Record oil prices puts pressure on FTSE

Record oil prices cast a shadow over trading today as earlier momentum ebbed away to leave the London market in negative territory.

The FTSE 100 Index had enjoyed some modest gains as banks advanced on the back of fundraising plans by Barclays and miners benefited from higher metals prices.

But oil reaching a new record of almost 140 US dollars a barrel and opening losses on Wall Street soured the mood and left the Footsie down 8.2 points at 5794.6 by the close.

In London, Barclays remained one of the standout stocks after announcing a reassuring trading update and confirmation that the firm was looking at plans for a share issue which could raise £4 billion from sovereign wealth funds. Shares were up 11p at 329p.

But rivals were on the back foot after three billion US dollars worth of second quarter losses for US investment bank Lehman brothers set the tone. Lloyds TSB was 8p worse off at 348p, while Halifax Bank of Scotland, due to update on trading in its right issue prospectus this week, eased 5.75p to 316p.

HBOS’s reverse came in contrast to the 13% rise seen on Friday when the City watchdog proposed new rules on short selling during rights issues.

Among the other fallers Flora food giant Unilever bore the brunt of a downgrade from UBS on concerns over the European food sector. Shares were down 3%, or 46p, to 1527p, while Cadbury – also marked down by UBS – fell 19p to 633p.

Investors also moved their money out of the telecoms sector today with heavyweight Vodafone falling 2%, or 3.15p to 149.95p. BT slipped 3p to 213.5p, while Cable & Wireless was 3.3p lower at 152.9p.

Housebuilders meanwhile were on firmer ground amid speculation that Britain’s biggest institutional investors have been working on plans to provide direct funding to shore up firms in the sector.

Persimmon jumped 2%, or 9.75p to 421.25p, while in the FTSE 250 Index Barratt Developments was 11p higher at 97.5p, a gain of 13%. Taylor Wimpey added 6p to 76.5p.

Back in the top flight, miners offered some support as commodity prices nudged up. Eurasian Natural Resources was the sector’s biggest riser after an ABN Amro upgrade pushed it up 6%, or 83p to 1404p.

British Airways was the biggest faller after oil prices rose despite Saudi Arabia pledging to up production by 200,000 barrels a day next month. Shares in the airline were down 11.25p to 239.25p, nearly 5%. Also dragged down by oil’s rise was cruise line operator firm Carnival, which shipped 42p to close at 1790p.

The Footsie’s four biggest risers were Eurasian Natural Resources, up 83p to 1404p, Kazakhmys up 61p to 1611p, Barclays up 11p at 329p, and Home Retail Group which added 7.5p to 226.5p.

The four biggest fallers were British Airways, down 11.25p to 239.25p, SABMiller down 49p at 1159p, Unilever down 46p at 1527p, and Cadbury, which closed down 19p at 633p.

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