FTSE drops slightly, but maintains two-year high

Rolls-Royce shares pulled out of their nosedive today as the group said it was making progress on finding the cause of the engine failure that forced a Qantas jet to make an emergency landing.

The manufacturing group closed 3% higher having fallen 4% in early trading after the chief executive of Qantas said oil leaks were found in three engines on its A380 fleet.

The wider FTSE 100 Index paused for breath after last week’s impressive rally, down 25.4 points to 5850, although it remained near recent two-year highs.

Wall Street’s Dow Jones Industrial Average was down nearly 60 points, after its recent surge triggered by the Federal Reserve decision last week to pump a further $600bn (€430bn) into the world’s largest economy.

The dollar strengthened a little against the pound and euro after slumping following the Fed’s announcement.

Sterling eased back by 0.4% to 1.61 dollars, having reached nearly 1.63 dollars last week.

Investors were more cautious on stocks ahead of figures over the next few days from the likes of Vodafone, Marks & Spencer and BT.

Royal Bank of Scotland was at the bottom of the Footsie after losing 5% on Friday following third quarter figures showing it slipped into the red by £1.4bn (€1.6bn). Shares in the part-nationalised player were down another 1.4p to 43.6p.

Barclays was also down 4.2p at 285.7p, while Lloyds was off 1.2p at 68.3p.

Rolls-Royce provided much of the focus again today as its engine drama unfolds.

The group’s statement helped provide some shares relief – up 16p at 607p - confirming the incident was specific to its Trent 900 engine and assuring that this was the first such failure on one of its large civil engines for 16 years.

Blue chip fallers included utility stock Scottish & Southern Energy after brokers at Nomura cut their rating on the firm, sending shares down 2% or 18p to 1122p.

Ahead of tomorrow’s interim results and strategy review by chief executive Marc Bolland, Marks & Spencer shares were 4.9p higher at 413.2p, while Primark owner Associated British Foods added 2p at 1073p ahead of its own figures.

Elsewhere, BSkyB rose 8p to 728p after announcing it had reached its target for 10 million television customers before the end of the year.

In the FTSE 250, property group Savills rose 13.5p to 359.8p after upping profits guidance following a particularly strong performance in Asia and the UK.

But fund manager Gartmore suffered a shares tumble – down 15% – after it said it was embarking on a strategic review and announced the retirement of star manager Roger Guy – the latest in a recent string of key departures. Shares in Gartmore plunged 18.9p to 107p.

The biggest Footsie risers were Inmarsat up 20p to 695p, Rolls-Royce ahead 16p to 607p, Compass up 13.5p to 537p and Cobham up 4.6p to 209.4p.

The biggest Footsie fallers were Royal Bank of Scotland down 1.4p to 43.6p, Anglo American off 73.5p to 2955.5p, Serco Group down 13p to 560p and Tullow Oil down 25p to 1226p.