Footsie gains as UK retail sales data buoys sentiment

The FTSE 100 Index regained some ground yesterday after positive retail figures at home and uplifting unemployment data in the US steadied investors' nerves.

The CBI reported a surprise three-year high for retail sales in the UK in August, while the US Labor department reported a drop in claims for unemployment benefits last week to 473,000.

"No-one was bullish on the labour market, but it was not as bearish as some people had thought.

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"Our call is still that we are not heading toward a double-dip (recession)," said Thomas Simons, a money market economist at Jefferies & Co. in New York.

Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 473,000, well below market expectations for a drop to 490,000.

But the four-week average of new claims – considered a better measure of underlying labour market trends – rose 3,250 to 486,750, the highest since late November.

A Labor Department official said there were no special factors

influencing the report.

The upbeat data eased traders' worries and saw the London market close 46.44 points up at 5155.84.

But as the FTSE 100 Index closed, Wall Street was losing earlier gains, with the Dow Jones Industrial Average down just under 1 per cent.

World markets have been shaken in recent days by persistent worries over the state of the US economic recovery, particularly in the wake of dismal figures on home sales and durable goods orders.

Confidence in the US markets is likely to have waned during yesterday's sessions as traders look ahead to today's revised second quarter GDP, as well as the latest speech on the state of the economic recovery from Federal Reserve chairman Ben Bernanke.

On the Footsie, miners benefited from yesterday's improved confidence in London as Kazakhmys and Rio Tinto climbed higher by 56p to 1129p and 72p to 3177p respectively.

The encouraging CBI results helped strengthen the pound, which was up against the dollar and the euro, at 1.55 and 1.22 respectively.

The figures showed more than half of retailers surveyed said their volume of sales rose during the first two weeks of August, while 18 per cent said they fell. The resulting balance of plus-35 per cent was the fastest rise since April 2007.

Blue-chip retailers consequently received an additional boost on the London markets, with Next closing up 46p to 1978p, Marks & Spencer gaining 63/8p to 3405/8p and Burberry up 181/2p to 839p.

The fallers' board included drinks giant Diageo after it reported a 2 per cent rise in operating profits for the year to June 30.

The company's shares dropped 16p to 1050p as the Guinness to Johnnie Walker firm failed to shrug off market concerns about its growth prospects.

Property group Segro was the worst hit FTSE 100 stock, down 103/8p to 2645/8p, after its interim results missed some analyst expectations, despite news of a 2.3 per cent rise in net asset value.

Shares in bookmaker William Hill were also lower in the FTSE 250, off 1/4p to 1663/4p, after tough trading conditions in retail and telephone betting limited growth in half-year profits to 3 per cent.

Estate agency and property group Savills joined it in the red as its cautious interim results comments and recent strong run for shares saw investors take profits. Shares in the group dropped 6 per cent, or 181/2p to 3101/8p.

The biggest Footsie risers were Kazakhmys, Amec ahead 43p to 8911/2p, Fresnillo up 471/2p to 1045p, and Aggreko ahead 49p to 1395p.

The biggest fallers were Segro, Invensys off 41/8p to 2305/8p, and BT Group, down 2p to 1305/8p.