FTSE rally loses steam as energy stocks dip

The FTSE 100 edged down this morning as energy and resource stocks pinned the market back after solid gains over the week.

Greece and its private bondholders resumed debt swap talks today amid signs they are edging towards the deal needed to prevent a chaotic default by Athens.

That helped to give financial stocks a boost but data suggesting that factory activity fell in January hit miners as continuing rapid China growth is vital to the sector.

The STOXX Europe 600 Basic Resources index was down 0.9 per cent, as the figures hit mining shares across Europe.

Yesterday London's blue chip index hit a five-and-a-half-month closing high on hopes of a Greek breakthrough and IMF moves to create an enlarged fund to ease the Eurozone's ongoing debt woes.

But this morning some of the steam was taken out of the rally.

Engineer Weir group was the steepest faller on the index, down 4.9 per cent. Also in the sector GKN was down more than two per cent.

Meanwhile oil services company Petrofac was also off by more than four per cent with Essar Energy - which earlier this week lost a high profile tax ruling in India - dipping by 3.3 per cent.

On the up side drinks giant Diageo gained 1.8 per cent, along with Imperial Tobacco, while property company Hammerson lifted by a similar level.

Vodafone nudged up by 1.6 per cent after it won a key tax case in India.

In financial services interdealer broker Icap was the biggest gainer, up 1.7 per cent, while hedge fund giant Man Group edged up by 1.6 per cent. Lloyds was the highest riser among banks, also up 1.6 per cent.

AB Foods lifted by more than one per cent after yesterday reporting strong sales fuelled by its Primark chain.

Meanhwile In Asia the Nikkei closed up 1.4 per cent and the Hang Seng 0.8 per cent.

In the UK economic data showed that retail sales volumes rose by 0.6 per cent in December, after shops slashed their prices.

Across the Atlanitc later US home sales data is due for release.