Footsie down as investors stay away

Potential blows to the profits of the UK’s heavyweight companies kept investors away from the London market today.

BP warned that storm damage could cost it more than £400 million in the third quarter of this year, setting the tone for a poor session by the FTSE 100 Index which never rose above the waterline before closing 7.1 points lower at 5494.4.

Its downbeat comments came as insurer Legal & General also warned of a one-off hit of up to £500 million from new UK tax legislation.

Shares in BP finished the session down 18p at 655.5p as investors also picked up on its statement that devastation caused by hurricanes Katrina and Rita meant it was unlikely to meets its 2005 target for production.

Major rival Royal Dutch Shell has already told the market that its Mars platform has suffered significant storm damage, and the Anglo-Dutch group lost 40p to 1919p on worries about the impact of this on its profits.

The oil stocks jockeyed with Legal & General at the top of the Footsie fallers board as the insurer retreated more than 2% or 2.75p to 111.5p on concerns at the potential blow from tax legislation proposed by the Treasury at the end of last week.

L&G has pledged its support to a campaign by the insurance industry to have the draft tax legislation amended or withdrawn.

Shares of insurers including Friends Provident and Prudential received support from their assessment that the proposed laws would not have a material impact.

Friends ticked up 0.5p at 186.75p, while the Pru advanced 4p to 520p. Norwich Union owner Aviva also added 0.5p to 626p after it said its operating profits would be unaffected.

In the telecoms sector, O2 made good progress after a positive note from stockbroker Bear Stearns. The mobile phone operator rose 2.75p at 164p, but lagged rival Vodafone which advanced 3.25p to 150.5p.

Others that tried to buoy the mood included tobacco stocks Gallaher and Imperial Tobacco, rising 9.5p and a penny to 887.5p and 1621p respectively.

Outside the top flight, butter maker Arla Foods retreated a penny to 58p 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 5p to 143.75p.

Yorkshire-based home shopping and educational supplies firm Findel headed the fallers in the FTSE 250 Index after it revealed that like-for-like sales fell 1% in the first six months of its financial year. With brokers cutting their forecasts for annual profits, Findel shares dropped 6% or 25p to 427p.

The highest Footsie risers today were Vodafone up 3.25p to 150.5p, Morrisons adding 3.75p to 180.75p, Cable & Wireless up 2.75p at 143.5p and Yell Group rising 8.5p to 487.5p.

The heaviest fallers were DSG International down 5.25p to 145.25p, Alliance UniChem off 25.5p to 849.5p, BP down 18p at 655.5p and Legal & General losing 2.75p to 111.5p.