Footsie hit by concern over US status

LONDON FTSE 100 CLOSE 5,846.95 -59.48

CREDIT rating agency Moody's decision to place US debt on review for a potential downgrade troubled investors yesterday, dragging down the Footsie.

The prospect that the US could lose its AAA-status undermined the market's confidence after Federal Reserve chairman Ben Bernanke's pledge to consider more stimulus measures to boost growth in the world's biggest economy.

The FTSE 100 index shed 1 per cent of its value, closing down 59.48 points at 5,846.95

Moody's announcement came on top of ongoing fears about the eurozone debt crisis as Italy was forced to pay a higher price to borrow money at a bond auction yesterday.

There are still concerns about whether Greece could default on its debts after its credit rating was downgraded further into junk status by Fitch.

The pound was down against the dollar at $1.61 after strong US jobs data but it was up against the euro at €1.13 on the back of ongoing eurozone debt fears. Michael Hewson, market analyst at CMC Markets, said: "The positive momentum that we saw on the back of Fed chairman Bernanke's comments about the likelihood of further quantitative easing have been quickly reversed after ratings agency Moody's put the US on notice of a downgrade if discussions to raise the debt ceiling did not bear fruit."

Among the stocks in London, Associated British Foods jumped 2 per cent after a robust trading update. It revealed that sales at its Primark clothing chain increased by 13 per cent in the 40 weeks to 25 June, with the rate rising to 15 per cent in the final 16 weeks of the period.

Analysts at Credit Suisse raised their price target on the stock, helping lift AB Foods near to the top of the Footise risers' board, up 24p to 1,081p.

In the same sector, Premier Foods led the FTSE 250 index after the Hovis owner appointed the European boss of Kraft Foods to lead the company's recovery following a profits warning earlier this month. Shares were up 18 per cent, or 3.56p to 21.7p.

Elsewhere, shares in Daily Mail & General Trust fell 4 per cent after it said advertising revenues for its national titles were down 7 per cent in the 13 weeks to 3 July. Shares dipped 18p to 421.4p.

Retailer Mothercare was another faller, down 5.6p to 405p, after it reported a further set of lacklustre sales figures from its UK business.

Lloyds Banking Group was in demand, up 3.2 per cent or 1.42p at 45.82p after analysts at Goldman Sachs upgraded their recommendation on the stock to "buy", with the broker bullish about part-nationalised lender's longer-term prospects.

Among the Scottish stocks, Edinburgh-based CCTV systems maker IndigoVision was in sharp focus, with its shares rising 5.3 per cent or 15p to 300p. The stock has been up and down since last month's surprise profits warning.

Faroe Petroleum, the Aberdeen-based oil and gas explorer, ended the day up 4.3 per cent or 7.25p at 175p following on from Tuesday's update on its Norwegian asset swap with Petoro.

Edinburgh-based dating website operator Cupid was also on the rise again, up 3.2 per cent or 7p to 227p after Peel Hunt reiterated its "buy" rating.