The FTSE 100 Index ended a see-saw session in positive territory today, despite gloomy Bank of England inflation forecasts hitting hopes of interest rate cuts.
Banks and retailers lost ground on the Bank’s warning that inflation could remain above target for two years, giving it little room for manoeuvre on cutting rates.
But the Footsie ended the day points 4.1 points ahead at 6216 after brighter news on the inflation front from the US cheered Wall Street’s Dow Jones Industrial Average.
The Dow was up nearly 1%, or 125 points, in early trade after better-than-expected figures showed inflationary pressures eased in April.
In London, rises for the mining sector amid consolidation talk also helped stopped the slide.
Banks suffered early on after Bradford & Bingley performed a u-turn and announced a £300 million rights issue. But the losses worsened after the Bank of England comments, which saw one economist predict no further rate cuts this year.
B&B, which said last month it did not plan a rights issue, lost 9%, or 14.75p to 144p, with Britain’s biggest mortgage lender Halifax Bank of Scotland down 14.75p to 470.25p, or 3%. Alliance & Leicester was also 3% lower, off 13p at 445.75p.
Joining the slide were housebuilders and building supplies firms. Charles Church owner Persimmon lost 30p to 550.5p with Build Center retailer Wolseley easing 9.5p to 554p.
Annual results from supermarket giant Sainsbury’s provided investors with the cue to take recent profits, particularly as the figures were marginally below market expectations. Shares fell 15.25p to 374.5p, a drop of 4%.
Other retailers were on the back foot amid the gloomy sentiment, with B&Q owner Kingfisher off 2.6p to 145.9p.
The banks were kept off the top of the fallers’ board by FirstGroup after the transport firm said it would place new shares in order to refinance debt taken on following its purchase of Greyhound bus firm Laidlaw last year. Shares dived 6%, or 37.5p to 561.5p, despite announcing a strong rise in operating profits.
Other travel firms were also suffering as oil prices remained above 125 dollars a barrel. British Airways lost 10.5p to 218p, with second tier rival easyJet down 8p at 279.75p. Cruise ship giant Carnival also hit choppy waters, easing 59p to 1981p.
Among the miners in better shape was BHP Billiton, up 98p to 2118p, amid market talk that Chinese group Chinalco was considering raising its stake in the giant.
Catering firm Compass was on the front foot after telling investors it had managed to improve profit margins despite food inflation headwinds. Shares were up 15.75p to 358p.
The biggest Footsie risers were Eurasian Natural Resources ahead 99p at 1476p, BHP Billiton up 98p at 2118p, Compass up 15.75p at 358p and London Stock Exchange up 47p at 1081p.
The biggest Footsie fallers were FirstGroup down 37.5p at 561.5p, RBS down 18.5p at 319.25p, Persimmon off 30p at 550.5p and British Airways down 10.5p at 218p.