Footsie mired in the red as oil heavyweight flounders

The oil major was the FTSE 100 Index's leading casualty with a 5 per cent slide as President Obama promised in a television interview to "kick ass" over the Gulf of Mexico crisis.

The FTSE 100 made early ground but twice fell below the 5000 mark before eventually closing 40.91 points down at 5028.15 amid increasing prospects of a European Union bank levy.

Wall Street moved into positive territory after initial falls, helping blue-chip stocks to recover some of the slide.

Despite positive comments on prospects for the US from Federal Reserve chairman Ben Bernanke lifting Asian markets early on, a fresh warning from ratings agency Fitch over the deficit challenge faced by the UK hit sentiment.

A top Federal Reserve official said high unemployment and low inflation justify holding benchmark interest rates ultra-low for "quite some time" but European debt woes are unlikely to derail the US economic recovery.

"We have a little bit more risk with the European situation; the (US) outlook looks good but not so strong as to reduce the unemployment rate very quickly; I don't see inflationary pressures at the moment," Chicago Federal Reserve Bank President Charles Evans said.

"So I think we will continue to have an accommodative policy stance for quite some time," Mr Evans told business leaders in Chicago.

The Fitch report sent the pound tumbling, giving up ground recently won against the euro as well as falling below 1.44 against the dollar at one stage before pulling back.

BP, meanwhile, took more punishment with shares down 213/8p to 4087/8p as the group came under renewed political pressure from Barack Obama, who said BP chief executive Tony Hayward should be sacked.

Meanwhile at Tesco Sir Terry Leahy's retirement as chief executive of the retail giant damaged its shares, which fell more than 2 per cent, or 93/4p to 3973/8p.

Investors were very disappointed at plans for Sir Terry – who has overseen a long period of dominance for the supermarket chain – to depart after 14 years next March.

He will hand over the reins to another lifelong Tesco employee – operations and IT director Philip Clarke, whose career with the firm dates back to 1974 and who already oversees nearly two-thirds of group space.

Banks and miners were among those joining Tesco on the fallers' board as the Footsie endured another difficult session.

Banking groups were also sold off as markets worried over sovereign debts as well as calls for new taxes on the sector by European finance ministers. Royal Bank of Scotland and Lloyds Banking Group fell 15/8p to 411/2p and 21/4p to 513/4p respectively, while Barclays was 93/8p cheaper at 2761/2p.

But power generation rental group Aggreko rose 53p to 1407p after it said full-year performance would be better than expected, helped by contract wins for the World Cup.

In the FTSE 250 Index, shares in power supply firm Chloride rose 18 per cent after ABB received the backing of the UK firm's board for a takeover offer.

US firm Emerson Electric, which failed with a 275p a share approach in April, said it was considering its options, fuelling hopes of a new offer.

Chloride shares rose 557/8p to above the ABB offer price, at 3441/2p.

The biggest Footsie risers were Fresnillo up 411/2p to 939p, Aggreko, Randgold Resources up 135p to 6090p and BHP Billiton up 33p to stand at 1768p.

The biggest Footsie faller was BP.