FTSE falls amid US borrowing fears

The FTSE 100 Index ended today in the red as fears of higher borrowing costs in the US offset a positive interest rate outlook in the UK.

The Footsie recovered some lost ground during the afternoon, but nevertheless closed down 5.7 points at 5053.2.

The Dow Jones Industrial Average fell 29 points shortly after London’s close as Federal Reserve chairman Alan Greenspan hinted that the Fed would not hesitate to raise rates to control US inflation.

The comments clashed with signals from the Bank of England that a mooted UK rate rise may not come as soon as expected.

A quarterly report from the Bank’s Monetary Policy Committee showed inflation was likely to overshoot its two-year target, making another rate hike appear likely, but probably not in the near term.

Downbeat unemployment data also counteracted the positive impact of the news on rates. Total unemployment in the UK, including people ineligible for benefits, rose 32,000 in the last quarter of 2004 to 1.41 million, the biggest three-monthly increase for almost two years.

Companies going ex-dividend contributed to a lacklustre mood in the City, with several companies including Compass, Scottish Power and GlaxoSmithKline dragging the market down after investors became ineligible for the most recent dividend payment.

Catering group Compass fell 3% or 8.75p to 255.25p, while Scottish Power lost 9.25p to 437.5p and GlaxoSmithKline shed 24p to 1249p.

In contrast, news and information group Reuters was the second highest Footsie climber as it posted a sharp improvement in annual profits after it cut costs and staged a business overhaul.

After an initial fall, shares cheered 3% or 12.25p to 420p.

The biggest riser was BHP Billiton, up more than 3% or 24p at 717.5p after reporting a 67% increase in earnings.

Motoring group RAC advanced 6%, up 43p to 708p, after unveiling a 2% hike in annual profits.

The day’s biggest risers were BHP Billiton, up 24p at 717.5p, Reuters gaining 12.25p to 420p, Xstrata adding 25p to 1062p and Rexam putting on 10p to 462p.

Biggest fallers included Schroders NV down 28p at 712p, Compass off 8.75p to 255.25p, Cairn Energy losing 29p to 1066p and British Airways weakening 7.5p to 279p.