Footsie recovers from pain in Spain

THE Footsie index crept into positive territory yesterday during another choppy session dominated by worries over the scale of Europe's debt crisis.

A bail-out of a regional bank in Spain, one of the countries dealing with a chronic deficit, spooked investors on both sides of the Atlantic and left the FTSE 100 index within 21 points of the 5,000 barrier at one stage.

By the close in London, sentiment had recovered slightly to leave the Footsie 6.68 points higher at 5,069.61 – even though the Dow Jones Industrial Average was in the red after a short-lived recovery on Friday.

Michael Hewson, analyst at CMC Markets, said: "The upside continues to remain constrained by fears of further problems in the eurozone. The down side remains supported by hopes that China may delay implementing further brakes on its economic growth… and a number of key technical level support levels."

World markets failed to shrug off growth concerns, with the eurozone under scrutiny after Germany's short-selling ban bombshell last week.

The bail-out of one of Spain's biggest regional banks sent the European currency down by about 1 per cent to just over $1.24. The euro also fell against the pound, with sterling up 0.9 per cent to 1.164.

Joshua Raymond, strategist at City Index, said: "It (the bail-out in Spain] sends a very clear and present warning to the market that the debt crisis could have a particularly negative effect on some of the banks that are directly exposed to sovereign debt."

One of the biggest share price falls was delivered by BP after it revealed the cost of cleaning up the mammoth spill in the Gulf of Mexico had hit about $760 million (523m) so far.

The cost has soared by $135m in the past week alone and BP said it was still too early to put a final figure on the bill, causing its share price to fall 13.7p to 493p.

Oil prices falling back below $70 a barrel also hurt the sector, with Shell down 31p at 1,713p and Edinburgh-based Cairn Energy off 9p at 376.9p.

Fellow Scottish oil and gas explorers and producers had mixed fortunes, with Dana Petroleum down 14p at 1,033p, Faroe 1.5p lower at 115p and Melrose Resources off 0.5p at 263.3p. But Bowleven was up 0.5p to end the day at 109.5p

Shares in the mining sector experienced a volatile session, with Kazakhmys closing 13p higher at 1,126p and silver miner Fresnillo losing 8.5p to 841.5p.

Prudential was one of the best performers in the FTSE 100 on reports that the US treasury had resurrected plans to float AIG's Asian arm if the Pru's attempts to buy it collapse. Such an outcome would be met with relief in some quarters of the City. Pru shares climbed 13p to 530p.

High street stalwart Marks & Spencer rose 6.4p to 333.5p on the eve of annual results that are expected to show full-year profits of up to 630m.

In the second tier, a broker note from JP Morgan Cazenove helped housebuilders make advances. Taylor Wimpey lifted 1.1p to 33.9p, while Barratt was up 2.9p to 110.2p.

Pork products supplier Cranswick was also on the rise – up 4 per cent with a 32p gain to 827p – after it reported record full-year profits of 43.8m, up 26 per cent year-on-year.