US recovery concerns keep FTSE in negative territory

There was little cheer despite JP Morgan's second quarter results beating market expectations, with investors focusing on disappointing industrial and manufacturing data in the US.

The Footsie closed 42.23 points down at 5211.29, while the Dow Jones Industrial Average was more than 70 points lower.

Asian stocks also finished lower as investors looked to take profits after a decent run for world markets in recent days. Hong Kong's Hang Seng and the Nikkei in Japan both lost more than 1 per cent.

Wobbles over the US economy helped the pound gain further strength against the US dollar. The US Federal Reserve issued a slightly weaker forecast for the world's biggest economy, which sparked speculation of more credit easing, helping sterling gain 0.8 per cent to 1.54 dollars.

New US claims for jobless aid tumbled to a near two-year low last week, but a modest gain in industrial output and a third monthly drop in wholesale prices in June confirmed a slackening in the economy's recovery.

Other data yesterday also implied the slowdown in manufacturing extended into July, but analysts said there was no evidence the economy was sliding back into recession.

"The numbers are consistent with a slowdown in the rate of growth in the US and the global economy, but not a double dip," said Nigel Gault, chief US economist at IHS Global Insight in Lexington, Massachusetts. JP Morgan kicked off the sector's reporting season with profits of 4.8 billion dollars (3.1bn) after an improvement in bad debt, but this failed to halt hefty slides for bank shares on this side of the Atlantic.

Barclays was the session's worst performing blue chip, down 131/4p to 3003/8p and Royal Bank of Scotland shed 1p to 451/4p. A disappointing session for miners saw many players in the sector on the back foot, with Eurasian Natural Resources and Rio Tinto off 301/2p to 8421/2p and 104p to 30301/2p respectively.

In corporate news, shares in Mothercare were 4 per cent lower after it revealed a 4 per cent decline in first quarter like-for-like sales in the UK. While the decline was offset by another period of strong international growth, shares in the FTSE 250 Index company still dropped 22p to 530p.

Fashion retailer SuperGroup moved in the opposite direction, jumping 15 per cent, or 120p to 920p, after it more than trebled full-year pre-tax profits and said there was plenty of potential for international growth.

The Superdry brand owner – which listed in March – was only surpassed at the top of the second-tier risers' board by IT firm Dimension Data, which soared 20 per cent, or 201/4p to 1213/4p, after the firm agreed a 2.1bn takeover by Japanese giant NTT.

A major faller in the FTSE 250 was fund manager Gartmore, which slid 61/8p to 104p after the resignation of its star trader Guillaume Rambourg.

Mr Rambourg was suspended in March as the company launched an investigation over "breaches of internal procedures". The firm said he had "decided to resign to devote his attention to concluding the FSA investigation into his conduct and to allow Gartmore to put these matters behind it".

Beleaguered social housing firm Connaught did worse with another 8 per cent drop, or 91/8p to 105p, as the stock continues to suffer following its profit warning last month due to government spending delays.

The biggest Footsie risers were Essar Energy up 191/8p to 4481/8p, Experian ahead 151/2p to 649p, Severn Trent up 24p to 1293p and GlaxoSmithKline ahead 211/2p to 1203p. The biggest faller was Barclays.