Wall St gloom reverses FTSE's rally

AN ATTEMPTED rally by the FTSE 100 index fizzled out yesterday as a lower opening for US stocks wiped out earlier gains.

The Footsie was up more than 1 per cent at one point as Friday's 3 per cent fall tempted investors back into the fray.

But the blue-chip index lost momentum late in the session to close 0.31 points down at 5,262.54 after Wall Street's Dow Jones Industrial Average was dented in early trading by disappointing manufacturing data.

Currency markets were also in focus as the euro traded near a four-year low against the dollar – below $1.23 at one stage amid fears that measures to tackle deficits will kill off growth.

Yusuf Heusen, a senior sales trader at IG Index, said: "European debt is still the topic of concern for markets at the moment – although this has played out in foreign exchange markets rather than equities.

"But worries about just how big a problem this could continue to be and how far any possible contagion could reach are serving to keep the lid on any optimism at the moment."

The pound also touched a year-low of $1.42 against the dollar at one stage, although it later strengthened to $1.44 as traders weighed up Chancellor George Osborne's independent fiscal watchdog to look into the Treasury books.

Ministers claimed they had found "black holes" in the budgets left behind by the outgoing Labour administration.

Oil giant BP lost ground, finishing 0.3p down at 529.9p after initially advancing when it said it had succeeded in capturing some of the oil and gas that is spilling into the Gulf of Mexico.

Shell edged 5p higher to 1784.5p, but crude prices at a three-month low of $71 a barrel also weighed on the sector.

Insurer Prudential, which finally launched its 14.5 billion rights issue to fund the acquisition of AIA yesterday, was down 8p to 534.5p and Standard Life slipped 3p to 187.2p.

Man Group was the biggest faller in the top flight after it said it would pay $1.6 billion (1.1bn) for rival GLG Partners. Concerns over the price of the deal meant shares dropped 9 per cent or 19.6p to 201.9p.

British Airways – expected to unveil record full-year losses of about 600 million this week and facing industrial action – was another casualty as shares fell 2.4p to 200.5p.

Rival airline EasyJet was the biggest faller in the FTSE 250 index after the low-cost carrier suffered more disruption due to the volcanic ash cloud and founder Sir Stelios Haji-Ioannou quit the board as part of his campaign to bring about a change of strategy at the company. Shares slumped 24.7p to 391p.

Outsourcing firm Mitie was heading the other way in the second tier after better than expected pre-tax profits of 91.7m and an "unprecedented" bid pipeline. The stock was 8.2p or 4 per cent higher at 238.2p.

Among the Scottish stocks, Wolfson Microelectronics ended the day up 6.9 per cent, or 11.5p, at 177.75p following an investors' day on Friday at which the Edinburgh-based chip maker demonstrated some of its latest designs.

Following the briefing, Panmure Gordon raised its recommendation from "hold" to "buy" and upped its price target from 180p a share to 220p.