FTSE loses sight of recent gains

The London market lost sight of its recent milestones today as investors fretted over a warning from oil giant BP that storm damage may harm its profits.

BP – the UK’s biggest listed company – was among the heaviest blue-chip fallers after it revealed hurricanes Katrina and Rita may cost it more than £400m (€589m) in the third quarter of this year.

This contributed to the FTSE 100 Index slipping back below the key 5500 mark, off 13.2 points at 5488.3 by mid-morning.

BP lost 8p to 665.5p, while rival Shell weakened 16p to 1943p. Shell has already said that its Mars platform has suffered significant storm damage, and the Anglo-Dutch group lost ground on worries about the impact of this on its profits.

But both firms were beaten to the top of the Footsie fallers board by insurance giant Legal & General – off 3% or 3.5p to 110.75p – after warning that proposed legislation could result in a one-off tax hit of £500m (€736m).

This put investors off the entire insurance sector where Aviva weakened 2p to 623.5p and Prudential dipped a penny to 515p.

In contrast, telecoms group O2 made good progress after a positive note from broker Bear Stearns.

The stock was the highest blue-chip riser, up 2.25p at 163.5p. Rival Vodafone also advanced a penny to 148.25p.

Others trying to buoy the mood included tobacco stocks Gallaher and Imperial Tobacco, rising 8p and 10p to 886p and 1630p respectively.

Outside the top flight, butter maker Arla Foods retreated half a penny to 58.5p after it left forecasts untouched in the current climate of high oil prices.

Media and marketing giant Aegis was boosted by takeover activity after revealing it had been approached by more than one party. The owner of the Carat media planning agency saw its shares rise 5.25p to 144p.