Middle East tensions drag Footsie down

Britain’s top shares dived into the red today as investors pondered the prospect of all-out war in the Middle East.

The FTSE 100 Index slumped 57.4 points to 5707.6 by the close to add to yesterday’s heavy losses of nearly 100 points.

Falls in London reflected stock markets around the world as investors took fright at the political unrest caused by fierce fighting between Israel and Lebanon, as well as tensions in Iran and North Korea.

Paul Webb, trader at CMC Markets, said: “Although news of a marginal slowing in the US economy – as has been seen today – would usually be good for stocks, markets seem somewhat caught up over the high price of oil and possibility of escalating conflict in the Middle East as we approach the weekend break.”

The Dow Jones Industrial Average was more than 100 points down when trading in London closed, while the Nikkei sank more than 250 points after the Bank of Japan raised interest rates for the first time in six years.

In London, petrol producer BP benefited as the price of crude rose above 78 US dollars charged by fears of a fuel shortage. BP finished the day 2p higher at 643p, although Shell fell 3p to 1903p.

Norwich Union owner Aviva was on the move – up 5p to 695p – after Merrill Lynch upped its rating from “neutral” to “buy”. Shares in Aviva have fallen more than 10% in the last 10 days including a dip yesterday after it bought US insurer AmerUs.

PartyGaming continued its run following after analysts said proposed laws to ban internet gambling in the US were unlikely to get through the Senate despite overwhelming approval in the House of Representatives.

The bill has hung over the industry for months and seen millions wiped off the value of the PartyPoker giant but the stock was a penny higher at 109p today as it built on gains earlier this week.

Much of the rest of the market was in retreat with broadcaster ITV at the top of the fallers’ board. Shares in ITV slipped 3.5p to 96.25p following speculation advertising bookings at its flagship channel ITV1 were down.

Banking stocks were also caught in the sell-off with Alliance & Leicester down 21p to 1015p, Royal Bank of Scotland 28p lower at 1675p and Halifax owner HBOS off 9.5p to 927.5p.

Second tier media group Emap gained 11.5p to 723.5p as investors bought back into the stock following its slump yesterday after it warned that underlying revenue may be down in the first half amid worsening trading conditions.

Also outside the top flight, catering equipment maker Enodis gained 8% or 16.5p to 215.25p as it considered a revised 220p a share takeover offer from Mantiowoc, which valued the firm at £892 million.

The day’s biggest blue chip risers were Drax up 8.5p to 868p, PartyGaming a penny higher at 109p, Aviva up 5p to 695p and Tesco 2p stronger at 347.

The heaviest fallers were ITV down 3.5p to 96.25p, Corus off 13.5p to 419.25p, Persimmon which lost 37p to 1188p, and Rio Tinto down 85p to 2725p.