Thursday lunchtime business bulletin

Jul 3 2008 By Andrew Mernin

The London market faced more pressure today amid a glut of poor economic news and record oil prices.

Expectations of an interest rate hike from European policymakers weighed on stocks in another volatile session after yesterday’s 1% fall.

By mid-morning the FTSE 100 Index was 20.1 points lower at 5406.2, although blue chips touched lows not seen since January earlier in the day.

Brent crude topped 146 US dollars a barrel ahead of the European Central Bank’s expected quarter-point rise, strengthening the euro at the expense of the dollar.

A second successive month of falling service sector activity added to the gloom, while Chancellor Alistair Darling and his US counterpart warned of slowing growth.

Heavyweight miners bore the brunt of a sell-off as the economic fears grew, with Ferrexpo and BHP Billiton down 16p to 327p and 52p to 1707p respectively. Rio Tinto gave up 128p to 5383p

Among the retailers, Marks & Spencer - which shed 25% yesterday after a shock profit warning - was on the back foot again today as investors continued to desert the stock.

Prime Minister Gordon Brown "does not understand" the global oil market and his ``begging" mission to Saudi Arabia has achieved nothing, Tories claimed today.

Shadow business secretary Alan Duncan made the attack as the cost of oil hit a new record, soaring past 145 dollars a barrel.

He said the Prime Minister’s efforts at the emergency meeting in Jeddah earlier this month had not helped hard-pressed UK consumers.

At the Jeddah summit, Saudi Arabia pledged to add another 200,000 barrels per day next month to a 300,000 barrel per day production increase already announced in May.

However Mr Duncan, a former oil trader, said much of that was heavy oil, when light crude was needed by the world markets.

Business Secretary John Hutton said at Commons question time: ``I accept that most of that is heavy crude, and there is an issue there about the ability of the world’s refining capacity to actually use that."

Supermarket milk supplier Robert Wiseman Dairies today said soaring fuel and packaging costs had created some of the toughest challenges ever faced by the firm.

The company has been forced to offset the rising bill for diesel, gas, electricity and milk cartons by hiking customer prices.

``It is clear there will be a need for the company to seek an increase in our selling prices from customers to recover the cost increases we are incurring," the firm said.

Chairman Alan Wiseman added: ``I can say that the last few months have been amongst the most difficult we have ever faced as a business."

Despite the cost problems, the Glasgow-based firm reported first quarter sales volumes 2% ahead of the same period last year, and expects to deliver results for the year in line with expectations.

The company, which supplies Tesco and Sainsbury’s, has also welcomed the recovery of bulk cream revenues that had been a ``major cause for concern" earlier in the year.

The pound at noon was US$1.9871 compared to US$1.9930 at the previous close while the euro at noon was £0.8000 compared to £0.7964 at the previous close.