FTSE optimism fades fast

Early optimism surrounding America’s hefty interest rate cut faded fast today as stock market attentions turned to the mounting economic gloom.

London’s FTSE 100 Index struggled to make headway, ahead 15.1 points at 4324.2, while indices across Europe fell into the red.

The Dow Jones Industrial Average on Wall Street dropped more than 120 points as investors looked to the economic reasons behind the Federal Reserve’s move yesterday to slash rates to between zero and 0.25%.

A raft of dire economic news in the UK also pegged back progress, with figures revealing the fastest rise in claimant count unemployment since 1991.

The news fuelled expectations of more rate cuts and sent the pound to a new record low, below 1.09 against the euro.

Sentiment in London also took a hit from a sharp fall for market heavyweight HSBC on rumours of a major capital raising.

The global banking giant fell more than 6%, or 43p to 672p, amid speculation it may have to raise $14bn through a share placing or rights issue.

Other banks were under pressure, with HBOS off 4.1p at 67.8p – a fall of 6%. And Royal Bank of Scotland dropped 2.5p to 50.5p.

Some sectors made progress, with insurers among those on the front foot. Prudential set the pace with a rise of 6% or 20p to 370p, while Legal & General rose 4p to 74.8p.

Higher commodities helped lend some support to the Footsie, as did advances made by oil majors BP and Royal Dutch Shell after oil cartel Opec cut production by 2.2 million barrels a day in

a bid to prop up prices.

BP rose 11.75p to 535.5p and Shell gained 38p to 1739p.

But oil and gas services firm Wood Group – soon to be relegated from the Footsie – fell 1.2p to 198.8p after warning of “a more uncertain and challenging outlook” next year. Fellow energy services firm Amec fell 2.5p to 518.5p after a UBS downgrade.

National Express gained ground, up 1.5p to 459.25p, after it detailed “robust” trading in its bus business and said rail operations continued to grow passenger revenues, despite the uncertain economic conditions.

The biggest Footsie risers were Fresnillo up 13.4p at 181.5p, Lonmin ahead 46p at 728.5p, Hammerson up 32.5p at 534.5p and Invensys up 9.5p at 165.6p.

The biggest Footsie fallers were HSBC down 43p at 672p, Halifax Bank of Scotland off 4.1p at 67.8p, Royal Bank of Scotland down 2.5p at 50.5p and Smith & Nephew down 20p at 425.5p.