Footsie down as interest rates are unchanged

Interest rates dominated the thinking of investors on both sides of the Atlantic today as London shares spent a second day in the red.

Interest rates dominated the thinking of investors on both sides of the Atlantic today as London shares spent a second day in the red.

The FTSE 100 Index was unable to develop a head of steam all day as it slipped 20.4 points to 4538, even though the Bank of England kept the cost of borrowing unchanged at 4.75%.

Traders remained upbeat about the outlook for blue-chip shares, but said another decline was possible tomorrow in the absence of major economic news.

Paul Webb, of deal4free.com, said today’s fall “could prove to be the adjustment traders have been looking for over the last few days and pave the way for the next phase of any rally".

Wall Street continued to retreat in the wake of comments from Federal Reserve chairman Alan Greenspan that were interpreted as cutting expectations for US growth. The Dow Jones Industrial Average was off 36 points in early trading.

In London, catering group Compass was the heaviest faller, losing almost a quarter of its market value after it warned a number of factors would reduce operating profits by £30 million in the current financial year. Shares weakened 80.5p to 239.25p.

ITV lost 3p to 102p, despite posting a 42% increase in half-year profits after seeing advertising revenues jump to their best level since the dotcom boom. The latest decline ensures further woe for shareholders, who have seen the stock remain well below its post-merger opening price of earlier this year.

Royal Bank of Scotland featured high on the list of fallers, off 30p to 1567p, after Spanish bank Santander Central Hispano pledged to give up its two boardroom seats at RBS if it lands Abbey National.

Shares in high street giant M&S weakened 2.75p to 352p after it announced that Yasmin Yusuf, the designer brought in to add sparkle to women’s clothing, is to leave after three-and-a-half years.

BAE Systems bucked the trend, however, rising 1.5p to 213.25p, as it announced interim pre-tax profits before goodwill and one-off items slightly ahead of expectations.

InterContinental Hotels was in high spirits with an 11p gain to 590p after a 55% rise in profits and the announcement that it was putting a further 76 hotels on the market.

And Enterprise Inns was buoyed by comments from the OFT in which it appeared to accept the structure of the tenanted pub industry, pushing shares 9p higher to 589p.

Outside the top flight, bus and rail operator Arriva failed to make it into the black after posting a 7.3% rise in half-year operating profits and predicting a revival in popularity of bus travel in the UK. Shares moved 4p lower to 420.75p.

The day’s biggest risers were Sainsbury’s, ahead 7.75p to 277p, Yell Group up 7.25p to 346.75p, InterContinental Hotels lifting 11p to 590p and Enterprise Inns advancing 9p to 589p.

The biggest fallers were Compass Group, down 80.5p to 239.25p, AstraZeneca off 109p to 2510p, Amvescap losing 12p to 297p and Man Group declining 43p to 1354p.

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