FTSE loses gains after weak US jobs data

London lost intraday gains on Friday, after news of weaker-than-expected job creation in the US resurrected fears of a recession in the world's biggest economy.

The FTSE 100 fell under the flatline after the report, trading 0.4 per cent lower at 6,4541.2, a loss of 26 points wiping out a small rally of about 0.5 per cent was wiped out by the data.

Only 18,000 jobs were created outside the agricultural sector in December, against forecasts of up to 70,000 .

Cairn Energy lost 1.5 per cent to £29.03 after disappointing news from one of its oil and gas prospects in Bangladesh. The company confirmed it had abandoned a potential well in the region after it came up dry.

Retailers failed to receive a lift from news of strong festive sales at unlisted high street bellwether John Lewis. The department store chain reported an 8 per cent increase in sales in the week to December 29.

But investors stayed cautious on the sector after DSG International (NASDAQ:DSGIF)'s profit warning on Thursday and news of lower like-for-like sales at fashion chain Next, down a further 2.1 per cent at £15.19. DSG was 1.3 per cent lower at 77p. Marks & Spencer lost 1.8 per cent to 533p.

Kingfisher, the operator of the B&Q home improvement chain fell the furthest, down 5.5 per cent to 131.9p, also under pressure from news of weaker house price inflation adding to the uncertain outlook for the UK property market.

Elsewhere on the High Street, jewellery retailer Signet Group was 5.5 per cent weaker at 60½p after Credit Suisse cuts its price target on the stock to 65p from 75p, holding its "neutral" rating.

Dealing room rumour of bid interest in Carphone Warehouse sent shares in the retailer to the top of the index, up 6 per cent to 352p on talk that existing investor Best Buy (NYSE:BBY) of the US was poised to increase its stake.

Mining stocks took their turn to make gains on the outlook for robust commodities prices. Xstrata rose 1.9 per cent to £36.39, with Lonmin up 0.9 per cent at £32.30 and Rio Tinto 1.7 per cent higher at £54.68.

Continuing weakness among mid-cap investment companies, unsettled by the uncertain market outlook for 2008, continued to weigh on the FTSE 250, down a further 0.4 per cent to 10,496.0 after losses of more than 1 per cent during the previous session.