Oil and gas sector weakens FTSE

The London market today lost some of its recent gains, as weakness in the oil and gas sector dragged the blue-chip stock index down.

Positive investor sentiment around telecoms giant Vodafone’s agreed deal to acquire Indian mobile-phone operator Hutchison Essar failed to lift the FTSE 100 Index, which closed at 6353.5, down 29.3 points.

Vodafone saw its shares rise 3% earlier in the day on the news of its £5.7bn (€8.6bn) acquisition of a controlling stake in Hutchison Essar, settling back to a hike of 2p to 151.25p.

Analysts said Vodafone paid a high price, but pointed out the significance of the acquisition for boosting the company’s exposure to one of the world’s fastest-growing mobile-phone markets.

Rolls-Royce topped the day’s leaders board, with shares jumping 3%, or 14.24p to 516.5p after Merrill Lynch put the jet-engine-maker on its list of recommended Europe stocks and as investors eyed the possibility of a share buy-back from the group following strong results last week.

The bulk of the day’s activity was focused on the FTSE 250 Index and tour operators after the agreed merger between holiday firms MyTravel and Thomas Cook sent shock waves through the sector.

The proposed MyTravel deal hit investors in rival First Choice as the firm had been hoping that either Thomas Cook or MyTravel would buy its mainstream holidays business. First Choice shares plunged 14%, or 41.25p, to 264p, as it confirmed it was no longer in talks over a possible sale.

MyTravel jumped by nearly a third in value, or 68p, to 306p, after the company’s board agreed to give German-owned Thomas Cook a 52% stake in the enlarged group, creating the Thomas Cook Group with combined sales of £8bn (€12bn).

Back in the top flight, InterContinental Hotels benefited from speculation it is the target of a bid from an unnamed predator ahead of its earnings results out next week, which sent shares up 3p to 1288p.

Gas and energy firms dominated the fallers board, with Cairn Energy leading the share-price losers, off 56p at 1627p. Gas group BG Group also saw shares drop 15.5p to 723.5p, while Royal Dutch Shell saw its shares slide 20p to 1683p.

British Energy bucked the trend, however, up 5.25p at 424p with its results due tomorrow, which are expected by analysts to see it post a 62% rise in profits.

In a poor session for investment firms Man Group slipped 15.5p to 576p and Amvescap dipped 7.5p to 628p as speculation over a possible tie-up between the two firms faded.

In the second tier, the London Stock Exchange slipped back 16p to 1266p as it successfully fought off a long-running takeover attempt from New York’s Nasdaq.

The company found itself out of an offer period for one of the few occasions since December 2004 after the lapse of Nasdaq’s offer over the weekend.

The biggest Footsie risers were Rolls-Royce, ahead 14.25p at 516.5p, Vodafone, up 2p at 151.25p, Imperial Tobacco, up 21p at 2203p and Smith & Nephew, ahead 5.25p at 612.25p.

The biggest Footsie fallers were Cairn Energy, down 56p at 1627p, Man Group, off 15.5p at 576p, Reuters Group, down 11.25p at 430.5p and ITV, down 2.5p at 110p.