London, New York shift into reverse gear

The London market slipped into reverse gear today as speculation mounted that interest rates will be hiked tomorrow.

Traders said the market had factored in a 0.25% rise, helping drag the FTSE 100 Index 15.3 points lower to 4489.5 by the end of the day.

Official manufacturing figures out today showing a sharper-than-expected recovery in factory output levels were boosting the case for the rate rise, analysts said.

One trader said: “If the MPC does decide to leave rates on hold tomorrow, a defined move upwards can be expected.

“Otherwise, we may well be looking at further downward pressure on equities towards the weekend.”

Concerns about rates offset the positive impact on equities of further falls in the price of crude oil.

New York’s Dow Jones Industrial Average was also in the red, falling 36 points shortly after London’s close.

Banking stocks were among the highest risers today, even though investors failed to warm to a trading update from Royal Bank of Scotland.

RBS, which said it had continued to make good progress in the first half of the year, fell 15p to 1664p.

However, Bradford & Bingley was the highest riser in the sector, gaining 2p to 284p, while Northern Rock advanced 5p to 748.5p and Lloyds TSB lifted 2.5p to 439p.

Broadcaster BSkyB was the highest overall riser after announcing to introduce a free-to-air service later this year. Shares rose nearly 3% or 17p to 629p.

Viewers will pay a one-off fee of £150 (€227) for a minidish, digibox and access card as part of a deal that BSkyB hopes will lead them to switch to pay-TV packages.

BT cheered 2p to 187.5p after mapping out plans to transform its network in a move that could help the telecoms group achieve cost savings of up to £1bn (€1.5bn) a year.

However, mining groups were on the slide after yesterday’s healthy gains.

Rio Tinto lost 24p to 1295p, Anglo American faltered by 21p to 1136p and BHP Billiton weakened 3.5p to 457.5p.

Outside the top flight, pubs group Yates moved ahead after independent directors supported a £93m (€140.8m) takeover by management. Shares rose 5.5p to 143p.

Housebuilder Country & Metropolitan was 7p higher at 188.5p as a sale signalled the end of the group’s dealings in the luxury property market.

And pub operator Burtonwood Brewery was up nearly 5% – 16.5p to 375p – as it reported record profits and announced plans for a name change to reflect its sole focus on retailing.

But jewellery retailer Signet failed to cheer investors despite a 33% hike in profits, after trading sparkled during the Valentine’s Day period. Shares weakened 1.5p to 115.25p.

The biggest risers in the Footsie today were BSkyB up 17p to 629p, Man Group ahead 34p to 1630p, Severn Trent up 11.5p to 819.5p and Scottish & Newcastle ahead 5.5p to 430.5p.

The heaviest fallers were Boots down 20p to 650p, BP off 11.5p to 480.75p, ICI down 5.25p to 222.5p and BAA off 12p to 546.5p.