Poor US consumer figures leave City mired in the red

Disappointing US consumer credit figures on Wednesday sparked the sell-off and the gloom was further exacerbated by a shock rise in benefit claims, dampening recovery hopes for the world's largest economy.

Initial claims for state unemployment benefits rose 18,000 to a

seasonally adjusted 460,000, the Labor Department said yesterday, well above market expectations for 435,000.

A Labor Department official said the spike in claims reflected difficulties in seasonally adjusting the data around a moving holiday like Easter. A March 31 holiday in California and the end of the

quarter also contributed to the rise.

However, other data showed Easter was a boon for retailers who saw sales jump. Analysts expect unusual shifts in the claims data to continue for a few weeks.

The FTSE 100 Index was 49.36 points lower at 5712.70 at the close after spending the session in the red.

Resurgent fears about Greek debts have also caused trader nerves, but these were partly soothed by positive comments from the European Central Bank on Thursday.

Phil Gillett, sales trader at IG Index, said: "The sea of red that traders were left looking at earlier has abated a little, but the losers still outnumber the winners seven to one."

Wall Street's Dow Jones Industrial Average was also under water, losing around 0.25 per cent. The decision by the Bank of England to keep interest rates at a record low of 0.5 per cent had been widely expected by the market.

The pound was meanwhile steady at 1.52 against the dollar and 1.14 against the euro.

Upbeat news from British Airways saw the airline climb to the top of the Footsie risers' board, but Marks & Spencer's positive comments failed to lift shares.

BA shares were up 63/4p to 245p – recovering from an earlier 1 per cent fall – after the signing of a long-awaited merger agreement with Spain's Iberia. The tie-up should be completed by the end of this year and lead to annual cost savings of 350m by the fifth year of the merger.

M&S impressed analysts by reporting a 5.1 per cent rise in like-for-like sales in the fourth quarter of its financial year, although it was helped by the first day of festive sales being included.

It now expects pre-tax profits for the 53 weeks to April 3 of between 680m and 690m, including 60m from an extra week of trading this year and taking into account a bigger than forecast staff bonus.

However, shares were 103/4p lower at 3671/2p as City analysts left their profit forecasts unchanged and expressed concern about higher than expected costs in the new financial year.

In the second tier recruitment firm Hays gained after it reported further signs of improvement in its key trading regions.

In the UK and Ireland, Hays saw "continued stability" after quarter-on-quarter net fees were broadly flat in the three months to the end of March.

Shares responded with a gain of 3p to 1151/4p, while rival Michael Page International lifted 1/2p to 4231/2p ahead of its own trading update today.

Low-cost airline easyJet was another riser, up 31/4p to 4731/8p, after it said it carried 3.96 million passengers during March, an increase of 13.5 per cent on a year earlier.

The four biggest risers were British Airways, Smith & Nephew ahead 111/2p to 675p, ICAP which rose 63/8p to 3843/8p and London Stock Exchange up 11p to 742p.

The biggest fallers were Xstrata down 501/2p to 1263p, Eurasian Natural Resources off 40p to 1210p and Lloyds Banking Group down 17/8p to 621/2p.