FTSE holds steady as US opens in red

The FTSE 100 Index pared back earlier gains, but remained 26.5 points up at 5221.6.

London’s top tier has traded in positive territory for the third straight session as recent worries over the impact of European austerity measures continued to ease.

The Footsie registered one of its strongest sessions of the year yesterday - rising by 3%, while the Dow Jones also finished sharply higher, up almost 3%.

Travel firms Thomas Cook and TUI Travel were making gains after broker Nomura raised its rating on both stocks to buy from neutral, up 4p to 209.9p and 2.9p to 241.2p.

The positive mood stretched to the retail sector, despite yesterday’s worse than expected survey result from the CBI business group.

Marks & Spencer shares surged 8.8p to 353.7p, a gain of 3%, after UBS upgraded the high street retailer and said the company’s recent full-year results offered encouraging signs in relation to trading in the current quarter.

Others on the front foot included Next, which rose 47p to 2096p, while B&Q owner Kingfisher added 4.9p to 225.3p ahead of a trading update next week.

Attention was also focused on Prudential after the insurer said it was in talks with AIG about renegotiating the terms of its takeover of the American insurer’s Asian arm AIA.

Pru shares, which rose sharply at one stage yesterday on speculation that it had pulled the 35 billion US dollars deal, fell 3p to 544.5p.

Severn Trent earned its place at the top of the risers board – up 3% or 36p to 1195p – after underlying profits of £557.1m (€654m) for the year to March 31 came in ahead of market expectations.

It also raised its full-year dividend by 7% and said it was well advanced in dealing with the challenges set by the regulator’s latest five-year review.

Meanwhile, yesterday’s recovery for BP shares proved to be short-lived as the oil giant said the cost of the Gulf of Mexico oil spill now stood at $930m (€753m) – up $170m (€138m) in the past four days alone. Chief executive Tony Hayward said more work on the process to seal the well was needed, dashing earlier hopes that BP was winning the battle.

Shares were down 4% or 21.2p to 499.7p after surging almost 6% yesterday.

The big talking point in the FTSE 250 Index came from the building supplies sector after Travis Perkins announced it was on the brink of a deal worth £553m (€649m) to buy plumbing specialist BSS. Travis shares were 7% or 53.5p higher at 798.5p, while BSS jumped 35% or 114.8p to 439.8p.