Bad day for FTSE

The London market tumbled into the red today as interest rate concerns returned to spook investors.

Strong gains from water company Severn Trent and Tate & Lyle were not enough to push the FTSE 100 Index forward, and it closed 46.6 points lower at 5928.3.

Paul Webb, trader at CMC Markets, said: “With the FTSE so close to that psychological 6,000 mark this morning, a run of opportunistic profit-taking has caused little surprise despite some well-received interims from blue chips HSBC and Pearson.”

Meanwhile, newly-created pharmacy giant Alliance Boots, formed by the merger of Boots and Alliance UniChem, made its debut on the stock market.

The company delivered an upbeat trading statement and said it expected to make £100m (€146.327m) of cost savings a year within four years, although shares in the firm slipped almost 3% or 20.5p to 786p.

The tentative start reflected trading across the wider London market as investors looked to Thursday’s Bank of England decision and the possibility that interest rates could rise to 4.75%.

The fall came after a strong run last week in which the Footsie made its biggest weekly gains since March 2003.

Oil stocks were weighing heavy on the market – under pressure from falling crude prices, which lost 1.7% on Friday to trade at $73.24 a barrel. Royal Dutch Shell was down 22p to 1971p while BP was off 6p to 645p.

Among today’s risers was Severn Trent after speculation over the weekend linked it with a £5 billion private equity bid.

Shares jumped 6% in the first minutes of trading before settling to close 2% higher – up 25p to 1298p – as investors began to question the likelihood of a bid.

But it was overtaken on the way up the blue chip leaderboard by Tate & Lyle, with a gain of 18p to 685p, after news that Mexico and America had agreed a timetable to eliminate a 20% tax on soft drinks made with sweeteners. The move could open up a sizeable market for Tate, which has previously been stifled by the tax.

Publisher Pearson gained 1%, or 7.5p, to 727p after its first half results beat expectations in the City. The company, which owns Penguin books and the Financial Times, turned pre-tax losses of £6m (€8.78m) in the first half of last year into profits of £31m (€45.37m).

Shares in HSBC initially rose after the company posted an 18% hike in first-half profits of $12.52bn (£9.8bn), but later dropped as investors banked profits to close 3p down at 971p.

Other banks were also in retreat, with Alliance & Leicester down 16p to 1047p and Barclays off 6p to 628p.

The day’s biggest blue chip risers were Shire up 23.5p to 863.5p, Tate & Lyle up 18p to 685p, Severn Trent up 25p to 1298p and Pearson up 7.5p to 727p.

The day’s biggest blue chip fallers were ITV off 2.75p to 97.25p, Northern Rock down 30.5p to 1115p, Prudential up 15p to 562.5p and Vodafone up 3p to 116.25p.