London advances despite oil heavyweight sell-off

The oil giant – whose board were meeting yesterday to discuss a dividend cut for the first time in 18 years – gave back all of Friday's 7 per cent advance and more to stand more than 9 per cent, or 361/2p lower at 3551/2p.

The firm's woes belied a better session for most of the top flight's other commodity-based stocks, which helped the blue-chip index finish 38.45 points ahead at 5202.13.

Across the Atlantic, Wall Street's Dow Jones Industrial Average added 1 per cent in early trading, while investors were cheered earlier by a 0.8 per cent monthly increase in industrial production in April across the 16-nation eurozone – a bigger rise than forecast which fuelled recovery hopes.

In the US, a top Federal Reserve official said a strong global economic recovery is under way, and is unlikely to be thrown off course by European debt woes or the improbable event of the bursting of an asset bubble in China.

"While the sovereign debt crisis in Europe is indeed a serious matter, the global recovery at this point looks very strong and seems unlikely to be derailed," said St Louis Federal Reserve Bank President James Bullard in remarks prepared for delivery to a conference in Tokyo.

In the UK, the newly-created Office for Budget Responsibility (OBR) surprised many traders by presenting a better-than-expected assessment of UK public finances.

The OBR said borrowing would be 155bn this year – 8bn lower than in March's Budget – and 23bn lower over the five years to 2014/5.

It predicted slower growth of 2.6 per cent in 2011 – prompting fears that cuts in the emergency Budget next week could plunge the UK into a double-dip recession. The pound strengthened on the better-than-expected borrowing figure, rising by just under 1 per cent to 1.475 against the US dollar and 1.204 on the euro.

Miners including Eurasian Natural Resources and Kazakhmys saw gains of 3 per cent or more, leaving shares in BP far behind.

David Jones, chief market strategist at IG Index, said of the latest sell-off: "With further news on whether the dividend is to be maintained not likely for at least a few more days, it would seem investors are losing their nerve about the potential for any short term recovery."

As well as the latest slump for BP, shares in Home Retail Group remained under pressure after last week's poor update from the owner of Argos.

JP Morgan Cazenove became the latest broker to cut its rating on the stock, causing shares to fall another 1 per cent, or 21/4p to 2311/2p.

Supermarkets were also on the back foot ahead of a trading update from Tesco today.

Tesco was 21/2p down at 3915/8p, Sainsbury's shed 13/4p to 3193/4p and Morrisons was 4p cheaper to stand at 2573/4p.

Outside the top flight, shares in Majestic Wine rose 7 per cent, or 191/2p to 292p, after the retailer announced a big rise in profits and said it planned to open 12 new UK stores in the current financial year.

The biggest rise in the FTSE 250 Index came from industrial valves and controls business Weir, which jumped 12 per cent, or 1151/2p to 1066p, after accompanying a strong trading update with the 138m acquisition of a Malaysian firm.

The biggest Footsie risers were Fresnillo up 51p to 1060p, Kazakhmys, Anglo American up 96p to 26721/2p and InterContinental Hotels ahead 42p to 1197p.

The biggest fallers were BP, Morrisons, Home Retail and Tesco.v