FTSE slips into the red over economic recovery worries

The FTSE 100 Index closed 4.83 points in the red at 5547.08, while Wall Street's Dow Jones Industrial Average also saw volatile trading after figures revealed first-time claims for unemployment benefits rose last week in the US.

Figures released by the US Labor Department showed jobless benefit

claims jumped by at least 12,000.

But existing US home sales in August rose from a 13-year low, suggesting the economy was stabilising after a sharp summer slowdown.

A third report showed a gauge of future economic activity increased 0.3 per cent in August after a 0.1 per cent gain in July, indicating a slow, but steady growth pace.

"The bottom line is the case for a double dip is weaker. The economy continues to expand, it has lost momentum, but it is likely to continue to expand over the coming months," said Hugh Johnson, chief investment officer at Hugh Johnson Advisers in Albany, New York.

Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 465,000, the Labor Department said, breaking two straight weeks of declines. Financial markets had forecast claims steady at 450,000.

The uncertainty was fuelled by signs earlier this week that policymakers at the Bank of England and US Federal Reserve have moved closer to taking additional measures such as more quantitative easing. But the pound saw strength across the board yesterday after a mixed week, with sterling up at 1.57 US dollars and 1.18 euros.

Investor confidence was reflected in a shortened risers' board, with miners and defensive stocks in the black.

Randgold Resources made gains as it continued to benefit from the elevated price in gold, which remained near a record high at 1,300 dollars. Shares were up 70p at 6560p. BAE Systems was marginally up 41/4p to stand at 3371/8p. The company made an announcement it had won significant new business in the commercial aviation market, including a multi-million pound five-year support deal with Ireland's CityJet to cover its 27-strong Avro RJ85 regional jet fleet.

Fallers included stocks in the banking sector, with Lloyds Banking

Group off 3/4p to 751/8p and Standard Chartered 12p lower at 1862p

ahead of more details due today on the Government's inquiry into whether to break up banks.

Shares in British Airways lost earlier gains, seen after the Spanish airline Iberia approved BA's plan to deal with a 3.7bn pension deficit.

Iberia had the right to pull out of a merger between the two airlines if it thought the outcome of discussions between BA and its pension trustees could damage the value of the deal. Shares were 1/4p lower at 2393/4p.

Outside the top flight, pubs chain Mitchells & Butlers improved 51/4p to 300p after its food-led trading strategy helped produce a 3.6 per cent rise in like-for-like sales in the nine weeks to September 18. It also reported an improved trend for margins as part of a performance described as encouraging by the firm's management.

Nightclub operator Luminar suffered another share price slump after revealing sales were down by 20 per cent over the summer. Trading has suffered due to the impact of youth unemployment and the distraction of the World Cup, but the Oceana and Liquid owner said it continued to trade within the terms of its banking agreements.

This failed to satisfy investors as shares fell 21/2p to 131/2p.

The Footsie's biggest risers were Petrofac ahead 28p to 1397p, BG Group up 201/2p to 1137p, Amec ahead 171/2p to 9731/2p and Schroders advancing 23p to 1396p.

The Footsie' biggest faller of the day was Kingfisher down 43/8p to stand at 2247/8p.