FTSE posts gains despite Spain bank bailout news

A bailout of a regional bank in Spain, one of the countries dealing with a chronic deficit, spooked investors on both sides of the Atlantic and left the FTSE 100 Index within 21 points of the 5000 barrier at one stage.

By the close in London, sentiment had recovered slightly to leave the Footsie 6.68 points higher at 5069.61 – even though the Dow Jones Industrial Average was in the red after a short-lived recovery on Friday evening.

In the US, sales of previously owned homes touched a five-month high in April amid a late rush to sign contracts before the expiry of a homebuyer tax credit, but a jump in houses on the market pointed to a slow recovery.

While industry officials and analysts generally expect a lull in activity over the next few months, they stressed a strengthening economic recovery and improving labour market should prop up housing in the absence of more government aid.

April sales of existing homes rose 7.6 per cent month-over-month to an annual rate of 5.77 million units, the National Association of Realtors said yesterday, beating market expectations of a 5.65 million-unit pace.

World markets failed to shrug off ongoing growth concerns, with the eurozone at the centre of attention after Germany's short-selling ban bombshell last week. The bail-out of one of Spain's biggest regional banks sent the single currency down by around 1 per cent to just over 1.24 dollars. It also fell against the pound, with sterling up 0.9 per cent to 1.164 euros.

One of the biggest share price falls was delivered by BP after it revealed the cost of cleaning up the mammoth spill in the Gulf Of Mexico had hit around 760 million US dollars (523m) so far.

The cost has soared by 135 million dollars (93m) in the past week alone and BP said it was still too early to put a final figure on the bill, causing BP shares to fall 133/4p to 493p.

Oil prices falling back below 70 US dollars a barrel also hurt the sector, with Royal Dutch Shell down 31p to 17131/2p and Cairn Energy off 2 per cent, or 9p at 3767/8p.

Shares in the mining sector experienced a volatile session, with Kazakhmys closing 13p higher at 1126p and silver miner Fresnillo losing 81/2p to 8411/2p.

Prudential was one of the best performers in the FTSE 100 on reports that the US Treasury had resurrected plans to float AIG's Asian arm if the Pru's attempts to buy it collapse. Such an outcome would be met with relief in some quarters of the City, as Prudential shares climbed 13p to close the day at 530p.

Retailer Marks & Spencer rose 63/8p to 3331/2p on the eve of annual results which are expected to show annual profits of between 620m and 630m.

In the second tier, a broker note from JP Morgan Cazenove helped housebuilders make advances. Taylor Wimpey lifted 11/8p to 337/8p, while Barratt Developments added 27/8p to close at 1101/4p.

Pork products supplier Cranswick was also on the rise – up 4 per cent with a 32p gain to 827p – after it reported increased supermarket demand for its bacon and sausages had helped annual profits jump by 26 per cent to a new record annual profit of 43.8m, up 26 per cent on a year earlier. The group also reported that sales had increased 22 per cent to 740m in the year to March 31.

The biggest Footsie risers were Prudential, SABMiller ahead 46p to 1908p, Reckitt Benckiser up 70p to 3254p and ARM Holdings which ended the session 5p better off at 2421/4p.

Biggest fallers were BP, Capita Group off 19p to 780p, Cairn Energy, and Invensys which closed 63/8p lower at 2797/8p.