City shrugs off BP losses as BSkyB offer lifts sentiment

The FTSE 100 Index maintained its positive start to the week yesterday, despite a fresh blow to BP after ratings agency Fitch slashed its debt to near-junk status amid fears over the impact of the Gulf of Mexico spill.

The oil giant tumbled another 4 per cent, or 131/2p to 342p, as BP also faced demands for it to set aside 20 billion dollars (13.5bn) in a special account to pay for damages and clean-up costs for the Gulf of Mexico disaster.

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The FTSE 100 Index survived the latest BP sell-off, rising 15.69 points 5217.82, as US stocks opened higher after a stronger session for the euro signalled that concerns were easing about the impact of the continent's debt crisis.

The euro rose to 1.232 against the US dollar and also strengthened against the pound. Sterling was up against the greenback despite a bigger than expected fall in the Consumer Prices Index to 3.4 per cent in May, suggesting that rate hikes to clamp down on soaring prices were less likely.

In the US, home-builder sentiment fell in June by the sharpest amount since the height of the financial crisis as the expiration of a popular homebuyer tax credit dimmed prospective sales, the National Association of Home Builders said.

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The NAHB/Wells Fargo Housing Market index dropped 5 points to 17, the sharpest point decline since November 2008, the group said in a statement. The sharper-than-expected decline followed two successive increases as the tax credit ran its course.

Economists polled by Reuters had expected the index to fall slightly to 21. A reading below 50 indicates more builders view sales conditions as poor than good. The index has not been above 50 since April 2006.

Satellite broadcaster BSkyB helped to lead the FTSE 100 Index higher after rejecting a 12bn takeover approach by its biggest shareholder.

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The proposed offer from Rupert Murdoch's News Corporation for the 61 per cent of the firm that it does not own left shares 17 per cent, or 991/2p higher at 700p, as the BSkyB board snubbed the 700p-a-share proposal but left the door open to an offer of 800p per share or more.

Tesco's shares recovered from a nervous start after the supermarket giant said UK like-for-like sales growth slowed to 0.1 per cent in the three months to May 30. Sales stripping out petrol had suffered because customers were paying around 30 per cent more for fuel than a year ago and were shifting spending from other areas, the firm said.

The grocer gained to close 27/8p ahead at 3941/2p as analysts said the UK slowdown was not a surprise and flagged up its international growth prospects.

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Rival Sainsbury's – which updates the market today – was ahead 43/4p to 3243/8p while Morrisons was 31/4p dearer at 2607/8p.

Among the fallers, mobile satellite firm Inmarsat was the leading Footsie casualty after brokers at BoA/Merrill Lynch cut the stock to underperform, sending shares more than 5 per cent lower, or 411/2p down to 7791/2p.

Argos and Homebase owner Home Retail Group also fell again as Deutsche Bank became the latest broker to cut its rating on the firm following last week's disappointing trading update. Shares fell by a penny to 2301/2p.

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In the FTSE 250, Bellway lost ground after the housebuilder reported a slight dip in site visits and weekly sales following the General Election amid uncertainty over looming cuts by the coalition Government. Shares fell 14p to 621p although other housebuilders were unaffected after Persimmon climbed 37/8p to 3681/4p and Taylor Wimpey lifted 5/8p to 295/8p.

The biggest Footsie risers were BSkyB, Centrica ahead 101/4p to 3011/8p, British Airways up 63/4p to 2127/8p and Whitbread ahead by 36p to 1487p. Biggest fallers were Inmarsat, BP, Tullow Oil down 13p to 1161p and Diageo off 12p to 1107p.

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