LLOYDS BANKING GROUP and BP defied wider market falls yesterday as investors cheered good news from the bluechip duo.

The bank posted forecast- beating first-half profits of £1.6bn, while oil giant BP has finally plugged its catastrophic Gulf of Mexico spill.

The pair both made gains in a see-saw session for the FTSE 100 Index, which eventually closed 10.3 points lower at 5386.2.

Markets started on the back foot after weak factory orders and housing figures in the US dampened the mood, although stronger growth among US service sector firms last month helped Wall Street’s Dow Jones Industrial Average make gains.

After a strong run for the pound against the dollar, the greenback fought back as sterling eased to 1.58. The pound held above 1.20 against the euro.

Lloyds was the London market’s top riser, with shares up 2.6p to 74.5p, on news of the bank’s turnaround from losses of £4bn a year earlier.

BP added 6p to 421.65p after it said its operation to cut the flow of oil by pumping mud into the Gulf well had been a success. The US government says most of the oil from the leak has now been dispersed.

But fashion chain Next was the leading casualty, with shares down nearly eight per cent after it warned that its prices may have to rise by as much as eight per cent next year.

In addition to a hike in costs, including the price of cotton, it warned that consumer spending will be more restrained in the second half of its financial year. High street like-forlike sales dropped 1.5 per cent in the 26 weeks to July 31 and could fall by as much as 4.5 per cent over the second half.

Shares were down 170p to 2029p, while the uncertain retail picture also dented Marks & Spencer as its shares slipped 10.4p to 350.2p.