Economic fears send FTSE into retreat

THE Footsie fell beneath the 6,000-barrier yesterday, dragged down by disappointing US jobs data, which sparked fears over the strength of the recovery in the world's biggest economy.

America's labour department revealed that the number of non-farm jobs created last month was just 18,000, against forecasts of about 100,000.

The news pushed the FTSE 100 index into a dive, shedding 1.1 per cent of its value or 63.97 points to close at 5,990.58.

The London benchmark had been up nearly 30 points in early trading but surrendered its gains following the US jobs announcement.

However, the index has still risen more than 5.5 per cent since touching three-month lows just 12 days ago, driven mainly by hopes that Greece will avoid defaulting on its debts.

IG Index sales trader Ben Critchley said: "After the run of gains seen over the past couple of weeks, the profit taking was always looking inevitable.

"That shocker of a non-farm payroll reading out of the US is also eroding sentiment, but arguably the question is now whether this marks the start of a bigger retracement that will last through the summer, or if this can prove to be a short-lived adjustment and we'll see the bulls wading back in on Monday."

The pound was up against the dollar, at $1.60, after the disappointing jobs data caused the greenback to lose its value. Sterling was also up against the euro, at €1.13, after concern over the strength of Italian banks hit the single currency.

The poor US data briefly turned attention away from BSkyB, which sank to the bottom of the FTSE 100 index after the UK government said it would take "some time" to reach a decision on whether News Corp's proposed bid for the satellite broadcaster could proceed.

BSkyB shares fell nearly 8 per cent, or 62p, to 750p after the Department for Culture, Media and Sport (DCMS) said it would take as much time as it needed to decide if it should refer the proposed deal to the Competition Commission.

The DCMS has received more than 160,000 responses to its consultation on the News Corp approach - with a surge of interest in the last few days driven by the unfolding phone-hacking scandal at the News of the World.

Shares in some of the UK's largest newspaper groups posted strong gains amid speculation their publications may benefit from the shock closure of the best-selling Sunday paper.

Johnston Press, which publishes The Scotsman and Scotland on Sunday, jumped 7.6 per cent or 0.4p to 5.65p, while Daily Record and Sunday Mail owner Trinity Mirror saw shares climb 4 per cent, or 2p, to 50p. The Daily Mail & General Trust was up 0.4p at 473.6p.

Smiths News, the UK's biggest newspaper distributor, reassured that closure of the News of the World would not hit its business. But investors were not convinced and the stock fell 2.5p to 87.5p.Edinburgh-based rival distributor John Menzies closed up 2.2 per cent or 11.5p at 544.5p after it made a small acquisition.

Primark-owner Associated British Foods topped the blue chip index risers' board, adding 18p at 1,092p ahead of next week's trading update. It also benefited from news that factory gate price inflation was slowing.