Retreat of gold price wipes out retail-led gains

LONDON FTSE 100 CLOSE 6,500.4 -5.8

ROLLERCOASTER trading yesterday afternoon finally took the London market lower as commodity shares weighed on the blue-chip index.

The FTSE 100 managed to cling to the 6,500 mark, closing down 5.8 points at 6,500.4, after the US dollar rallied against several foreign currencies, making dollar-dominated commodities less of a bargain.

A choppy opening on Wall Street - as US pending home sales fell to their lowest level in more than six years - added to the downturn on this side of the Atlantic.

Philip Isherwood, a strategist at Dresdner Kleinwort, said: "You've had some more weak-looking data from the US. It is more confirmation of the US-led slowdown.

"The markets have been sitting there, thinking 'we're going to get Fed cuts' and assuming that they are for free."

A fall in the cost of gold saw miners on the back foot, helping to wipe out gains from earlier in the session, following a strong set of half-year results from Tesco.

Lonmin was the biggest loser, topping the fallers' board with a drop of 6 per cent or 205p to 3,499p, while BHP Billiton was 80p lower at 1,735p.

The cost of light, sweet crude retreated below the $80 mark to see Royal Dutch Shell fall 58p to 1,968p, while BG Group slipped 33p to 820.5p.

Brokers at Cazenove upgraded UK retailers. Market sentiment has weakened following recent hikes in interest rates, but Cazenove believes the sector is now looking cheap.

Argos owner Home Retail Group was up 18.75p at 407.5p, while fashion retailer Next was ahead 68p at 2,051p.

Among banking shares, mortgage lender Northern Rock advanced as rumours of an imminent private equity rescue swept the market. The crisis-hit stock tested new record lows earlier in the session but picked up 3.5p to close at 135.6p on reports the company was due to meet would-be suitors.

The positive sentiment helped the rest of the sector, as brokers said the worst fears following the credit crunch may not materialise.

Barclays was ahead 20.5p to 621p, while Alliance & Leicester was 43p up at 822p.

Housebuilders also enjoyed a rebound as Taylor Wimpey lifted 13p to 288.75p, Persimmon rose 58.5p to 1,051p and Barratt Developments gained 31.5p to 781p.

Satellite broadcaster BSkyB held firm, up 3.5p at 687.5p, despite the Competition Commission's preliminary findings that its 17.9 per cent stake in ITV was against the public interest.

Mail order specialist Findel made ground after it dropped plans to split or demerge its home shopping operations from its educational supplies division. Findel also revealed that sales in the first six months of the current year were up 32 per cent, with home shopping driving the improvement.

The shares closed 42.5p higher at 690p.

DOW JONES 14,050.64 -36.91

WALL Street ended mixed last night, selling off large companies' stocks but buying up those of smaller companies, as investors cashed in gains from Monday's big rally and poked around for new bargains.

It was an unusual day of trading - normally, the major stock indexes closely track one another. But given the market's quick, sharp rebound from August's credit-market squeeze and stock sell-off, it's understandable investors would pause to reposition as Q4 gets under way.

"The economy is soft, you have this big run-up, and the fact is people are just taking some profit," said Scott Fullman, director of investment strategy for I. A. Englander.

The Dow Jones Industrial average fell 40.24, or 0.29 per cent, to 14,047.31. The broader Standard & Poor's 500 index fell 0.41, or 0.03 per cent, to 1,546.63, but the Nasdaq composite index rose 6.12, or 0.22 per cent, to 2,747.11.