Egypt casting a shadow over markets

London took little cheer from positive economic growth figures in the US yesterday as slipping metal prices weighed on mining stocks and investor confidence was hit by the unrest in Egypt.

Official data showed the US economy grew at an annualised rate of 3.2 per cent between October and December, which was up on the annual rate of 2.6 per cent in the previous quarter. The US economy grew by 2.9 per cent in the whole of 2010, which is the strongest year of growth since 2005.

However, the political turmoil unfolding in Egypt dominated sentiment later in the session.

The dollar rose as concerns that protests in Egypt will intensify and spread across the Middle East drove investors to seek safer assets.

The benchmark FTSE 100 Index closed 83.71 points or 1.4 per cent lower at 5,881.37, also hit by losses in the weighty mining sector.

David Jones, chief market strategist, IG Index, said: "It is the continued unrest in Egypt that has made investors increasingly risk adverse. Shares came under further pressure as the perceived safe havens of gold and the US dollar soar.

"After calm steady rises, particularly in US markets, it seems investors are deciding that taking their money off the table is the sensible approach ahead of the weekend."

Oil prices jumped more than 2 per cent, with US crude rising over $2 a barrel to almost $88, as investors reacted to the accelerating growth in the United States in the fourth quarter of 2010 and increasing unrest in Egypt.

Sliding metal prices saw Vedanta Resources lose 109p at 2,291p, Anglo American slip 112p at 3,031p and Rio Tinto drop 132.5p at 4,281.5p.

Sentiment was not helped by a gloomy consumer confidence survey from market research firm GfK NOP.

The study revealed the biggest drop in consumer confidence in nearly 20 years between December and January as Britons faced up to the reality of higher VAT and public spending cuts.

Shares in TUI Travel dropped 4 per cent, down 12.1p to 259.8p, after a downgrade by Deutsche Bank and as traders monitored Egypt, one of the travel industry's top destinations.

Pubs and brewing group Marston's saw its share price ease 1.5p to 102.3p despite the company reporting strong trading figures for Christmas and New Year.The 11.2 per cent rise in the 12-day period helped the Tavern Table owner to offset the impact of snow disruption at the start of December, while its operating margin was slightly better than a year earlier.

Fellow pub company and brewer Fuller, Smith & Turner was down 3.5p at 616p despite reporting that sales of its own-brewed beers including London Pride returned to growth.

But it echoed the sentiments in the consumer confidence survey when it warned that customers' spending power was likely to be squeezed by the government's austerity measures.

Banknote printer De La Rue said supplies to a key customer were still suspended as it is yet to resolve talks over production problems five months after they first emerged. Its shares dipped 12p to 686.5p, a fall of 1.7 per cent.