Footsie slips back as US economic woes outweigh Vodafone's gains

FTSE: 5,815.19 (–58.02) Mid-250: 11,552.06 (–63.51) Small Cap: 3,261.87 (–10.66)FINANCIALS WERE the main drag on Britain's top share index yesterday, which fell sharply as concerns grew over the fragile state of the US economy and the country's bitter battle to deal with its debts.

The UK’s benchmark index shed 58.02 points or 1 per cent to 5,815.19 on the last trading day of the month, though it recovered from a session low of 5,772.43.

But for the promise of a big payout for shareholders of mobile operator Vodafone, the index would have been weaker.

“In the face of the selling, the FTSE has done remarkably well to prevent losses from being even greater, and late on in the session buyers crept back into the market,” said Angus Campbell, head of sales at Capital Spreads.

“For one, the bond markets still believe that the storm clouds over the market will disperse by the time the deadline expires,” he said.

London’s blue-chip index traded in the red all day. Investors reacted negatively as the US edged closer to defaulting on its debts after a planned vote on a budget deficit plan scheduled for Thursday night was put off.

Analysts have estimated that a default could see as much as 30 per cent wiped off the value of global stock markets.

Banks and insurers fell sharply, with Lloyds and life insurer Standard Life down 4 and 1.4 per cent, respectively.

The index retreated further, briefly, after data showed the United States’ economy was in worse shape than many had feared. Fresh figures revealed the world’s biggest economy grew less than expected in the second-quarter of 2011.

Vodafone contributed 13 points to the index, rising 4 per cent after saying it would pass on $3.3 billion to shareholders out of a long-awaited dividend from its stake in Verizon Wireless.

BSkyB said it would dish out £1 billion to investors who lost out when News Corp dropped its bid for the satellite broadcaster, its shares slipped 0.56 per cent.

International Airlines rose 2 per cent after the company defied the gloom in the airline sector by swinging to a profit in the first half.

Fresnillo and Randgold bucked the trend of a weaker mining sector, as investors turned to the precious metal miners.

Anglo American fell 3.3 per cent after it missed first-half expectations. – (Reuters)