FTSE belies BP's growing troubles

LONDON'S top share index maintained its positive start to the week yesterday, despite a fresh blow to BP after ratings agency Fitch slashed its debt to near-junk status amid fears surrounding the impact of the Gulf of Mexico spill.

The oil giant tumbled a further 4 per cent, or 13.45p, to 342p as BP also faced demands for it to set aside $20 billion (13.5bn) in a special account to pay for damages and clean-up costs as a result of the disaster.

The FTSE 100 Index survived the latest BP sell-off, rising 15.69 points to 5,217.82, after US stocks opened higher following a stronger session for the euro signalled that concerns were easing about the impact of the continent's debt crisis.

Michael Hewson, a market analyst at CMC Markets, said: "The market appears to have once again tried to focus on the positives despite horrendous German and eurozone economic sentiment numbers. Banks were also higher as demand for European government debt helped revive some risk appetite."

The euro rose to $1.232 against the dollar and also strengthened against the pound. Sterling was up against the greenback despite a bigger than expected fall in the consumer prices index to 3.4 per cent in May, suggesting that rate hikes to clamp down on soaring prices were less likely.

Satellite broadcaster BSkyB led the FTSE 100 Index higher after rejecting a 12bn takeover approach by its biggest shareholder.

The proposed offer from Rupert Murdoch's News Corporation for the 61 per cent of the firm it does not own left shares 17 per cent, or 99.5p, ahead at 700p, as the BSkyB board snubbed the 700p-a-share proposal but left the door open to an offer of 800p or more.

Tesco's shares recovered from a nervous start after the supermarket giant said UK like-for-like sales growth slowed to 0.1 per cent in the three months to 30 May. The grocer closed 2.85p ahead to 394.5p as analysts said the UK slowdown was not a surprise.

Rival Sainsbury's – which updates the market this morning – was ahead 4.7p to 324.4p while Morrisons was 3.2p dearer at 260.9p.

Among the fallers, satellite firm Inmarsat was the leading Footsie casualty after brokers at BoA/Merrill Lynch cut the stock to "under-perform", sending shares more than 5 per cent, or 41.5p, down to 779.5p.

Home Retail Group – which owns Argos and Homebase – also fell again as Deutsche Bank became the latest broker to cut its rating on the firm following last week's disappointing trading update. Shares were down a penny at 230.5p.

In the FTSE 250, Bellway lost ground after the house-builder reported a slight dip in site visits and weekly sales following the general election amid uncertainty over looming cuts by the coalition government.

Shares fell 2 per cent, or 14p, to 621p although other house-builders were unaffected after Persimmon climbed 3.9p to 368.3p and Taylor Wimpey lifted 0.6p to 29.6p.

Debt adviser Invocas fell by 0.5p to 11p despite Swedish value investor Peter Gyllenhammar taking his stake up in the Scottish firm to 8.4 per cent. The company is planning to de-list from Aim next month.