FTSE Close: Kingfisher, BP up; BT, Icap down

By Reuters
Updated: 12:22 EDT, 16 September 2010

17.15 (close)

The FTSE 100 Index failed to make headway today as a surprise fall in retail sales weighed on sentiment.

Trading was also lacklustre on America's Dow Jones Industrial Average as investors received mixed economic data.

The Footsie closed 15.4 points lower at 5540.1, with the Dow down by a similar amount.

News that US lenders repossessed more homes in August than in any month since the sub-prime mortgage crisis hit Wall Street, overshadowing figures showing a fall in US jobless claims.

In the UK, a shock fall in retail sales weighed on stocks.

The 0.5% decline for August sales offset initial encouragement seen after B&Q owner Kingfisher beat market forecasts with a 23% rise in half-year profits.

Kingfisher clung to positive territory after initially rising 3%, but the rest of the sector saw declines.

The top flight hit a four-month high at the start of the week, however it has been stuck in a narrow trading range since then as investors struggle to make up their minds on the next move for world markets.

Today's downbeat retail sales also put pressure on sterling, with the pound down to 1.56 dollars and 1.19 euros.

Oil and commodity stocks did their best to keep the FTSE 100 on an even keel after BP rose 4.4p to 408.5p, Royal Dutch Shell lifted 21.5p to 1829p and Randgold Resources cheered 50p to 6295p.

Among retailers reeling from the Office for National Statistics retail data, Next shares, which rose 7% on Wednesday, slipped 6p to 2170p, while Marks & Spencer surrendered an early gain to stand 3.5p lower at 376.1p.

Kingfisher remained in positive territory, up 0.9p to 219.8p, after the company's half-year figures impressed investors, despite continued pressure on sales in the UK division.

Homebase rival Home Retail Group was down 1.1p to 213.4p, while Kesa Electricals lifted 2.1p to 137.5p in the FTSE 250 Index after reporting strong first quarter sales from its Comet business in the UK.

One of the biggest falls in the top flight came from BT Group after Morgan Stanley downgraded the stock on fears the pensions regulator may accelerate the company's proposed deficit reduction schedule. The stock fell 3% or 4.4p to 140p.

Outside the top flight, attention was focused on the dairies sector after Robert Wiseman revealed a major profits squeeze as it battles "intense" competition across the industry.

The Glasgow-based firm, which processes and delivers more than 30% of the fresh milk consumed in Britain every day, warned its profits could be as much as £16m lower in the next financial year due to pressure on margins.

Shares slumped 30% or 143.5p to 342p and caused rival Dairy Crest to fall by 4% or 14.5p to 361.3p.

The biggest Footsie risers were Cable & Wireless ahead 3.4p to 77.6p, Eurasian Natural Resources up 32p to 898p, Aggreko up 22p to 1550p and Royal Dutch Shell up 21.5p to 1829p.

The biggest Footsie fallers were Icap down 17.1p to 437.6p, BAE Systems down 11p to 329.8p, BT Group off 4.4p to 140p and Investec down 13p to 497p.

15.30 The Dow Jones was lower in early trade after news that US lenders repossessed more homes in August than in any month since the sub-prime mortgage crisis.

It slipped 20.4 points to 10,552.3.

A shock fall in UK retail sales also weighed on the FTSE 100, down 13.6 points at 5,542.

12.30

The retail sector's recent rally was knocked off course after the Office for National Statistics reported a shock fall in sales last month.

The 0.5% decline for August offset initial encouragement seen after B&Q owner Kingfisher beat market forecasts with a 23% rise in half-year profits.

Kingfisher shares remained 3% higher but the rest of the sector faded to leave the FTSE 100 index 3.7 points lower at 5,551.8.

The Bank of England said inflation expectations for the next 12 months rose to 3.4% last month, up from 3.3% in May, the highest rate since August 2008 just before the financial crisis really hit hard.

And the CBI's monthly industrial trends survey showed its total order book balance fell slightly in September to -17, down from -14 in August, below expectations of an improvement to -13.

'Traders are watching with bated breath to see if markets can push on and break out of their current ranges,' said Joshua Raymond, market strategist at City Index.

'If they do so, there is every chance that September could maintain its unusual bullish form to be a very good month for equities but there is a big question mark on this,' he added.

Miner Eurasian Natural Resources now tops the blue chip risers, up 4.4%, after Credit Suisse upped its rating to 'outperform' from 'neutral'.

Inter-dealer broker Icap was the top faller, down 3.3%, with Panmure Gordon cutting its rating for the firm to 'hold' from 'buy', one day after a downgrade by UBS.

Outside the top flight, attention was focused on the dairies sector after Robert Wiseman revealed a major profits squeeze as it battles 'intense' competition across the industry.

The Glasgow-based firm, which processes and delivers more than 30% of the fresh milk consumed in Britain every day, warned its profits could be as much as £16m lower in the next financial year due to pressure on margins.

Shares slumped 26% or 126.3p to 359.2p and caused rival Dairy Crest to fall by 8% or 28.1p to 347.4p.

10.30

Shares in New York are expected to dip on opening. The Dow Jones Industrial Average is forecast to open down 37 points at 10,472, according to spread betting activity.

Broker BGC also suggested the S&P 500 would begin the session 4.75 points lower at 1,116.

10:00

The Footsie dipped slightly this morning after hitting a four-month high earlier in the week, despite the retail sector posting more positive results.

London's leading index was down 1.26 points at 5,554.3 following lacklustre sessions on Wall Street and Asia overnight.

On the risers board, Kingfisher shares were 4% or 8p higher to 226.9p after the company's half-year figures impressed investors, helping to dispel some of the gloom about consumer demand in the face of sharp cuts from the government expected in the October spending review.

'The numbers from Next yesterday and Kingfisher today suggest that the incoming austerity measures can be ridden out,' said Jeremy Batstone-Carr, head of research at Charles Stanley.

'I think consumer discretionary spending will be hard hit, and it will hurt more than people think, but for now people are taking the retailers at their word.'

Homebase rival Home Retail Group followed suit with a rise of 4.6p to 219.1p, while Marks & Spencer added 2.6p to 382.2p and Kesa Electricals lifted 4.5p to 139.9p in the FTSE 250 Index after reporting strong first quarter sales from its Comet business.

August's retail sales, out this morning, are forecast to have risen 0.3%, below a 1.1% increase in July. September's UK CBI monthly trends survey, due at 1000 GMT, will also be of interest.

The biggest fall in the top flight came from BT Group after Morgan Stanley downgraded the stock on fears the pensions regulator may accelerate the company's proposed deficit reduction schedule. The stock fell 3% or 4.4p to 140p.

Strength from energy firms offset weaker mining and telecoms stocks, with confidence about the demand outlook helping keep crude above $75 per barrel. BP added 1.9%, while Royal Dutch Shell gained 0.9%.

Miners were hindered by weaker metal prices. Xstrata fell 1% or 12p to 1,148p, and Rio Tinto lost 1.1% or 38.5p to 3,534p.

Cable & Wireless Worldwide by contrast climbed 2.8% as Goldman Sachs raised its recommendation on the telecoms firm to 'buy' from 'neutral', saying it could attract M&A interest.

Rolls Royce fell 2.1% or 9.5p to 574.5p after Boeing said that it had a serious problem with a Rolls-Royce engine on one of its 787 Dreamliner aircraft, requiring it to be replaced.

Overall trading was thin, and Batstone-Carr noted that options expiries due tomorrow were keeping traders from taking big positions.

Investors will eye US weekly jobless claims data at 1230 GMT. The US Producer Price index for August will also be released then.