Footsie reverses early gains as Dow losses hit sentiment

The London market gave up early gains to finish the day 20.38 points down at 5365.78 after initial unemployment claims confounded

expectations by rising to 479,000 last week, sparking more recovery doubts and sending Wall Street's Dow Jones Industrial Average down early on.

But Aviva still topped the risers board with a seven per cent or 26.4p gain to 394.3p as it increased its dividend on the back of a third consecutive quarter of sales growth and profits of 1.27bn, a rise of 21 per cent on a year earlier.

The pound was flat at 1.58 against the dollar and 1.20 against the euro as the latest no-change move from the Bank of England offered no surprises.

The interim bank reporting season has so far confirmed the sector's return to health following the financial crisis, with even embattled Royal Bank of Scotland – down 0.1p at 52p – expected to show profits today.

Lloyds, which was the London market's biggest riser on Wednesday, added another 1.54p to 76.03p. Barclays' results were in line with expectations, but shares fell 15.85p to close at 324p as investors sealed in profits following a 31 per cent rise in the past month.

The bank reported a 44 per cent leap in half-year profits to 3.9b – up 22 per cent on an underlying basis – but said Barclays Capital revenues dropped 15 per cent during the second quarter. As well as the surge for Aviva, fellow insurer and More Than parent company RSA Insurance made gains after its half-year figures also impressed.

Shares rose four per cent or 5p to 1331/2p as RSA joined Aviva in lifting its dividend and highlighted "good top line momentum" despite a three per cent fall in first half operating profits as a result of one-off claims costs. Prudential, which is also expected to deliver a dividend boost in results next week, joined the insurance sector rally with a rise of 131/2p to 582p.

On the fallers board, shares in consumer products group Unilever were under pressure after it said it may find it hard to recoup rising commodity costs.

With underlying sales growth also slowing in the second quarter, shares dropped five per cent or 95p to stand at 1736p.

Charles Stanley analyst Jeremy Batstone-Carr said: "The negative share price reaction to these results reflects a downbeat outlook statement within which Unilever anticipates rising commodity costs, sluggish economic growth across developed economies and an increase in competitive activity, which will limit the scope for product price increases.

"In such circumstances the continued commitment to delivering profitable volume growth, a sustained improvement in operating margins and cash flows may be hard to achieve."

The pressure on other consumer-facing firms due to the twin threats of weak demand and rising costs was again evident in the top flight. Tesco dropped 1.8p to 399.4p while Costa coffee shop owner Whitbread fell 28p to 1409p.

Outside the top flight, shares in Ladbrokes jumped five per cent – up 6.8p to 1451/2p – after new chief executive Richard Glynn reported a five per cent rise in operating profits and flagged the potential for further operational improvement.

The biggest Footsie risers were Aviva up 26.4p to 394.3p, RSA Insurance ahead 5p at 1331/2p, Schroders up 47p to 1385p and Eurasian Natural Resources ahead 23p at 9851/2p.

The four biggest Footsie fallers of the day were Cobham down 16p to 224p, Randgold Resources off 320p to 5395p, Unilever down 95p to 1736p, and Fresnillo off 55p to 1043p.