Footsie tumbles into red as US data knocks sentiment

The FTSE 100 Index in London came under further pressure as

disappointment over the latest US unemployment figures saw early gains turn to heavy losses.

The Footsie closed down 71.73 points at 5145.74 – its lowest close for nearly three months and a reversal on the more than 60-point gain seen earlier in the session.

Sentiment was hit after a drop in new US jobless claims came in short of expectations and as American factory orders rose only slightly.

The US Commerce Department said durable goods orders rose 0.3 per cent in December, held back by a surprise drop in civilian aircraft orders that analysts saw as temporary. Economists had expected orders to climb 2 per cent.

Separately, the Labor Department said initial claims for state unemployment benefits drop-ped 8,000 to 470,000 last week, after rising for three weeks in a row.

The Dow Jones Industrial Average dropped 1.6 per cent within the first few hours of trading as optimism over Wednesday's interest rate

decision and State of the Union speech faded fast.

Trading had been boosted by relief over President Barack Obama's State of the Union address, which saw him pledge to create more jobs and spur growth in the world's largest economy.

US policymakers also voted on Wednesday to leave interest rates unchanged – as expected – and maintained their pledge to keep borrowing costs low for an extended period.

While this eased worries about the prospect of tighter monetary policy, the reaction to yesterday's economic figures in the US highlighted stock market fragility and concerns over the global recovery.

The US stock market plunge sent investors rushing to the dollar as a safe haven, with the greenback rising against both the pound and euro as a result.

Among UK stocks, the biggest fall in the top flight was posted by AstraZeneca after analysts expressed disappointment at the content of the drug company's annual results, particularly its guidance for 2010 earnings.

The company is stepping up its efficiency drive with another 8,000 job cuts over the next four years, but this was not enough to prevent shares from falling 5 per cent, or 140p, to 2905p.

Miners were also caught in the wider market sell-off, with Xstrata leading the declines with a 451/2p fall to 10041/2p.

BSkyB was among early risers after it reported a 4 per cent increase in half-year profits to 401m, but shares failed to remain in positive territory, falling 14p to 540p by the close.

Outside the top flight, the spotlight was also firmly on Mitchells & Butlers as its board conceded defeat yesterday after a bitter battle with rebel shareholders claimed the scalp of its chair-man.

The group will now have a new-look board line-up following votes at an investor meeting in Birmingham and shares lifted 13/4p to 2753/8p.

Shares in sugar producer Tate & Lyle fell 5 per cent after it said full-year operating profits were likely to be marginally below last year.

The stock, which recently dropped out of the FTSE 100, fell 183/8p to stand at 3883/4p.

Transport firms dominated the second-tier risers' board after Arriva announced it was in merger talks with European bus and coach operator Keolis.

Arriva shares rose 131/2p to 4813/8p, while hopes for further

consolidation lifted National Express 61/2p to 212p.

The biggest Footsie risers were Carnival up 36p to 2272p, Next ahead 25p to 1950p and RSA Insurance up 11/4p to 129p.