CAIRN Energy, Scotland's largest oil company, was dragged down by its subsidiary, Cairn India, yesterday after the Indian government slapped a 10 per cent tax rise on the price of fuel.
Observers said the drop was also part of a downbeat view o
f the market, with almost all major Indian shares dragged down. With GDP growth of about 8 per cent of the year, the move is not expected to hit overall demand for oil. Shares in Cairn India fell 7 per cent and this sent Cairn Energy down 124p, or 3.7 per cent, to 3,224p.
In the wider market, the FTSE 100 fell below the psychologically important 6,000 mark for the first time since April, with a rising US dollar cutting mining and energy shares.
US Federal Reserve chairman Ben Bernanke prompted a rise in the dollar after warning of the impact the weakness of the currency is having on inflation, widely read as a sign there will be no more interest rate cuts in the near future. The blue chip index ended the session 87.6 points lower at 5,970.1.
Among the miners, the dollar's impact on metals prices was compounded by talk that Kazakhmys, which shed 66p to 1,670p, was considering selling its near-15 per cent stake in Eurasian Natural Resources. ENR fell 48p to 1,319p.
Crude oil continued to settle, dropping below $123 a barrel as the dollar firmed. Heavily weighted BP lost 23.5p to 581p, while Royal Dutch Shell fell 60p to 2,024p.
But the falling oil prices lifted airlines, with British Airways gaining 6 per cent or 13p to 243.75p. In the midcap FTSE 250, budget carrier EasyJet rose 19.5p to 314.75p.
Among FTSE 100 heavyweights there was little cheer. Vodafone was the biggest faller in the index as it went ex-dividend yesterday. There were also investor fears that it may be prepared to pay too much for Italian company Tiscali, which it is poised to bid for. Vodafone shares closed down 8.1p or 5 per cent at 154.65p.
The financial sector also broadly fell, on more concerns over the credit crunch and funding concerns, sparked most recently by Bradford & Bingley.
Edinburgh-based HBOS slipped 11.25p at 340.5p, while Barclays was 8.25p at 352p.
Some banking shares rose, notably Scotland's largest company, Royal Bank of Scotland, boosted by reports that Texas Pacific Group, Bradford & Bingley's new American shareholder, is seeking to build stakes in other UK banks. Royal Bank of Scotland rose 4.75p to 249.5p as it closed in on its rights issue deadline, while Alliance & Leicester added 3 per cent to 412.5p.
Housebuilders suffered as Analysts at UBS marked down the entire sector. In the FTSE 250, Barratt Developments fell 12.75p to 143.75p, Redrow dipped 9.25p to 214p and Taylor Wimpey eased 4.25p to 78p.
B&Q owner Kingfisher revealed that it had protected profit margins despite continued sales pressure, but its shares closed down 2.9p at 135.9p.
