FTSE under pressure on US interest rate fears

Fears that the US Federal Reserve will soon consider raising interest rates put world markets under fresh strain today.

The FTSE 100 Index extended its recent poor run by sliding to a five-week low, with the top flight 22.8 points lower at 5253.8 by the mid session.

This represented an improvement on the 1.5% fall seen earlier as nervous investors worried about events in the United States later in the day.

As well as President Obama’s State of the Union address, the outcome of tonight’s Federal Reserve’s interest rate meeting loomed amid fears that policymakers could be looking at when to tighten monetary policy.

The Fed is expected to keep its benchmark interest rate unchanged at a range of zero to 0.25%, but the accompanying statement may highlight whether there is continued support for keeping borrowing costs at current levels.

President Obama’s speech will also be studied for any further attack on banks after last week’s proposal to impose restrictions on Wall Street’s more risky trading activities.

This shock announcement triggered the recent sell-off in world markets and left banking stocks sharply lower.

Barclays and Royal Bank of Scotland were back under pressure after declining 4.5p to 271.4p and 1.1p to 33.7p respectively. HSBC fell 9.1p to 664.5p.

Any cheer for investors came from outside the top flight after well-received trading updates from drinks firm Britvic and pubs group Greene King.

The latter rose 11.2p to 444.2p after it reported a strong Christmas, although it added that sales had moderated since then due to January’s big freeze.

Investec Securities upgraded its profit estimates by 4% following the update.

Meanwhile, analysts said a return to growth in the water and sports drinks category represented a significant trend for Robinsons firm Britvic, which saw its shares top the FTSE 250 Index risers board – up 6% or 25.3p to 429.7p - after an 11% rise in first quarter sales.

WH Smith shares were also higher, up 5.1p to 495.1p, after the retailer reported another steady trading performance.

The company said like-for-like sales were down 4%, but this was offset by continued margin improvement in its high street and travel divisions.

Chief executive Kate Swann said the company had delivered another good performance in the 21 weeks to last weekend, adding that it remained on course to meet targets for the full year.