Markets: Irish debt crisis keeps lid on Footsie

Trading remained cautious on the London market yesterday amid worries over Ireland's debt crisis as Britain pledged aid for the stricken economy.

The FTSE 100 Index spent much of the session in negative territory before closing just 10.66 points higher at 5,692.56.

Fears over a bail-out for Ireland also continued to weigh on sentiment on Wall Street, with the Dow Jones Industrial Average struggling to move from its opening mark by London's close, having suffered its biggest loss since the middle of August during Tuesday's session.

A subdued US inflation report and another weak reading on the American housing market did little to draw investor attention away from Europe's sovereign debt crisis, with Chancellor George Osborne saying Britain stood ready to offer support to Ireland if needed.

The threat of higher interest rates in China added to market jitters, which sent the Footsie tumbling by almost 2.5 per cent on Tuesday. However, it was a marginally better session for the pound yesterday, which edged higher against the dollar after recent losses - ahead at just over $1.59.

Sterling was helped by an unexpected fall in UK jobless benefits and further signs in minutes of the last rates meeting that the Bank of England is in no rush to pump more money into the economy.

Mining stocks remained under pressure due to the China rate hike fears, with African Barrick Gold surrendering earlier gains to stand 11.5p lower at 539.5p.

One of the biggest falls came from the mobile phone giant Vodafone, which dropped 3.5p to 167p after its shares went ex-dividend, excluding new investors from the latest dividend payment.

Retailers were also under pressure for the same reason after Marks & Spencer dropped 11.8p to 384.2p and Sainsbury's fell 6p to 367.7p.

A profits guidance upgrade from British Gas parent Centrica failed to help the stock, as shares slipped 1.2p to 332.2p despite news that operating profits for 2010 were likely to be slightly ahead of the 2.2 billion expected.

Credit checking group Experian was enjoying better fortunes, with shares up 6 per cent or 44.5p to 748p after posting better-than-expected first-half results in the wake of a strong performance in Latin America.

In the FTSE 250, Premier Foods gained 0.7p to 18.1p after consolidation elsewhere in the food manufacturing sector boosted sentiment.

The deal-making involved Fox's biscuits and Goodfella's pizza firm Northern Foods, which jumped more than 24 per cent or 11.25p to 56.5p, after announcing plans to merge with Irish-based supermarket sandwich supplier Greencore.

The tie-up is expected to generate cost savings of around 40 million a year.Among the Scottish stocks, Alva-based medical testing kit maker Omega Diagnostics fell 1.76p to 15.99p after the company unveiled a 7.75m share placing to fund an acquisition.

Wolfson Microelectronics closed up 1.5p at 232p after the Edinburgh-based chip maker announced its products would be used in the first mobile phones capable of handling 3D images.