Eurozone debt levels worry the City

LONDON FTSE 100 CLOSE 6,060.09 -2.81

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

The FTSE 100 Index closed 2.81 points lower at 6,060.09 after data revealed a decline in Portugal's gross domestic product and fears emerged over the possible break up of a German bank.

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 today and the Bank of England's quarterly inflation report tomorrow.

Anthony Grech, head of research at IG Index, said: "It was a fairly uneventful day for shares with blue-chips under pressure for much of the morning session.

"Despite a mixed finish to the day, the FTSE has been in recovery mode for the afternoon, but with little in the way of significant economic news to sway investors there was no reason for a major move in either direction." Traders were edgy as the White House revealed its budget proposal for 2012, with President Barack Obama confirming a $3.73 trillion (2.3 trillion) package. Investor confidence was shaken by the projected deficit - expecting it to reach $1.65 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 London, 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 today, and by a report revealing 0.3 per cent 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 to General Electric (GE) for about 1.75 billion.

The Wood deal prompted gains for engineering firms Weir Group and Invensys, which were up 68p at 1,763p and 11.6p at 352.5p respectively, and topped the Footsie risers board.

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

Rolls-Royce edged ahead 3p to 654.5p in the FTSE 100 after the engines giant unveiled a long-term services deal with airline Emirates worth some 1.4bn.

Speedy Hire reported that its tool and equipment hire business returned to revenues growth in the final quarter of 2010, despite the contraction in the construction industry.Shares were up nearly 2 per cent or 0.5p at 30p as it said it could return to underlying profit in the six months to the end of March if it trades well in the next few weeks.

Among other Scottish stocks, Xcite Energy dipped 13p to 369.5p despite announcing details of a new drilling contract in the Bentley field, while Cupid was up 2.5p to 116.5p on news that it had bought US dating site IndianDating.com.