Libya unrest keeps markets subdued

LONDON FTSE 100 CLOSE 5,937.30 -37.46

Fighting in Libya remained top of investors' minds yesterday as share prices went into retreat once more on rising oil prices.

The benchmark FTSE 100 index closed 37.46 points or 0.6 per cent lower at 5,937.30, despite forecast-beating results from Prudential and a potential major deal involving Rolls-Royce.

Volatile trading on Wall Street added to the pressure on London stocks, with US investors spooked by Brent crude moving back up to $115 a barrel and US crude for April delivery lifting 0.5 per cent to $105 on the New York Mercantile Exchange.

Anthony Grech, head of research at IG Index, said: "After a directionless morning session, shares in the UK were knocked lower by a poor start to Wall Street trading. This was despite a better-than-expected rise in US inventory data - confirming that at the moment Libya is still the focus for equity investors, not the state of the global economy.

"Only a dyed-in-the-wool optimist would be forecasting significant short-term gains while the Libyan unrest continues."

The pound gained strength as better-than-expected UK trade data gave sterling a boost, while sovereign debt worries weighed on the euro. Sterling rose to $1.62 and €1.16.

Prudential topped the risers' board after the insurer rebuilt bridges with investors by proposing a 20 per cent hike in its full-year dividend.

A 24 per cent rise in operating profits to 1.94 billion came in ahead of market expectations as the Pru shook off memories of last year's uproar over its botched attempt at Asian deal-making. Pru shares rose 5 per cent or 35p to 749p.

Rolls-Royce followed close behind with a rise of 19p to 619.5p after the engineering giant joined forces with Daimler to announce an offer worth €3.2bn (2.7bn) for German industrial engines maker Tognum.

Commodity-based stocks were under pressure for a second successive session following Tuesday's disappointment over results from Antofagasta. Industry powerhouse BHP Billiton dropped 60p to 2,383p, while in the oil sector BP dropped 8.8p to 485.1p and Royal Dutch Shell slipped 35p to 2,133.5p.

Investors were also focused on the retail sector after John Lewis announced a 20 per cent rise in full-year profits and said gross sales for the first five weeks of its new financial year were up 6.5 per cent.

This received a mixed reaction from other major players in the sector, with Marks & Spencer up 2.4p to 340.9p and Next losing early session gains to stand 14p lower at 1,920p.

Shares in Tullow Oil fell 47p to 1,413p despite reporting thatpre-tax profits jumped to $152 million (94m) in 2010. While revenues were ahead of expectations, analysts expressed concern at the impact of higher costs.

Shares in Restaurant Group jumped 9 per cent after the owner of Frankie & Benny's and Chiquito reported a 12 per cent rise in full-year profits and said new year sales had bounced back after the snow chaos.The shares rose 26.3p to 306.1p.

Among the Scottish companies, Johnston Press was down 19 per cent to 9.92p despite announcing its first underlying operating profit increase since 2004.