London shares lose early momentum

London shares lost their early momentum today despite another strong showing by mortgage bank Abbey National.

Abbey soared to the top of the FTSE 100 Index leaderboard with a near 7% gain as speculation about a bid continued to circle the City.

But fears about a poor start on US markets this afternoon wiped out a 48 point surge by the FTSE 100 Index in the first hour.

And by lunchtime the Footsie was up just 5.3 points at 3735.8, a mere 60 points from last month’s six-year closing low.

In thin trading, tobacco stocks were among the fallers as the spectre of litigation continued to hang over the industry.

British American Tobacco was down 25p at 599p as investors fretted about Philip Morris’ recent record payout to a cancer patient in the US last week.

Oil giants BP and Shell were also weighing on the top-flight index with BP down 6.5p at 405.5p and Shell off 4p at 381p.

And aerospace group BAE Systems was another on the slide, down 6% or 12.5p to 194p amid weaker sentiment for defence stocks.

Banking stocks had helped power the Footsie to its strong start early on and Abbey was 38p higher at 592p by lunchtime.

Bank of Ireland is still expected to make a bid for the group despite Abbey’s rejection of its informal takeover approach.

And stockbroker SG Securities added to the positive sentiment on the stock by upgrading to a buy from a hold.

Abbey’s rivals held onto their early gains with Lloyds TSB up 14p at 501.5p, HSBC up 12p at 662p and HBOS 17p higher at 582p.