Footsie slips as China again rattles market nerves

LONDON FTSE 100 CLOSE 6,664.1 -12.6

THE London market finished in negative territory yesterday as new fears over the Chinese stock market overshadowed trading.

The FTSE 100 index was 12.6 points down at 6,664.1 at the close, as weaker-than-expected US factory order data late in the session added to concerns over an 8 per cent drop seen on China's main share index.

The sell-off on Chinese exchanges followed a similarly dramatic fall in the Shanghai Composite index last week, caused by the government's attempts to cool growth by tripling the stamp duty levied when investors trade shares.

"It's a combination of things," a trader said. "If China starts to slide further, the profit-taking that we are seeing is going to spiral into something more significant. With the interest rates coming this week, everybody is a bit nervous."

A lack of major heavyweight corporate news added to the Footsie's sluggish start to the week.

Pharmaceuticals firm Shire topped the risers' board, with a 1 per cent or 14p increase to 1,192p, after losses seen at the end of last week. Traders said the firm was becoming the choice stock in the sector following GlaxoSmithKline's recent losses.

Vodafone had set the early pace among blue-chips but finished 1.2p down at 161.7p despite an upgrade for the market heavyweight from broker HSBC, which raised its target price for the stock to 200p.

Property firm Hammerson was the top faller, down 27p at 1,588p after speculation over a bid from British Land subsided.

British Land was off 24p at 1,436p, while Land Securities was off 32p at 1,919p as the sector fell out of favour with the market.

Financial services group Bradford & Bingley, was hit with a 4.5p drop to 422.75p amid expectations the group will drop out of the top flight index in the FTSE 100's quarterly reshuffle tomorrow.

Power station operator Drax also suffered from relegation fears, with reports suggesting it could slip into the FTSE 250 to make way for pest-control-to-hygiene group Rentokil Initial.

Drax shares were down 10p at 776p.

But the prospect of promotion for housebuilder Barratt Developments - the first time the stock would be placed in the top tier - failed to lift the group's shares, which were down 31p at 1,064p.

Sentiment remained weak towards sugar giant Tate & Lyle after the disappointment caused by its results last month.

Its shares were off 8p at 589.5p.

In the second tier, construction company Morgan Sindall jumped 13 per cent or 175p to 1,500p, reflecting a deal to buy Amec's urban regeneration business and its loss-making project services division.

The deal increases the firm's order book to 4.1 billion and cements its leading position in the urban regeneration market.

Leisure group Whitbread fell 8p to 1,890p despite conditionally agreeing to sell its David Lloyd Leisure business to London & Regional Holdings and Bank of Scotland Corporate for 925 million.

DOW JONES 13,675.83 +7.72

US STOCKS rose yesterday, with the S&P 500 and the Dow industrials reaching closing records as higher energy shares and a fresh round of takeovers offset concerns about a sharp sell-off in Chinese stocks.

In a possible sign of slower US growth, government data showed factory orders rose less than expected in April.

Wal-Mart Stores rose after several brokerages raised their rating on the shares.

Shares in Onyx Pharmaceuticals also lifted following news from that its Nexavar liver cancer treatment was shown to extend the lives of patients.

The Dow Jones industrial average finished up 7.72 points at a record 13,675.83. The Standard & Poor's 500 index was up 2.82 points to finish at a record 1,539.16. The technology-heavy Nasdaq Composite index closed up 4.37 points at 2,618.29