Gloom in US and Europe knocks FTSE

ECONOMIC growth figures from the United States were worse than the market had expected, adding to concerns over America's debt crisis and pushing the Footsie down yesterday.

The FTSE 100 index closed 58.02 points, or 1 per cent, lower at 5,815.19 after the US economy grew by just 1.3 per cent in the second quarter as consumers reined in spending.

America's poor second quarter GDP figures were compounded by a downward revision of first quarter growth to 0.4 per cent, prompting economists to warn of a possible recession if the US debt crisis is not resolved soon.

The dollar fell to $1.65 against the pound, while sterling rose against the euro to €1.14.

Christopher Beauchamp, research analyst at IG Index, said: "There was little in the way of Friday cheer for investors, as the markets have been battered from all sides by sluggish growth and debt concerns on the final trading day of the month."

Britain's biggest banks were among the main fallers after a decision by ratings agency Moody's to put Spain's credit rating on review troubled traders. Moody's move suggests a further debt downgrade could be on the cards for yet another country in the eurozone.

Lloyds Banking Group was 1.7p lower at 43.4p - though the stock was also hit by a broker downgrade from RBS Equities, which cut Lloyds from "buy" to "hold" under a note headed "Flogging a dead horse".

Barclays was not far behind, off 4.9p to 223p, while Royal Bank of Scotland shed 0.6p to 35.7p. The sector is due to report half-year figures next week and broker Seymour Pierce expects the results to be disappointing.

BSkyB shares were largely unmoved, dipping 4p at 712p, despite the satellite broadcaster reporting a 23 per cent hike in full-year operating profits to 1.1 billion and a surge in customer numbers. While operating profits increased, the results showed that pre-tax profits decreased by 15 per cent to 1bn.

The results were overshadowed by the decision to keep James Murdoch on as chairman after calls for his resignation in the wake of the News International phone-hacking scandal.

Vodafone unveiled plans for a 2bn special dividend, stemming from its US joint venture Verizon Wireless, which on Thursday declared a 6.1bn payout. Vodafone jumped 4 per cent, or 6.6p, to 172p.

Outside the top flight, pest control firm Rentokil Initial jumped 2 per cent to near the top of the FTSE 250 index despite a 6.8 per cent decline in adjusted pre-tax profits to 70.9m.Analysts said the results were still ahead of expectations.

Cupid, the Edinburgh-based dating website operator, continued to rise after Thursday's upbeat note from Numis Securities, up 8.12p at 233.12p, building on the previous day's 4.25p gain.

Hospital billing software firm Craneware, also based in the Scottish capital, ended down 3.5p at 566.75p despite positive comments from Evolution Securities, which said strong results on Thursday night from three US healthcare stocks indicated improving market conditions.

Johnston Press, which owns The Scotsman, rose 8.2 per cent, or 0.4p, to close at 5.3p, a day after naming former BBC Online editor-in-chief Ashley Highfield as its new chief executive.