FTSE in positive territory despite Wall Street decline

Gains from defensive stocks such as miners and drugs firms helped the FTSE 100 Index close up 20.85 points at 5266.06 despite falls on Wall Street.

The Dow Jones Industrial Average in the US was another 50 points lower soon after opening as it continued to slide following this week's gloomy economic forecasts from central bank bosses in the US and UK.

Wednesday's rout left the Dow 2.5 per cent lower in the wake of the Federal Reserve's downbeat assessment of the US recovery, which was compounded by the Bank of England warning of lower growth and higher inflation in the UK.

Sentiment was hit yet again in the US yesterday after more disappointing economic news, with data showing applications for jobless benefits advanced last week to the highest level in almost six months.

The number of new claims for jobless benefits rose 2,000 to 484,000 in the week ended August 7, the second straight increase, the Labor Department said yesterday. Economists had expected claims to edge down to 469,000.

"This is not a good number," said John Brady, an analyst at MF Global in Chicago.

"Claims are going the wrong way. That has the market concerned."

US stocks opened lower on both the data and a disappointing revenue forecast from tech bellwether Cisco Systems, while US Treasury debt prices pared losses and the dollar trimmed gains against the yen.

While stocks in London enjoyed a much better session, the pound

continued to slide after the Bank's lowered UK growth forecast.

Sterling slipped 0.5 per cent to just under 1.56 dollars and was also off 0.5 per cent to 1.21 euros.

Among stocks, Cairn Energy made strong advances after it revealed it was in talks to sell an interest in its India operations to Vedanta Resources.

The news helped Cairn recover all of Wednesday's losses with a rise of 8p to 4523/4p, although the developments saw Vedanta plunge to the bottom of the index, down 7 per cent, or 176p to stand at 2181p. Initial riser Prudential lost value despite posting better-than-expected operating profits of 1.68bn and a 5 per cent rise in its half-year dividend. The move has been seen as having the potential to end shareholder discontent over its failed takeover of Asia's AIA, but this was not reflected on the market as the insurer's shares closed 81/2p lower at 5531/2p.

British Gas parent Centrica was the biggest gainer, up 103/8p to 3301/8p, as it announced a natural gas acquisition in Canada for 229m.

Elsewhere in the FTSE 100 Index, drink groups SABMiller and Diageo made headway after a solid update from rival AB InBev and a broker upgrade on the entire sector.

SAB lifted 321/2p to 1898p and Guinness brewer Diageo improved by 13p to 1109p.

Outside the top flight, the turmoil at bank note printer De La Rue continued after its chief executive James Hussey quit the business over the paper production irregularities uncovered last month. Shares slumped another 821/2p to 7111/2p.

It was joined on the FTSE 250 fallers' board by Aberdeen-based oil and gas explorer Dana Petroleum, which declined 63p to 1630p after it emerged talks over its 1.7bn takeover by a South Korean firm had broken down.

News of another deal falling through hit London black cab maker Manganese Bronze.

It plunged 5.75p to stand at 45p after revealing that Chinese partner Geely had decided against a share placing that would have given it a controlling stake in Manganese.