Winning run continues as BP looks to ease pressure

As US politicians began grilling chief executive Tony Hayward over the Gulf of Mexico oil spill, shares closed 223/4p higher at 3593/4p. The rally came as markets bet that axing the dividend and setting up a 20 billion dollar (13.5bn) compensation fund should ease the political pressure on the firm.

The heavyweight's push higher helped the FTSE 100 Index gain 15.97 points to 5253.89 as the top flight enjoyed its seventh day of gains in a row.

Wall Street's Dow Jones Industrial Average was lower at the time of London's close after a bigger than expected rise in initial jobless claims last week, although there was better economic news on the home front.

Fears that growth in the US could be slowing were heightened by a report showing factory activity in the country's Mid-Atlantic region braked to its slowest pace in 10 months in June. The employment gauge fell to its lowest level since November.

"I don't know if this is temporary, related to everything that has been going on in the markets, or if this means that the recovery is slowing," said Alan Lancz, president of Alan B. Lancz & Associates in Toledo, Ohio.

Financial markets have been worried that a debt crisis that started in Greece could spread. Belt-tightening by European governments already looks set to slow economies there and take a small bite out of US growth.

UK retail sales, which outperformed market expectations for May with a 0.6 per cent rise, lifted sentiment and ensured strong buying of sterling on hopes of better conditions on the UK high street.

The pound rose nearly 1 per cent against the dollar at 1.481 while it was also slightly higher against the euro. Retailers were stronger after the firmer data, with Marks & Spencer up 31/4p to 345p and Argos and Homebase firm Home Retail Group up 3/4p to 2323/8p as the blue-chip stock looked to recover after a difficult few sessions.

Among retail stocks in the FTSE 250 Index, Debenhams rose 11/2p to 601/4p and Sports Direct International lifted 31/4p to 1071/2p but shares in Game Group continued to struggle after it said like-for-like sales fell 12.3 per cent in the 19 weeks to June 12 and would stay in the red for the rest of the year.

With the highly-cyclical sector in a trough due to the absence of major console releases, shares fell 6 per cent, or 47/8p to 833/8p.

Back in the top flight banking stocks, which have benefited from the improved market sentiment, rose again as Lloyds Banking Group lifted 11/2p to 571/4p and Royal Bank of Scotland cheered 11/2p to 463/4p.

Barclays added 73/4p to 3125/8p as Exane analyst Ian Gordon said UK banks should feel "cautiously relieved" by the tone and content of Chancellor George Osborne's speech to the City on Wednesday night.

Design and engineering firm WS Atkins fell 301/2p to 6951/2p in the second tier after full-year profits declined 6 per cent and it painted a cautious outlook due to uncertainty caused by public spending cuts.

Results were ahead of expectations but with broker KBC Peel Hunt downgrading the stock to a hold rating shares fell 4 per cent.

Elsewhere in the second tier, shares in Stagecoach rose 45/8p to 1903/4p after a franchise contract dispute with the Department for Transport, worth an estimated 70m to 100m, was won yesterday by South West Trains (SWT).

The biggest Footsie risers were BP, Royal Bank of Scotland, Lloyds Banking Group, and Barclays. The biggest fallers were Carnival down 76p to 2593p, Fresnillo off 30p to 1025p and TUI Travel down 61/4p to 2253/4p.