FTSE rises above spending fears

LONDON FTSE 100 CLOSE 5,498.2 +24.7

A BETTER session for banks and miners helped the FTSE 100 to close in positive territory last night, despite the retail sector being buffeted by a sell-off prompted by fears over consumer spending.

The fallers board was littered with high street names, with raised profit guidance from Home Retail Group – owner of Argos and Homebase – offset by trading concerns in the sector.

The wider FTSE 100 index closed up 24.7 points at 5,498.2 but early progress on Wall Street was hit after disappointing economic reports on unemployment and retail sales.

Figures showed a bigger-than-expected rise in the number of newly laid-off US workers seeking unemployment benefits, while retail sales saw a shock fall in December – leaving 2009 with the biggest drop on record.

The Dow Jones Industrial Average fell into negative territory soon after opening although it later edged into the black.

The poor retail sales saw the dollar weaken against the pound, while sterling continued to power ahead thanks to Wednesday's hawkish comments from Bank of England rate setter Andrew Sentance.

James Hughes, market analyst at CMC Markets, said: "Disappointing numbers out of the US led to the gloss being taken off of a positive session in Europe as the major indices shook off Wednesday's indecision and managed to post some steady gains."

In London, Home Retail Group was the biggest casualty, dropping 6 per cent even though it said it expected to exceed profit forecasts by 20 million.

Analysts said the group – which fell 17.7p to 265.8p – looked vulnerable to competition from supermarkets and the likes of DSG International, which owns electricals giant Currys.

DSG highlighted progress in its turnaround strategy by posting an 8 per cent quarterly rise in like-for-like sales at its UK electrical division, although the picture was mixed for its PC World division. Shares were hit by the wider gloom and fell 12.34p to 35.19p.

Associated British Foods – which owns Primark – was the only blue-chip retailer to make progress. Shares rose 9.5p to 869p after the conglomerate reported sales growth of 17 per cent and said it expected strong operating profits. Panmure Gordon also raised its price target to 970p.

Among other retailers with trading updates, Mothercare fell 29.5p to 626p and Halfords dropped 16.3p to 405.9p.

HMV was the biggest faller in the FTSE 250 index – off 7.35p to 84.4p – after a disappointing festive performance from its Waterstone's book division.

Chocolate firm Thorntons proved to be one of the exceptions in the sell-off, as shares rose 4p to 103p following its success in protecting margins over the Christmas period.

Back in the top flight, stronger metal prices as well as solid output data from Rio Tinto meant commodity stocks set the pace, with Xstrata up 47p at 1,220p, and as well as higher mining stocks, banks enjoyed a strong performance. Lloyds Banking Group was the highest banking riser, adding 1.5p to 57.5p.

Among Scottish stocks, Faroe Petroleum edged up 0.75p to 135.75p after agreeing a two-year extension to its NOK500m (55m) revolving credit facility with Bank of Scotland.

Chief executive Graham Stewart said the extension will allow Faroe to "continue to leverage Norway's state contribution towards exploration and appraisal expenditure, through its constructive tax regime".

FirstGroup slid 16.6p or 4 per cent to 398.5p after the Aberdeen-based transport giant revealed that revenue growth at its UK bus business almost spluttered to a halt before Christmas in tough economic conditions.