FTSE recovers from morning slump

The London market held its nerve today as the FTSE 100 Index took tentative steps back into positive territory after taking a battering in the previous two sessions.

A turbulent morning left the blue-chip index as low as 5807.1 points in early exchanges but it staged a steady recovery to finish the day 4.9 points up at 5846.2.

The small gains came after a torrid two days trading saw markets around the world dive deep into the red following a strong bull run.

Falling commodity prices and fears over inflation hit stocks in London on Friday and Monday while a weak US dollar piled on the gloom on Wall Street.

But trading in London echoed positive moves on European bourses today with small gains although the Dow Jones Industrial Average was down at the close on this side of the Atlantic.

It came as investors appeared to take official figures showing that inflation hit the Bank of England’s target of 2% last month in their stride.

CMC Markets trader Jimmy Yates said: “There does seem to be some consensus forming that we’ve now seen a correction with some of the heat having been taken out of th market, especially with some reasonable corporate numbers being announced earlier in the session.

“Volatility is likely to continue as the week progresses but to close in positive territory today may well offer some much-needed confidence for London equities in the days ahead.”

Alliance UniChem and Boots were among the key risers with investors excited about their planned merger.

Deutsche Bank upgraded Boots to “buy” from “hold” and said the tie-up made both strategic and financial sense. It helped send Boots shares 12p higher to 734.5p while Alliance was 24.5p to the good at 933p.

Shares in catering giant Compass were also amongst the highest risers, gaining nearly 3% or 6p to 240.5p despite reporting a 9% slump in pre-tax profits for the first half after finance director Andrew Martin signalled progress was being made in creating a solid platform for future growth.

On the down slide, hotels group InterContinental saw its shares drop 1% or 10p to 958.5p despite posting a near 8% rise in pre-tax profits to £70 million for the first quarter.

Meanwhile an 8% rise in operating profits failed to do the trick for airports operator BAA which edged 1.5p lower to 834.5p.

But the day’s biggest faller was Carnival after it reduced its earning forecast for the year. Shares in the cruise giant slumped 12% or 326p to 2326p.

And mining stocks continued to tumble with investors instead taking refuge in defensive stocks.

Antofagasta was off 2% or 45p to 2228p, while Xstrata was down 5% or 107p to 2101p and Anglo

American was 67p lower at 2215p.

The day’s biggest risers were Cadbury Schweppes up 17p to 537p, BSkyB up 17p to 545.5p, Alliance UniChem 24.5p stronger at 933p and Compass up 6p to 240.5p.

The heaviest fallers were Carnival down 326p to 2326p, Xstrata off 107p to 2101p, Corus down 16.75p to 404.5p and Man Group 88p lower at 2312p.