FTSE off as investors bank profits after winning run

The Footsie closed 45.99 points lower at 5319.68, with worries over a slowing recovery in the US and UK adding to profit-taking pressures.

Wall Street's Dow Jones Industrial Average also slipped in early trading after an unexpected decline in manufacturing orders during June reinforced concerns that the recovery in the United States is running out of steam.

On currency markets, there was no let up in the pound's rally against the dollar as it rose past 1.56 dollars – its highest level since mid-February.

But banks stocks gave back some of Tuesday's impressive gains, having driven the Footsie higher on Tuesday amid prospects of more lenient regulatory reforms.

Lloyds Banking Group eased 2.45p to 69.35p and Royal Bank of Scotland fell 0.62p to 49.73p.

The market was also knocked by cautious comments on the UK economy from Bank of England Governor Mervyn King.

He said he was not confident of a "sustained" recovery and also warned of an uncertain world outlook, although mining shares were higher on optimism over Asia's two leading economies, Japan and China.

The latter's central bank said it believed its economy was unlikely to suffer a "double dip" while the International Monetary Fund also said growth should be robust. Xstrata was one of the top tier's best performers – cheering 13p to close the day at 10441/2p.

Shares in British Gas owner Centrica were down one per cent, or 3.7p to 304p, after the firm posted half-year results in line with market expectations.

Centrica lifted overall operating profits 65 per cent to 1.56bn but the focus of households was on the 98 per cent rise in British Gas profits to 585m after the company benefited from the coldest winter in 30 years.

Engineering firm Invensys provided one of the biggest falls – off 13.9p to 279.1p – even though it said it expected to deliver an improved performance in the year.

The stock has made strong gains in recent weeks on takeover speculation but lost five per cent of its value yesterday.

In the FTSE 250 Index, shares in directories firm Yell continued to struggle after the company warned revenues would suffer due to uncertainty over the pace of the economic recovery. While its fall in first-quarter revenues and earnings matched City expectations, shares fell 19 per cent or 5.69p to 241/2p.

EasyJet shares were also lower – down seven per cent or 30.9p to 403.6p – as founder Sir Stelios Haji-Ioannou stepped up his attack on the budget airline by threatening to withdraw the rights to the "easy" brand in a row over punctuality.

The entrepreneur is engaged in a long-running dispute with the EasyJet board over its growth plans.

The founder – whose family owns a combined 38 per cent stake – wants the firm to stop buying aircraft and begin dividend payouts.

EasyJet believes he has no right to terminate the agreement on punctuality grounds. The airline says almost two-thirds of its planes travel through French airspace, where controllers have been taking industrial action.

The airline had earlier delivered a blow, saying temporary action to resolve "crewing issues" in some parts of its network would lift costs by up to three per cent during the current financial year.

The biggest Footsie risers were BSkyB up 91/2p to 720p, Xstrata ahead 13p at 1044.5p and BHP Billiton up 23p at 19911/2p.

The biggest Footsie faller was Scottish & Southern Energy down 63p to 1115p.