Markets: Rolls-Royce takes off again after scare

Rolls-Royce found support yesterday as the group said it was making progress on finding the cause of the engine failure that forced a Qantas jet to make an emergency landing.

Shares in the aero-engine group closed almost 3 per cent higher having fallen 4 per cent in early trading after the chief executive of the Australian carrier said oil leaks were found in three engines on its A380 fleet.

News of progress on the issue - specific to Rolls' Trent 900 design - and a separate announcement of a $350 million (217m) services contract with Egyptair helped provide some shares relief - up 16p at 607p. Rolls ended the day one of the biggest FTSE 100 risers.

The index closed down 25.39 points, or just over 0.4 per cent, at 5,849.96. It hit a 29-month closing high on Friday after investors cheered the US Federal Reserve's commitment on Wednesday to boosting economic growth.

David Jones, chief market strategist at IG Index, said: "Since markets opened this morning it has been a day of gradual but persistent selling. It is nothing too dramatic as of yet, and for now it just looks like a bout of profit taking following the sharp gains seen last week as a result of the QE2 (quantitative easing] statement from the Fed."

Financials were struggling with traders citing criticism over the Basel III agreement, ahead of the G20 summit in Seoul this week, and eurozone sovereign debt woes weighing on stocks.

Banks were lower, led by state-backed Royal Bank of Scotland which shed 3 per cent at 43.64p. Lloyds Banking Group eased 1.2p to 68.63p.

Investors will watch for the Bank of England quarterly inflation report tomorrow and governor Mervyn King's news conference for any indication on the central bank's own quantitative easing programme.

Blue chip fallers included utility stock Scottish & Southern Energy after analysts at Nomura cut their rating on the firm, sending shares down 2 per cent or 18p to 1,122p.

Ahead of interim results and strategy review by chief executive Marc Bolland, Marks & Spencer shares were 4.9p higher at 413.2p, while Primark owner Associated British Foods added 2p at 1,073p ahead of its own figures.

Elsewhere, BSkyB rose 8p to 728p after announcing it had reached its target for ten million television customers before the end of the year.

In the FTSE 250, property group Savills rose 13.5p to 359.8p after upping profits guidance following a particularly strong performance in Asia and the UK.

But fund manager Gartmore suffered a shares tumble - down 15 per cent - after it said it was embarking on a strategic review and announced the retirement of star manager Roger Guy, the latest in a recent string of key departures.Shares in Gartmore plunged 18.9p to 107p.

Irish Life & Permanent tumbled 17 per cent after KBW downgraded its rating on the bancassurer on growing concerns over the deteriorating economic environment in Ireland.

On the upside, satellite operator Inmarsat rose 3 per cent to 695p after beating third-quarter earnings expectations.

Invensys gained 2.2 per cent to 320.3p.