FTSE rooted in red

The London market remained rooted in the red today as economic news pointed to another interest rate hike.

The FTSE 100 Index recovered some of its earlier 21-point loss, but was still 10.2 points off at 4985.3 by mid-morning.

The manufacturing sector escaped a dip into recession after official figures showed a 0.6% rise in output in December.

An unexpected improvement in the UK trade deficit to £3bn (€4.4bn) during the same month, despite another record month for imports, provided further good news.

A number of analysts said the data indicated that any rate move in the foreseeable future was likely to be up rather than down.

HSBC’s John Butler said: “Overall, this is a stronger than expected set of data, which provides on balance hawkish news for interest rates.”

The rate fears swept away the exuberance of yesterday, which lifted the Footsie to within a few points of the 5000 mark.

American shares ticked higher last night amid hungry buying of microchip stocks and drug maker Pfizer. The Dow Jones Industrial Average edged 8.87 points ahead to 10,724

Back in London, Shell led the decline, down almost 3% after its stock went ex-dividend – meaning investors are no longer entitled to the current payout. Shares were 12p cheaper at 474.75p.

Household products group Reckitt Benckiser lost ground in early trading, but rebounded to stand 5p ahead at 1586p after posting results ahead of market expectations.

Reckitt topped City hopes with fourth quarter net income of £201m (€292.9m) and promised revenues growth of at least 5% in 2005.

Airports operator BAA rose 4p to 622p after saying its seven UK airports handled 9.9 million passengers in January, up 7.4% on the same month last year.

In the FTSE 250 Index, Woolworths gained almost 2% or 0.75p to 48.75p, despite rejecting a takeover approach from private equity group Apax.

Analysts said the share price gain reflected expectations that another bid could emerge from Apax, or even another party.