Rattled retailers hold back FTSE

RETAILERS continued to slide yesterday on fears that a cut in public spending will hit the economy.

Comments from Sainsbury's chief executive Justin King that the real impact of the current downturn will be felt when the government cuts spending caused jitters in an already nervous sector.

Marks & Spencer continued its poor run by falling 4.6p to 366.4p, while fashion chain Next dropped 19p to 2,040p and B&Q owner Kingfisher eased 4.2p to 225.6p.

Although oil shares were also broadly in decline yesterday the FTSE 100 managed to close up 7.5 points at 5,534.2.

An unexpected sharp increase in US jobless figures added to the caution, casting fresh doubts over the recovery of the world's largest economy and sent the US dollar plunging.

Royal Dutch Shell was one of the market's biggest fallers, down 20p to 1,835p, as the price of a barrel of oil fell back below $83. BP was also down, dropping 1.6p to 621.7p, but Edinburgh-based Cairn Energy rose 1.9 per cent to 361.9p.

Vodafone fell for a second successive session after US firm Verizon Wireless played down hopes that the pair's joint venture will pay a dividend this year. Vodafone shares were down 1.8p at 137p.

Barclays was one of a number of financial stocks making gains, rising 5.05p to 320.55p and extending its recent strong run after broker UBS upgraded its rating on the stock from neutral to buy.

Part-nationalised RBS was lower, despite offloading a chunk of its asset management business. Its shares closed down 0.75p at 35.12p.

Scottish & Southern Energy rose 12p to 1,171p despite analysts at Goldman Sachs cutting their target price on the Perth-based company and urging clients to sell the shares.

The latest round of trading updates from consumer-facing firms delivered positive news, with Mitchells & Butlers up 8 per cent after revealing like-for-like sales rose by a "strong" 3.4 per cent in the six weeks to 2 January.

Shares in the All Bar One operator were 21.4p higher at 273.7p, while fellow FTSE 250 pubs group JD Wetherspoon gained 25p to 466p.

Ted Baker was another firm on the front foot – up 11p to 516p – after it revealed a 19.1 per cent rise in retail sales and said it was performing ahead of hopes in the UK. Investec Securities upped its profits forecast by 7 per cent following the update.

Weir Group continues to rise in anticipation of its trading statement on Tuesday, and an upgrade from Cazenove earlier in the week. Already trading at the highest level in more than a year, shares in Weir rose 3.3 per cent to 832p.

Aberdeen Asset Management fell 3.3 per cent after raising 119 million through a share placement to fund the acquisition of assets from Royal Bank of Scotland. Shares in the group closed down 4.6p at 134p despite positive comments from several analysts.

Wood Group, Scotland's largest oil services company, was boosted after Numis initiated coverage of the company was an "add" recommendation and a 385p target price.

Wood Group jumped 5.3 per cent to 347.9p, with the comments coming just days after Morgan Stanley named it as one of its top picks for the sector.

Axis-Shield, the Dundee medical testing group, said it planned to pay a maiden dividend if this year's results were in line with market expectations. Its shares rose 11p to 398p.

On Aim, SeaEnergy, the listed wind farm group rose as much as 18 per cent after it announced a joint venture in which it has a stake had won the right to investigate a major wind farm project in the Moray Firth. The shares settled to close up just a quarter of a penny at 71.25p.