City shrugs off retail gloom to close in positive territory

The fallers' board was littered with high street stocks, with raised profit guidance from Home Retail offset by 2010 trading concerns across the sector.

Gains were seen on the wider FTSE 100 Index, which closed up 24.72 points at 5498.20 thanks to a better session from banks and heavily-weighted miners.

But 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 workers seeking unemployment benefits, while US retail sales had seen a shock fall in December – which left 2009 with the biggest yearly drop on record.

The US Commerce Department said retail sales fell 0.3 per cent last month, the first decline in three months, as consumers spent less on vehicles and an array of other goods during the holiday shopping month.

November sales were sharply revised up to a 1.8 per cent gain and October sales were bumped up a touch as well. Financial markets had expected retail sales to gain 0.5 per cent last month.

A separate report from the Labor Department showed initial claims for state unemployment benefits rose 11,000 to 444,000 last week, higher than the 437,000 claims analysts had forecast.

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.

Among stocks, Home Retail was the biggest casualty, dropping 6 per cent even though it said it expected to exceed profit forecasts by 20m.

Analysts said the Homebase owner – which fell 173/4p to 2653/4p – looked vulnerable to competition from supermarkets and the likes of Currys owner DSG International.

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 somewhat mixed for its PC World division after a 3 per cent drop in comparable sales.

Shares fell 23/8p to 351/4p.

Primark owner Associated British Foods was the only blue-chip retailer to make progress. Shares rose 91/2p to 869p after the sugar, grocery and retail conglomerate reported sales growth of 17 per cent and said it expected strong operating profits.

Among other retailers with trading updates, Mothercare fell 291/2p to 626p and Halfords dropped 163/8p to 4057/8p.

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 to 1220p.

As well as higher mining stocks, banks enjoyed a strong performance. Lloyds Banking Group was the highest banking riser, adding 11/2p to 571/2p.

The biggest Footsie risers were Xstrata, Antofagasta up 31p to 1031p, Wolseley ahead 42p to 1493p and Carnival up 60p to 2240p.

The biggest Footsie faller was Home Retail Group.