announced that it had been granted a 10 million credit facility by Lloyds Banking Group to fund acquisitions.

Scottish & Southern Energy was also on the risers' board – 27p at 1,079p – after ruling out a rights issue to buy part of EDF's distribution network.