Footsie dips as investors fear oil prices may derail global economic recovery

FTSE:5,973.78 (–16.61) Mid-250:11,747.87 (+24.86) Small Cap:3,274.61 (+0.71)

MINERS DRAGGED Britain’s top share index lower yesterday, as escalating violence in the Middle East and surging oil prices crimped investor appetite for risk.

The FTSE 100 index closed down 16.61 points, or 0.3 per cent, at 5,973.78, nearly 70 points below the session high as the index traded at 80 per cent of its average 90-day volume.

Crude oil prices were higher, with Brent above $116 a barrel, as fighting intensified in Libya, and with its resulting effect on inflation investors worried that the fragile global economic recovery could be derailed.

“The FTSE seems to be becoming more and more irrational and unpredictable as once again we see it recover from a negative start before giving up on all the hard work later in the session,” Angus Campbell, head of sales at Capital Spreads, said.

“It’s hard to push on to new ground and maintain gains when the price of oil remains supported by the unrest in the oil producing nations,” he said.

Base metal prices were down across the board as rising costs brought on by soaring oil prices weakened demand. Antofagasta, which is due to report results today, fell 1.2 per cent.

Insurer Old Mutual and engineer Weir, both reporting during the next session, slipped 0.8 and 0.6 per cent, respectively.

With investors worried that the unrest in North Africa and the Middle East could affect larger producers, a number of brokers issued upbeat comment on the integrated oils sector, which they see benefiting long term from higher oil prices.

BP added 0.7 per cent and BG rose 0.3 per cent respectively, boosted as UBS and Citigroup said they saw surging oil prices as positive for the sector.

Part nationalised Lloyds Banking shed 1.8 per cent. The Guardian reported the Liberal Democrats backbench Treasury Committee had backed a radical plan to distribute the government-owned shares in both Lloyds and Royal Bank of Scotland to the public.

Burberry climbed 3.6 per cent as French peer LVMH launched a €3.7 billion bid for Italy’s Bulgari, a premium of almost 60 per cent.

Intertek rose 5 per cent as the testing firm posted results and made an acquisition.

Satellite operator Inmarsat shed 13.4 per cent after results missed market expectations. – (Bloomberg)