Interest rates concerns weigh down FTSE

Interest rates weighed on the minds of investors on both sides of the Atlantic as the FTSE 100 Index dropped below the 5000 level today.

With the Bank of England due to announce the outcome of its monthly rate-setting meeting at noon and US Federal Reserve chairman Dr Alan Greenspan set to give testimony later today, investors used the morning session to bank profits.

As a result, only a clutch of blue-chip stocks were in positive territory and the FTSE 100 Index stood 17.4 points lower at 4986.3 by mid-morning.

Analysts were of the view that the cost of borrowing in the UK will remain at 4.75% today, but the picture was less clear across the Atlantic. Many believe Dr Greenspan will signal that the Fed will keep raising interest rates, despite speculation to the contrary earlier in the week.

In London, steel group Corus led the top-flight fallers as investors reflected on the news of its demotion from the top flight to the FTSE 250 Index. Shares were more than 2% or a penny down at 42p.

Morrisons continued its downward spiral following yesterday’s profits warning, standing second in the fallers with a 3.5p retreat to 179.5p.

Airports group BAA was one of the few stocks to make headway, rising 0.5p to 610p after reporting a healthy rise in passenger numbers in May.

Halfords was high among the FTSE 250 risers after the car accessories and bikes retailer reported continuing sales growth. Shares rose 7.5p to 295p.

It was headed by engineering group FKI – up 4% or 4.25p at 102p – after it unveiled a 5.4% rise in profits and said it was poised for further growth this year.

Elsewhere, bars operator Urbium lifted 10% or 67.5p to 767.5p as investors welcomed its decision yesterday to reject an approach by Regent Inns.

Alba fell more than 13% or 60p to 393.5p as it reported a 32% fall in annual profits – driven by retailers reducing the prices of its consumer electronics goods.