Market report: 'Correction' talk after year's 10% gain

THE FTSE 100 index yesterday showed little appetite for finishing the year above the 6,000 mark, despite better economic news from the United States.

The last full session of the year saw the benchmark Footsie drop 25.35 points - or 0.4 per cent - to close at 5,971.01, but the top flight remains on track to have risen by more than 10 per cent in 2010 after a rally in December capped a strong second half to the year.

James Hyerczyk, an analyst at Autochartist, sounded a warning note.

He said: "A lack of volume is leading some longer-term traders to suggest a more serious correction is imminent once large traders and institutions return after the new year holiday."

On Christmas Eve, the top-tier closed above the 6,000 level for the first time since June 2008 as thin trading volumes and a "Santa rally" helped blue-chips move higher.

But with just a half-session today, the festive charge looks to have run its course, judging by yesterday's decline, which was triggered by a disappointing session for Asian markets overnight.

Japan's Nikkei 225 fell 1.1 per cent as investors sold export-based stocks due to the strengthening of the yen against the dollar, a factor which cuts the value of profits and makes products less competitive abroad.

Better-than-expected news on US employment, manufacturing and housing should have triggered a fightback, but the Dow Jones Industrial Average was lower at London's close as investors locked in profits after the recent strong run.

The impact of the economic data failed to improve the position of the dollar against the euro. Meanwhile, Sterling was weaker against the dollar.

Heavyweights such as BP were among those lower in London after a drop of 2.15p to 471.2p. Mobile phone group Vodafone fell 1.85p to 167p and BT dropped 1.2p to 183.5p.

Silver miner Fresnillo was top of the FTSE 100 pile after lifting 42p to 1,661p, a gain of more than 2 per cent in an upbeat session for the mining sector. Other risers included Rio Tinto with a gain of 31.5p to 4,584p and Xstrata 10.5p higher at 1,535p.

But retailers experienced a disappointing session despite more evidence that the sector held its own during a snowbound run-up to Christmas.

This was underlined by Asda - which is owned by US retail colossus Walmart - as it revealed it had maintained sales momentum over its most recent trading period. The fortnight leading up to Christmas saw 11 stores record sales of more than 7 million, compared with the nine that passed the figure in 2009.

Tesco was down 5.9p at 429.55p, Sainsbury's eased 3.2p to 380.1p and Morrisons slipped 3.8p to 267.4p.

Next, which is due to publish trading figures on Wednesday at the start of the sector's Christmas reporting season, fell 12p to 1,994p.Marks & Spencer was 2.6p lower at 373.2p.

Among the Scottish stocks, Galashiels-based specialist drugs developer ProStrakan was the star performer.

The pharma company posted a near-18 per cent rise, gaining 15.75p to close at 105p after the US Food and Drug Administration gave it permission to sell its testosterone cream in America.