FTSE 100 close: Footsie comes to standstill

By This Is Money
Updated: 12:03 EDT, 3 July 2009

A subdued London market paused for breath today after grim US unemployment data caused shares to slide on Thursday afternoon.

Quiet day: Shares are expected to trade in a narrow range.

The FTSE 100 index, which slumped more than 2% yesterday, recovered its poise to close 2.0 points ahead at 4,236.3.

With little in the way of corporate news and US markets shut for Independence Day, traders had not been expecting a surge in activity.

'It's a very quiet day in terms of corporate announcements and with the bank holiday on the other side of the pond I think you could just see us drifting for most of the day,' said Richard Hunter, head of UK equities at Hargreaves Lansdown.

There was more economic gloom in the UK as the Chartered Institute of Purchasing and Supply posted an activity index of 51.6 - down from the previous month's 51.7 when the sector notched its first month of growth since April last year.

The worries over global economic growth were again reflected in trading for mining shares, with Kazakhmys down 16p at 630p and Vedanta Resources off 19p at 1369p.

British Airways attracted interest later in the session as the under-pressure company posted traffic figures for June: it carried 2.93m passengers last month - 4.9% fewer than in June 2008.

BA said that in response to the 'challenging economic conditions' it was now expecting its capacity for the period April-October this year to be 3.5% down rather than the originally-forecast 2.5%. Its shares closed 6.5p ahead at 125.5p.

Banks also featured on the risers board, with Royal Bank of Scotland up 0.89p at 38.79p, Lloyds Banking Group ahead 1.6p at 67.5p and Barclays 8p stronger at 297p.

Insurer Friends Provident fell more than 6%, down 4.58p to 63.51p, after it completed the offloading of its majority stake in F&C Asset Management to its own shareholders. The disposal of the asset management firm will allow it to focus on the task of reviving its core business.

The leading Footsie riser was publishing and media group Reed Elsevier, which gained 17.25p or 457.25p or 4% after Credit Suisse brokers upped the European media sector to overweight.

Associated British Foods - 5p ahead to 781p - was given a lift as Citigroup hiked its target price to 790p a share from 715p ahead of the company's third-quarter trading update, scheduled for release on 9 July.

On a quiet day for corporate news, Balfour Beatty shares were 7.75p lower at 300.5p after the construction firm said it had been trading in line with expectations.

In the FTSE 250 transport group Arriva lost 18.25p to 386.75p despite a buy recommendation from Nomura. Other stocks favoured by the firm in the sector, Stagecoach and Go-Ahead, rose 1p to 127.5p and 11p to 1,179p respectively.

In small caps, Braemore Resources saw its shares tumble 33% or 1.55p to 3.05p as news of Jubilee Platinum's all-share offer for the company failed to inspire investors.

The slump in Braemore's share price reflects the assumption the deal undervalues the platinum and nickel producer, traders say. Jubilee shares retreated 1.5p to 44p as retail investors had been speculating that the mining exploration company would itself be the target of a bid from one of the larger players, which proved unfounded, one analyst says.

However, FinnCap analyst Joe Lunn says 'the deal will enable Jubilee to control more of the value chain and offer an intermediate product for refinement'.

'We believe the combined company will contain a suit of complementary mining and processing assets and will be well positioned to exploit the synergies between them.'

Meanwhile, Morse jumped 23% or 3.5p to 18.25p after the British IT consultancy group forecast full-year earnings at the upper end of analysts' view.

Panmure Gordon shifted the stock from 'hold' to 'buy' that Morse has £12m cash in the kitty. The brokerage also raises its price target on Morse's stock to 22p from 10.5p.