Footsie tumbles as poor US jobs data knocks sentiment

Investors' spirits were dampened by initial jobless claims figures in the US as well as disappointing orders of 'big ticket' manufactured goods, sparking worries over the recovery.

US bank shares were also pressured as negotiations over a financial reform bill approached the final hours.

Democrats in charge of the process appeared likely to retain tough restrictions on banks' trading and investment activities that could crimp profits. JPMorgan Chase & Co was the biggest drag on the Dow, falling 2.8 per cent to $37.81 as the KBW bank index lost 2.1 per cent.

"What's on everyone's mind is a potential double dip," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.

The Footsie was off 78.29 at 5100.23 as the figures followed a statement overnight from the US Federal Reserve warning financial conditions were "less supportive" of economic growth – seen as a reference to Europe's debt crisis.

Wall Street's Dow Jones Industrial Average was off almost 1 per cent in early trading, with France's CAC 40 and Germany's Dax down 2.4 per cent and 1.4 per cent respectively.

The pound enjoyed a better day however, creeping above 1.50 against the dollar at one point and moving to an 18-month high of 1.22 against the euro at one stage. In London, miners had been expected to rally following new Australian Prime Minister Julia Gillard's comments about seeking negotiations with the sector over a proposed super tax.

Instead, the heavyweight sector proved the main drag on the index as Eurasian Natural Resources declined by 44p to 967p and Kazakhmys dropped 59p to 1110p.

Defensive stocks such as mobile phone giant Vodafone – up 17/8p to 1427/8p – were on the front foot, while British Gas owner Centrica rose 81/4p to 3071/4p, helped by recent revived speculation of bid interest from Russian giant Gazprom.

BP shares failed to hold on to an earlier bounce back, down another 81/4p to 3251/4p, after hitting their lowest level this week since the Gulf of Mexico disaster struck in April.

In corporate results, DSG International shares were slightly lower, even though full-year profits of 90.5m came in higher than expected in the City. The share price fall of 3/8p to 271/8p followed a decent session for the consumer goods sector on Wednesday.

Shares in transport group Go-Ahead were 119p lower to stand at 1200p, after it said revenues from its new high speed services in Kent had failed to match up to expectations due to the impact of the recession.

Shore Capital stockbrokers reduced its profit forecast for Go-Ahead by 5m as a result of the more cautious forecasts in the rail segment.

Meanwhile, shares in household products group McBride fell heavily after it warned of further cost input rises this year and said revenues growth had slowed due to increased pressure from branded products.

Shares slumped 39.4p to 1393/4p.

There was better news for housebuilders after share price rises for a number of players. Redrow set the pace with a rise of 25/8p to 1265/8p, while Taylor Wimpey lifted 1/2p to 313/4p.

The biggest Footsie risers were Centrica, Morrisons ahead 71/4p to 2721/2p, Vodafone, and Tesco ahead 31/2p to 400p.

The biggest Footsie fallers were Kazakhmys, Barclays off 133/4p to 287p, ENR, and Tullow Oil off 47p to 1087p.