Market struggles amid euro concern

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The FTSE 100 Index closed 2.8 points lower at 6060.1

The London market has struggled to make progress as eurozone debt concerns weighed on the minds of investors.

The FTSE 100 Index closed 2.8 points lower at 6060.1 after data revealed a decline in Portugal’s gross domestic product and fears emerged over the possible break up of a German bank.

Traders were edgy as the White House revealed its budget proposal for 2012, with President Barack Obama confirming a 3.73 trillion US dollar (£2.3 trillion) package. Wall Street’s Dow Jones Industrial Average dipped 0.1% following the announcement.

Investor confidence was shaken by the US Government’s projected deficit – expecting it to spike to 1.65 trillion US dollars (£1 trillion) in the current fiscal year.

The eurozone woes weakened the euro, which was down against the pound at 1.18, while sterling was also up against the US dollar at 1.60.

In the UK, bankers were weighed down by growing speculation that German lender WestLB could be facing a break up as it prepares to meet a European Commission deadline for restructuring and by a report revealing 0.3% decline in Portugal’s gross domestic product in the final quarter of 2010.

Lloyds Banking Group was down 1.1p at 65.7p, Barclays off 0.4p at 310.8p and HSBC 6.1p lower at 707.9p. Engineering stocks enjoyed a good session after oil and services support firm Wood Group announced it had sold its well support arm, which makes electric submersible pumps used to maximise oil production, to General Electric (GE) for 2.8 billion US dollars (£1.75 billion).

The Wood deal prompted gains for engineering firms Weir Group and Invensys, which were up 68p at 1763p and 11.6p at 352.5p respectively, and topped the Footsie risers board.

Meanwhile, Aberdeen-based Wood surged more than 13% on the FTSE 250 Index, up 79.5p at 652p, after announcing its deal with GE, which will see at least £1 billion of the proceeds go to shareholders.

With little in the way of corporate results in the UK, the market was looking ahead to economic data due to be released later this week, including inflation figures from the Office for National Statistics and the Bank of England’s quarterly inflation report on Wednesday.

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