FTSE reverses into the red as commodity stocks slide

The FTSE 100 Index paused for breath yesterday after its recent shares rally as commodity stocks posted heavy falls.

London's blue-chip share index closed down 36.93 points to 5555.97, with falls mirrored across Europe and Wall Street.

The Dow Jones Industrial Average fell more than 0.5 per cent soon after opening amid mixed economic news.

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Pending sales of previously owned US homes rose to a four-month high in August, implying the housing market was regaining some stability after recent steep declines following the end of a homebuyer tax credit.

Another report yesterday showed new orders received by US domestic factories fell 0.5 per cent in August as demand for transportation equipment fell sharply. Analysts had forecast a drop of 0.4 per cent in August.

However, excluding the transportation segment, factory orders rose 0.9 per cent.

The data offered few fresh clues on whether the Federal Reserve would embark on a new round of monetary policy easing next month, as widely anticipated by financial markets.

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Resources-based stocks have gained in recent sessions following a run of positive economic figures, including a better-than-expected Chinese manufacturing report. This helped the Footsie to climb 44 points on Friday.

But with investors on edge ahead of jobs numbers in the United States later in the week, Xstrata fell 321/2p to 1209p and BP slipped 103/8p to 4301/8p after showing signs of recovery in recent days.

News of a surprise pick-up in UK construction activity last month failed to help stocks, although the industry survey data gave sterling a boost.

The pound performed well against most major currencies, particularly against a weakened euro, up 0.8 per cent to 1.16 euros.

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Back in the FTSE 100, satellite firm Inmarsat was another faller after news that hedge fund Harbinger was looking at the possible sale of all or part of its 28 per cent shareholding in the group.

Shares in Inmarsat dropped 131/2p to stand at 655p as it hit hopes that Harbinger will bid for the company.

Shares in supermarket Tesco made tentative gains ahead of the group's keenly awaited half-year results today, with shares up 21/4p at 4303/8p.

While profits are expected to rise to 1.6bn compared with 1.42bn a year earlier, all eyes will be on latest sales performance after growth nearly ground to a halt in its first quarter. News on key hires helped National Grid and FTSE 250 firm Yell move higher.

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Power group National Grid rose to the top of the Footsie risers' board – up 121/2p to 5531/2p – as it named former Cadbury finance chief Andrew Bonfield as finance director from November 1.

He will replace Steve Lucas, who retires from the board at the end of this year.

Yellow Pages firm Yell added 1p to 151/2p on the appointment of Tony Bates – formerly of telecoms group Colt and music firm EMI – as chief financial officer.

Also in the FTSE 250, Premier Foods' shares jumped 10 per cent after the UK's biggest food producer confirmed it was considering a sale of meat substitute Quorn as it comes under pressure to reduce a 1.4bn debt mountain.

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Shares improved 13/4p to 177/8p as it said it received a number of takeover approaches for the business.

There was also a rise for Newcastle-based oil services firm Wellstream after a newspaper linked American giant General Electric to a takeover bid. Shares jumped 151/2p to 789p.

The biggest Footsie risers of the day were National Grid, BT Group up 3p to 1453/4p, Wolseley ahead 19p to 1601p and Morrisons up 31/8p to 2961/2p.

The four biggest Footsie fallers were Xstrata, Kazakhyms down 38p to 1423p, BP and Invensys which closed 61/4p lower

at 298p.