FTSE remains in negative territory

The London market closed below the 6,000 barrier for the third session in a row today as heightened volatility kept stocks in negative territory.

Uncertainty over the US and UK economies saw the FTSE 100 Index swing dramatically between gains and losses as nervous investors reacted to movements on Wall Street.

The Footsie closed down 0.7 points at 5901.7, but had surged by more than 2% at one stage today on early hopes of a better session for America’s Dow Jones Industrial Average.

But the gains were soon reversed as the US index dived on further bad economic data, despite President George Bush calling for an economic rescue package that includes 145 billion US dollars (£72.3bn) worth of tax incentives for businesses and individuals.

London’s leading share index had been buoyed in mid-session trading by speculation that mining giant BHP Billiton may sweeten its proposal for rival Rio Tinto.

The talk sent shares in the sector soaring, with Rio enjoying a gain of 221p to 4700p, or 5%. Xstrata also benefited, up 266p at 3363p amid the sector rally.

London Stock Exchange joined the mining pair near the top of the risers board, with shares up 63p to 1650p amid news that the LSE had opened an office in Beijing.

Retailers also made strong gains, helped by market whispers of stake building in Marks & Spencer. M&S added 15.25p to 414.5p, although BHS boss Sir Philip Green was quick to rubbish speculation that he was involved in the buying spree.

Analysts said there was an element of relief that Christmas was not a total wash-out, despite official figures today showing worse-than-expected volumes in December.

The Office for National Statistics (ONS) revealed that retail sales dropped by 0.4% in December, far worse than the 0.3% increase forecast by analysts in the City.

But the news failed to halt a shares lift across the sector, with B&Q owner Kingfisher up 5.4p at 129.9p and Argos parent Home Retail Group ahead 13p at 279.25p.

Mobile phone and broadband firm Carphone Warehouse suffered jitters, even though it told investors that it remained on course to meet market expectations. Shares closed down 2.75p at 302p.

Elsewhere, British Energy shares recovered from a weak start to stand 11.5p higher at 531.5p. It said today that two of its power stations would remain shut until the second half of 2008, but the guidance was taken as a positive sign that the company has a robust plan in place to resolve the problems.

In the FTSE 250, investment management group New Star Asset Management saw its shares lose nearly a third of their value after it warned that 2008 operating profit would decline significantly as investors took cash out of equities.

Shares dropped 45.75p to 101.25p.

The biggest Footsie risers were Xstrata up 266p at 3363p, Sage Group ahead 13p at 228.5p, Rio Tinto up 221p at 4700p and Home Retail Group up 13p at 279.25p.

The biggest Footsie fallers were Standard Life down 14.25p at 211.75p, Prudential off 37p at 596.5p, Schroders down 60p at 1019p and ICAP off 34p at 616.5p.