1:00PM New York, 5:00PM London – Stocks in London and Europe fell after the unemployment rose in the U.S.

London market averages dipped after the US Department of Labor reported that the unemployment rate rose more than forecasted in May. Weaknesses in the financial stocks also weighed on the market. Rising crude oil prices however helped to trim losses.

In London trading FTSE 100 stocks fell 1.48% or 88.5 at 5,906.80. Of the 103 FTSE 100 stocks 18 rose and 84 declined. Xstrata led gainers in the index shares with a rise of 3.66% as metal prices advanced.

U.S. unemployment rate rises to 5.5% in May

The Bureau of Labor Statistics of the U.S. Department of Labor reported today that the unemployment rose to 5.5% in May from 5% in April as employers lowered staff in construction, manufacturing, retail trade, and temporary help services. However, health care continued to add jobs. Economists had estimated unemployment rate at 5.1%.

The Bureau added average hourly earnings rose by 5 cents, or 0.3%, from the previous month.

Unemployed persons increased by 861,000 to 8.5 million in May, after seasonal adjustment, and the unemployment rate rose by 0.5 percentage point to 5.5%.

In addition, the number of newly unemployed--those jobless fewer than 5 weeks--rose by 760,000 to 3.2 million in the month under review, while the number of persons unemployed for 27 weeks or more increased by 197,000 to 1.6 million, contributing 18.3% of the unemployed in May.

On the overall, total employment was little changed at 146 million and the number of persons who worked part time for economic reasons was also unchanged at 5.2 million in May.

Lloyds provisions £180 million for the U.S. probe

Lloyds TSB Group said in regulatory filing yesterday that it will make a provision of £180 million pounds in the wake of a probe by the U.S. Department of Justice on the company’s US dollar transactions with countries, companies and individuals subject to US economic sanctions. The lender has been in talks with the US Department of Justice, the New York County District and the Office of Foreign Assets Control.

Gainers & Losers

Xstrata Plc. Led gainers in the FTSE 100 index shares with a rise of 3.66% followed by rises in Cairn Energy of 2.53%, in Carphone Warehouse of 2.53%, in Johnson Matthey of 2.50%, and Eurasian Natural of 2.37%.

Xstrata gained as copper prices rose 2.3% to $7,994 a metric ton in London.

Energy stocks rose as well as crude oil prices increased by more than $6 today. Contract for July delivery edged up 5.4% to $134.68 a barrel. Morgan Stanley forecasts that oil prices may advance to $150 a barrel, driven by rising demand from Asia. BHP Billiton advanced 1.33%, Tullow Oil surged 0.73% and Royal Dutch Shell increased 0.44%.

Carphone Warehouse also increased after Merrill Lynch & Co. added the stock to its preferred list of stocks.

British Airways led decliners in the FTSE 100 index shares with a drop of 8.16% followed by losses in HBOS Plc of 7.61%, in Barclays of 6.96%, in Standard Life of 5.91%, and Alliance & Leicester of 5.57%.

Other financial stocks fell. Royal Bank of Scotland fell 5.21% on Deutsche Bank’s comments that the impending capital raising offering may not be adequate.

World markets review

In Tokyo Nikkei 225 Index closed higher 148.32 or 1.03% to 14,489.44, in Hong Kong Hang Seng index increased 146.89 or 0.61% closed to 24,402.18. In Australia ASX 200 index higher 62.00 or 1.12% to close 5,592.10. In Malaysia KL Composite index increased 25.01 or 2.04% closed to 1,248.57.