Retail sector advances fail to inspire London market

A profits upgrade from Argos and Homebase owner Home Retail Group

helped retailers make strong advances.

But the wider FTSE 100 Index slipped into the red – closing down 23.31 points at 5617.26 – as a sharp rise in Chinese inflation raised fears that officials could slam on the economic breaks and dent a global recovery.

The potential impact on growth prospects put a raft of heavyweight mining stocks under pressure, led by Kazakhmys which declined 3 per cent, or 49p, to 1496p.

Wall Street's Dow Jones Industrial Average also dipped in early trading after mixed jobs data, weighing further on the London market.

The number of US workers filing new applications for unemployment benefits fell slightly less than expected last week, hinting at a slow labour market recovery.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 462,000 from 468,000 the prior week, the Labor Department said yesterday. That was a touch less than market expectations for 460,000.

Separately, the Commerce Department said the nation's trade gap shrank 6.6 per cent to $37.3bn as oil imports fell to their lowest since February 1999. However, US exports also declined.

The pound at least had a better day and crept above 1.50 against the dollar. The main cheer in an otherwise lacklustre session came from the retail sector.

Home Retail made its second increase to guidance in less than three months, causing its shares to rise by 41/4p to 272p.

Analysts said cost cuts and better than expected margins at the Argos business lay behind the upgrade to 290m for the year to the end of February. And while Home Retail's sales were under pressure due to the weather, other retailers drew encouragement from the figures as Marks & Spencer lifted 45/8p to 3533/4p, Next added 42p to 2020p and B&Q owner Kingfisher rose 7p to 2233/4p.

They were joined on the risers' board by Thomas Cook after the travel giant's investor day prompted analysts at Panmure Gordon to maintain their positive stance on the blue-chip stock. Shares were 73/4p higher to stand at 2481/8p.

Elsewhere, shares in Friends Provident owner Resolution rose 1/8p to 735/8p despite it losing its place in the FTSE 100 Index following the latest reshuffle.

The business, which floated in 2008, will be replaced by Investec, down 9p to 530p. The change is due to take place at the end of this month.

Among companies reporting results, supermarket chain Morrisons failed to benefit after a strong set of full-year figures showed a 21 per cent rise in profits to 767m.

Shares slipped 3 per cent, or 81/2p, to 2953/4p as analysts noted the company's more cautious outlook comments on trading in 2010.

Meanwhile, JD Wetherspoon shares were up 7p to 512p after it reinstated its dividend in the wake of a 17.5 per cent rise in underlying half-year profits to 36.2m.

Also in the second tier, shares in support services firm Connaught rose 6p to close at 3081/2p, as traders digested reports of potential bid interest from 3i. Connaught denied the rumours later.

Waste disposal group Shanks moved in the opposite direction, down 43/8p to 104p after private equity firm Carlyle confirmed it was no longer interested in bidding for the firm.

The biggest Footsie risers were Petrofac up 39p to 1201p, Kingfisher, Thomas Cook and Standard Life up 61/2p to 2143/4p.