London slides into the red despite retail sector gains

Next shares leapt nearly 7 per cent – up 136p to 2176p – after it stuck by profits guidance and defied fears over current headwinds in the sector, to flag possible long-term shareholder returns of between 9 per cent and 15 per cent a year.

This was met with relief among other retail stocks but the overall London market failed to sparkle during a rare recent session on the back foot. The FTSE 100 Index finished 11.85 points lower at 5555.56, while the Dow Jones Industrial Average opened in similar fashion on Wall Street before turning positive.

Sentiment was hit by a slowdown in industrial production growth in the United States and a worse than expected survey into the state of manufacturing industry in and around the New York region.

US industrial production rose 0.2 per cent in August, matching economists' forecasts for a sharp slowdown from July when unusually strong auto manufacturing lifted output, Federal Reserve data showed. July's gain was revised down to 0.6 per cent from 1 per cent.

Excluding motor vehicles and parts, total industry output increased 0.4 per cent in August, compared with July's 0.3 per cent advance.

Separately, the New York Fed's 'Empire State' general business conditions index slipped to 4.14 in September from 7.10 in August. September's reading marked the lowest since July 2009 and was below market expectations for 8.0.

Economists often look to the Empire State report as an early gauge of national output patterns because it is one of the first data points released each month.

The pound was stronger against the dollar and the euro but the main focus for traders was on Japan after the country's central bank intervened in currency markets for the first time in six years. The surprise move to sell the yen and buy dollars will help exporters and prevent the currency's recent strength from derailing recovery hopes.

In London, stocks in the retail sector dominated the FTSE 100 Index risers' board despite Next's warning that prices will have to rise next year due to higher raw material costs and January's VAT hike to 20 per cent.

Marks & Spencer lifted 125/8p to 3795/8p, B&Q owner Kingfisher gained 71/4p to 2187/8p and Argos firm Home Retail Group added 21/8p to 2141/2p.

Elsewhere in the sector, French Connection shares were 4 per cent higher after its founder and chairman Stephen Marks said the brand was back on track after reporting half-year profits from those businesses being retained in the wake of a restructuring. The stock lifted 2p to 47p.

Numis Securities said French Connection had "gathering momentum" after tackling the non-core and loss-making elements of the business.

Back in the top flight, shares in utility firms were under pressure after Goldman Sachs reviewed its ratings for the sector. It left United Utilities 10p lower at 585p, while Scottish & Southern Energy dropped 17p to 1162p.

In the second tier, power station Drax dropped by 4 per cent, or 15.7p to 3981/4p, after JP Morgan Cazenove downgraded the stock following a recent rise in its share price.

BP shares fell 111/8p to 4041/8p as it emerged that inspections on its North Sea installations found a number of them did not comply with guidelines over regular training for offshore operators on how to respond to an incident. However, chief executive Tony Hayward defended the firm's safety record in the North Sea and told MPs that recent criticisms had not exposed "any fundamental weakness".

In corporate results, construction firm Galliford Try lifted 23/4p to 2961/4p after it reported a 56 per cent rise in profits from its housebuilding division.

The biggest Footsie riser was Next.