Interest rate threat dampens FTSE performance

Following a positive start to trading the London market was back in the red today as profit taking at a number of blue chips and the threat of higher interest rates offset a recovery in the mining sector.

Following a positive start to trading the London market was back in the red today as profit taking at a number of blue chips and the threat of higher interest rates offset a recovery in the mining sector.

The FTSE 100 Index slipped 8.6p to 5839.1 by mid morning as investors mulled over minutes from the Bank of England which showed a member of the Monetary Policy Committee became the first in a year to vote for a hike in interest rates.

Cruise ship company Carnival was leading the slide down after yesterday’s lower earnings guidance caused shares to fall 126p to 2200p. The drop of 5% followed a decline of 12% last night.

Carnival was followed by retailer Sainsbury’s after chief executive Justin King warned the road ahead remains challenging and energy costs would increase significantly more than expected in the second half of this financial year.

Although the company said it has turned its first-ever loss into profits of £104 million shares were 12p lower at 334.5p, a drop of more than 3%. In contrast, stock in rival and market leader Tesco were 1% higher, up 3.5p to 323.25p

A recovery in metal prices took mining stocks to the top of the risers board. The sector was also buoyed by Xstrata’s offer for the 80% of nickel producer Falconbridge it does not already own, lifting its shares 50p to 2150p while Antofagasta gained 85p to 2313p and BHP Billiton was up by 10p to 1092p.

Steel giant Corus also cheered 9p to 413.5p after Mittal Steel won the backing of financial regulators in Luxembourg, Belgium and France to launch its £12.67 billion offer for rival Arcelor, which has buoyed the sector.

Camera shop chain Jessops saw its shares lift 5% or 6p to 132.25p after it posted a 10.4% rise in half-year sales to £178 million and looked ahead to further growth in the digital market.

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