FTSE pares back losses on positive start for Wall St

A better-than-expected rise in pending United States home sales boosted investor optimism over the world's biggest economy, helping the Dow Jones Industrial Average to rise more than 1.2 per cent.

This saw the Footsie narrow earlier losses of more than 60 points to close 11.98 points lower at 5151.32.

BP had spent most of the day deep in the red once more after news that US authorities had launched a criminal investigation into the Deepwater Horizon disaster. The news came after it suffered a 13 per cent plunge on Tuesday.

But the stock, which accounts for seven per cent of the FTSE 100, benefited from the late session turnaround, closing down 0.3p at 429.8p.

In currency news, sterling also remained firm, hitting 1.20 euros, while the embattled euro fought back from four-year lows against the dollar, holding its ground at $1.22.

Prudential remained in the spotlight after the insurer officially called off its 24bn takeover pursuit of AIG's Asian arm AIA.

The move will leave the company with a 450m bill and the prospect of losing its chief executive Tidjane Thiam after he staked his reputation on the company-transforming deal.

Pru shares were 141/2p lower at 561p.

Banks joined the group on the fallers board after Lloyds Banking Group and Royal Bank of Scotland were both downgraded by JPMorgan, with RBS compounding matters by announcing 500 job cuts as part of further restructuring.

RBS slipped 1.7p to 45.1p and Lloyds fell 11/2p to 55.9p.

Among the risers more defensive stocks were in vogue as investors lost appetite for risk. Lambert & Butler firm Imperial Tobacco was a prominent gainer, with shares up 52p to 1892p.

Big pharmaceutical stocks were also doing well after a broker upgrade for GlaxoSmithKline, which cheered 23p to 11811/2p.

Peers Shire and AstraZeneca added 39p to 1446p and 381/2p to 2943p respectively.

In the FTSE 250, Northumbrian Water addedtwo per cent after annual pre-tax profits rose to 170m and it assured markets over its funding position. Shares gained 5.7p to 284.1p.

But the latest figures showing subdued mortgage lending during April – with just a two per cent increase in home loans – unsurprisingly failed to give much impetus to housebuilding stocks. Taylor Wimpey dropped 0.4p to 33.2p.

Elsewhere, shares in Topps Tiles were lower after it said like-for-like sales fell 4.3 per cent in the seven weeks since the start of April.

Chief executive Matthew Williams said the business had performed robustly in the face of uncertain trading conditions.

He added: "The economic environment remains challenging for retailers, with consumer confidence and discretionary spending continuing to show signs of weakness."

With half-year profits also dropping 10 per cent to 7.8m, Topps shares were 3.3p lower at 46.3p.

Topps is being cautious over expansion, having opened three stores and closed three since September.

The biggest Footsie risers were Compass Group ahead 24p at 561p, Imperial Tobacco up 52p at 1892p, Shire ahead 39p at 1446p and Burberry Group up 191/2p to 7231/2p.

The biggest Footsie fallers were Royal Bank of Scotland down 1.7p at 45.1p, National Grid off 151/2p at 4871/2p, Lloyds Banking Group down 11/2p at 55.9p and Marks & Spencer down 9p at 347.7p.