FTSE reverses early gains as Dow losses hit sentiment

London's blue-chip share index failed to hold on to gains yesterday as losses on Wall Street wiped out early progress.

Initial optimism over the world economy helped the FTSE 100 index more than 30 points higher at one stage, but sentiment soon switched after trading opened in the United States.

Despite a busy day for UK corporate news, the Footsie finished 5.73 points lower at 5313.95 – dragged lower as the Dow Jones Industrial Average fell more than 60 points.

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Nervousness surrounding today's second-quarter US growth figures hit the Dow Jones hard, while it was also weighed down by mixed earnings from the likes of consumer giant Colgate-Palmolive.

After a recent strong rally, the pound eased back a little yesterday, slipping just below $1.56 and down to 1.19 euros.

Better-than-expected results from publisher Reed Elsevier, drugs firm AstraZeneca and engineer Rolls-Royce provided much of the focus among Footsie stocks.

Reed Elsevier led the risers with a four per cent, or 20p gain to 552p as it noted an improved trading performance and stabilising advertising markets.

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AstraZeneca followed close behind after lifting its full-year earnings guidance and gaining a boost for heart drug Brilinta from US

regulators. Shares cheered 861/2p to 3289p.

Meanwhile, defence giant BAE Systems added 3.1p to close at 320.1p as it said it expected to maintain growth this year despite pressure on the budgets of its major customers.

Elsewhere in the sector, Rolls-Royce said it expected "modestly higher" annual results, driven by a strong performance at its marine business, although it failed to maintain earlier advances, off 2p at 5851/2p.

Oil giant Royal Dutch Shell added 6p to 1713p as the Anglo-Dutch company lifted profits 34 per cent after a strong second quarter and faster-than-expected progress on cost-cutting plans.

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The leading Footsie faller was aluminium drinks can maker Rexam, after Credit Suisse brokers cut their rating on the firm, leaving shares

11.1p lower at 3161/2p or three per cent.

Shares in satellite broadcaster BSkyB were 9p down at 711p despite a 10 per cent rise in operating profits to 855m and 90,000 new customers in the final quarter of its financial year.

In the FTSE 250, shares in troubled social housing firm Connaught jumped almost 15 per cent, or 4.52p to 35.52p, as the company said it had arranged a 15m short-term overdraft facility from lenders to ease immediate funding concerns.

Another strong gainer in the second tier was gaming group Rank, which posted its own double-digit gains after reporting the first growth in customer visits to its Mecca Bingo halls in more than a decade. Shares cheered 7.75p to 117p.

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Both firms were surpassed by PartyGaming, up 20 per cent or 521/2p to stand at 3091/2p as the firm announced a merger with bwin to create the world's largest online gaming business.

Bwin boss Norbert Teufelberger will be joint chief executive with PartyGaming's Jim Ryan.

Mr Teufelberger said: "We will be in pole position to capitalise on the wealth of opportunities that will flow from the continued evolution and expansion of the global online gaming industry."

New regulatory regimes are expected in several countries as the

popularity of online gambling grows.

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Both bwin and PartyGaming believe major operators – "large, well-capitalised and international businesses" – will have market-leading positions.

The biggest Footsie risers were Reed Elsevier ahead 20p at 552p, BT Group up 4.9p to 144.8p, BP ahead 11p to 4131/2p and AstraZeneca up 861/2p to 3289p.