Poor NY session puts FTSE in slump

Traders were struggling to find reasons to enter the London market today as a poor session in New York and fears over higher interest rates derailed a recent rally.

The FTSE 100 Index slumped 54.6 points to 4322.7 by lunchtime, washing away the progress of yesterday when gains of 40 points were achieved.

The latest blow to confidence stemmed from the United States after mixed earnings updates and weakness in the tech sector unsettled investors.

That uncertainty was compounded by stronger-than-expected UK retail sales figures as fears grew of another increase in interest rates next month.

Only a handful of top flight stocks were in positive territory with Associated British Foods heading the list – up 6% or 34.5p to 642p – after buying a bakery and a herbs and spices business from an Australian firm for £730m.

That proved the only bright spot for the market as banks and financial stocks led the stampede south.

Barclays was second on the fallers list, down 14.25p to 445.75p while Royal & Sun Alliance lost 2p to 75.75p and Lloyds TSB drifted 8.75p to 397.75p.

The mood in the sector was not helped by the lack of an update on the sale of Prudential’s 79% stake in Egg.

The internet bank unveiled improved half-year losses but analysts were disappointed at the lack of progress on the sale process, which has been running since the start of the year.

The Pru slipped 10.75p to 435.75p while Egg was down 6.25p to 150.75p, despite returning to the black in its second quarter.

Outside the top flight, home furnishings retailer MFI was ahead by 1.5p at 135.25p after saying its turnaround strategy had produced a better showing in the last five weeks, despite a fall in half-year profits.

And rival DFS rose 7.75p to 443.25p as independent directors agreed to a £496m takeover by chairman and founder Graham Kirkham.

Elsewhere, Luton airport owner TBI gained half a penny to 67.25p after budget airline Ryanair followed easyJet by announcing expansion at the Bedfordshire site.

Ryanair’s shares tumbled 6% or 28c to €4.67 after it also started court proceedings against BAA relating to claims of over-charging on fuel levies.

Virgin Mobile, which made its stock market debut with conditional dealings yesterday, was below its flotation price of 200p – off 7.5p at 193.5p.

Comet owner Kesa was also in the red, down 2p to 278.75p, despite saying strong demand for electrical goods helped it continue its positive start to the year.