Interest rate and oil price woes hit FTSE

Market confidence was dealt a double blow today as investors fretted over US interest rates and the impact of BP’s decision to shut a key oil field.

The FTSE 100 Index rallied on Friday but was 1% lower by mid-morning – down 60 points at 5829.4.

A major factor proved to be the near-2% decline in shares of market heavyweight BP, following news that it had begun the closure of its Prudhoe Bay oil field in Alaska because of pipeline corrosion. Shares fell 10.5p to 625.5p.

The development caused a spike in oil prices, with the price of Nymex crude ahead by more than one US dollar at around $76 a barrel.

Uncertainty over this week’s US Federal Reserve decision weighed on mining stocks, which are impacted by any possible threat to growth.

RioTinto led the fallers board with a drop of 92p to 2714p, while Xstrata was off 64p at 2185p and BHP Billiton dipped 25p at 1005p.

Only a handful of stocks were in positive territory, including ITV as interest in the stock remained at fever pitch ahead of interim results on Wednesday and the prospect that chief executive Charles Allen will quit. Shares were 0.75p higher at 102.5p.

Among companies reporting corporate results, car dealership Pendragon fell even though it said the addition of acquisition Reg Vardy contributed £19.9m (€29.5m) in operating profits. Shares were 22.5p lower at 518p, as investors took note of a warning that second half trading conditions were likely to remain tough.

Elsewhere, Premier Foods saw its stock ease 0.75p to 315.25p, after lifting half-year operating profits by 13% and announcing a fresh push on the baked bean market.

Budget airline easyJet fell 8p to 423.5p, despite maintaining recently upgraded profits guidance. Investors appeared more concerned that costs were slightly higher than predicted, while passenger growth showed a slight dip on previous trends.