FTSE falls into negative territory

Fears of another interest rate hike sparked by rising factory gate prices left the London market in negative territory today.

Concerns that a higher-than-expected 0.5% rise in prices charged by producers for their goods would cause inflation to increase left the FTSE 100 Index seven points off at 4975.

Jitters ahead of this week’s British budget were also weighing on investors. Although the City expects UK Chancellor Gordon Brown to give away up to £2bn (€2.8bn) to entice voters ahead of the election, there are fears that a higher figure would drive up borrowing and put his fiscal rules at risk.

The prospect of lower oil prices was lending support to the markets in New York, where the Dow Jones Industrial Average had lifted 13 points shortly after London’s close.

Saudi Arabia, OPEC’s biggest oil producer, encouraged investors by calling for members of the oil cartel to increase output quotas.

In late afternoon trading, the cost of US light crude for delivery in April had fallen to just above $54 a barrel.

Back in London, telecoms groups were among the fallers, with Cable & Wireless weakening 2p to 131p and Vodafone off a penny to 138.5p. O2 also chalked up losses of 1p to 126.75p as it placed shares and changed its name from mmO2.

Marks & Spencer fell 3.5p to 344.75p as investors digested news that it had appointed Ian Dyson from Rank Group as its new finance director.

Leisure group Whitbread eased 5.5p to 959.5p although the sale of its Marriott hotels met expectations. Shares had surged last week when news of a possible deal first broke.

The day’s biggest winners were Royal & Sun Alliance, up 2p to 84.5p, ITV gaining 1.75p to 128.75p, Allied Domecq adding 5.5p to 526.5p and BG Group lifting 4.25p to 414p.

Biggest losers included Dixons, down 3p to 152.25p, InterContinental Hotels off 12p at 648p, Morrisons weakening 3.75p to 219p and Old Mutual retreating 2,25p to 138.75p.