FTSE in red as BP rumours fail to inspire London shares

BP, which plunged to below 300p and hit a 14-year low last month, added more than 3 per cent, or 111/4p to 3331/4p, after talk that it could raise 6bn by selling off a stake to rival oil groups or sovereign wealth funds.

The share gains came despite the clean-up costs of the Gulf of Mexico spill passing 2bn. With US markets closed for the Independence Day holiday, the Footsie eventually finished 14.56 points lower at 4823.53 in a listless beginning to the week.

In the currency markets, sterling drifted slightly lower to 1.51 against the dollar, and lost some ground against the euro, trading at 1.20.

Concern about the US economy mounted after Friday's jobs data showed weak private hiring, raising fears that the global economy could be heading for a double-dip recession and dragging the dollar to a near two-month low against a currency basket.

"The market last week was clearly concerned about a US slowdown... It was the first week in a long time we have seen the dollar react like that," Chris Turner, head of foreign exchange strategy at ING, said.

"There is a creeping fear that the strong dollar environment will start to break. That has not happened yet and it is likely to be steady this week."

As well as BP, M&S shares rose almost 3 per cent, or 83/4p to 3417/8p, as the market positioned itself ahead of the company's first quarter trading update which is due tomorrow.

Despite the more nervy retail climate, Nomura analyst Fraser Ramzan expects like-for-like sales growth in food of 1.5 per cent with a 4 per cent advance in general merchandise, which includes clothes.

In a strong session for the retail sector, Next added 25p to 2014p, B&Q owner Kingfisher added 21/2p to 2101/4p and Burberry cheered 51/2p to 745p.

This was despite disappointing monthly growth figures in the services sector, which offered fresh signs of a consumer spending slowdown.

The other big rise in the FTSE 100 Index came from school books-to-Penguin publisher Pearson after analysts at Royal Bank of Scotland removed their sell rating on the stock. Pearson rose more than 2 per cent, or 201/2p to close at 8871/2p.

Telecoms firm Cable & Wireless Worldwide also shrugged off downbeat broker comments to add 1p to 86p after Morgan Stanley began coverage with an underweight rating.

British Airways however was a faller, down 13/4p to stand at 1865/8p, after it carried 11.1 per cent fewer passengers in June, reflecting the impact of strike action by cabin crews.

Banks and mining stocks were also under pressure as Royal Bank of Scotland dropped 11/8p to 39p and Barclays fell 73/4p to 2591/4p. Metal prices meanwhile came off overnight highs, denting miners.

Eurasian Natural Resources led the sector lower, off 231/2p to 818p.

Plumbing supplies firm BSS was a major mover in the FTSE 250 Index after it backed a cash and shares takeover offer from builders' merchant Travis Perkins.

The proposal valued BSS at 558m, slightly higher than previously thought and sufficient for its shares to rise another 103/4p to 427p.

Travis Perkins, which has targeted cost savings from the deal of 25m a year by 2013, shed 11/2p to close at 753p.

The biggest Footsie risers were BP, M&S, Pearson and Aggreko which ended the day 29p better off at 1418p.

The biggest Footsie fallers were Barclays, ENR, RBS and Xstrata which finished the session 201/8p worse off at 851p.