London sentiment lifted by positive US job figures

Battered oil giant BP was hit by another sell-off yesterday in London as £5bn was wiped off the value of the heavyweight.

Shares fell by as much as 12 per cent as the political storm over the Gulf of Mexico spill showed no signs of abating and investors worried over a US threat to force a dividend cut.

BP eventually closed 6.6 per cent or 26.05p lower at 3651/2p despite a second successive day of gains for the wider FTSE 100 Index, which finished 46.64 points ahead at 5132.50.

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The oil company was forced to put out a statement saying it was not aware of any reason for a plunge in its New York-listed shares overnight, although these bounced back strongly as Wall Street markets opened yesterday afternoon.

The Bank of England's decision to hold interest rates and keep its quantitative easing programme unchanged was widely expected by the market and had very little in the way of impact.

But positive US jobs data and promises of short-term help for the banking sector from the European Central Bank helped to lift sentiment.

The markets soared in the US after China confirmed that exports jumped 50 per cent in May from a year ago, reassuring investors about the global economy in the face of the euro-zone debt crisis, and pushing energy and materials stocks higher.

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Investor confidence also benefited from hopes that the worst may be over for the EU and the euro after a strong showing in a Spanish bond auction.

Energy shares also gave one of the biggest boosts to the US markets after official estimates predicted growth in oil demand.

Back in London, with no surprises on rates coming from the ECB, the pound saw a steady day, trading at 1.46 against the dollar and 1.21 against the euro.

Banking stocks had been under early pressure after the Office of Fair Trading (OFT) announced a study into some of their fees and services, although they recovered as the session wore on.

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Royal Bank of Scotland rose 1.08p to 43.16p while Lloyds Banking Group cheered 2.44p to 55.91p and Barclays was up 5.15p to 287.85p.

In the consumer sector, Home Retail Group followed BP lower with a 4 per cent drop after it posted a disappointing trading update from its Argos chain of stores.

The company said like-for-like sales were down 8.1 per cent in the first quarter of its financial year, offsetting a solid performance at DIY arm Homebase.

The shares, which have recently been helped by rumours of bid interest from Asda, were 9.7p lower to stand at 228.3p.

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Supermarkets were also on the back foot with Morrisons down 2p to 264.7p, Sainsbury's off 11/2p to 323.1p and Tesco down 0.9p to 401.55p. Analysts expect food inflation to weigh on sales figures from Tesco and Sainsbury's next week.

The leading Footsie riser was chip designer ARM Holdings, which surged 6 per cent or 16.1p to 290.1p amid talk that US giant Apple was considering a potential bid.

Mining stocks also gained ground on the back of Chinese trade figures which helped the sector on Wednesday. Mining stocks were well represented among the risers with Eurasian Natural Resources and Kazakhmys adding 44p to 1026p and 38p to 1144p respectively.

In the FTSE 250, consoles and games firm Game Group was down 4.4p to 85.65p ahead of a looming trading update while publishing firm Trinity Mirror - whose relegation from the second tier was confirmed on Wednesday - was 11/2p lower to stand at 84.9p.

The biggest Footsie risers were ARM Holdings up 16.1p to 290.1p, Burberry ahead 37p to 784p, Autonomy up 88p to 1915p and Lloyds

advancing 2.44p to 55.91p.