FTSE falls to lowest level in a month on US jobless figures

BRITAIN’S top share index fell to its lowest close in a month yesterday, as weak US labour and other data cast further doubt on the strength of the global recovery and as oil stocks fell on lower crude prices. The FTSE 100 fell 91.58 points, or 1.7 per cent, to 5,211.29 points, the lowest close since 20 July. Meanwhile, the FTSE 250 fell 51.71 points, or 0.5 per cent, to close at 9835.37.

“There is a fear of a double-dip recession in the United States,” said Bob Parker, vice chairman of asset management at Credit Suisse.

He cited other worries such as deflation both in the United States and Europe, and said there was a “serious risk” the FTSE could go as low as 4,800 by the end of September, though it might bounce back to 5,700 by year-end, as corporate earnings stayed strong. Data showed new US jobless claims scaled a nine-month high last week and Mid-Atlantic factory activity contracted in August for the first time in more than a year.

The US data helped pull crude prices down more than 1 per cent to about $74.40 a barrel, hurting energy shares.

Integrated oil companies BP and Royal Dutch Shell both fell 2.7 per cent.

Cairn Energy fell 4.3 per cent. The Edinburgh-based explorer had been a strong performer earlier in the week, following its deal with miner Vedanta, which fell 4.8 per cent.

Other miners to fall, as copper and other base metals slipped, included Anglo American, Eurasian Natural Resources Corporation and Rio Tinto, down between 2.3 and 4.4 per cent.

BHP Billiton fell 2.2 per cent, as sought regulatory approval for its $39bn hostile bid for
Potash.

But Randgold Resources rose 0.9 per cent, as gold prices hit seven-week highs.

The heavyweight banking sector was also a major drag on the index. Barclays, HSBC and Standard Chartered fell between 1.7 and 2.7 per cent.

Earlier, London shares had risen on data suggesting the UK recovery was on track.

British retail sales volumes rose nearly three times faster than expected in July, and a
surge in corporate tax receipts cut public borrowing sharply.

With few major companies reporting, broker notes were key in moving shares. Inmarsat
was the biggest FTSE 100 faller, closing 5.1 per cent lower after UBS downgraded its
rating on the satellite firm to “neutral” from “buy” on valuation grounds.

United Utilities fell 2.9 per cent as JPMorgan Cazenove cut its rating to “neutral” from “overweight”.

Wm Morrison Supermarkets was one of just ten blue-chip gainers, rising 1.9 per cent, as Credit Suisse raised earnings estimates for the company, ahead of the company's first-half results on 9
September, saying there is margin upside
Serco was the biggest gainer in the FTSE 100, up 2.6 per cent.