Sales fall sees FTSE decline

Sales fall sees FTSE decline

The UK retail sector's recent rally was knocked off course today after the Office for National Statistics reported an unexpected 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 5551.8 at midday.

The top flight hit a four-month high at the start of the week but 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.

Oil and commodity stocks did their best to keep the FTSE 100 Index on an even keel after BP rose 8.3p to 412.4p, Royal Dutch Shell lifted 20.5p to 1828p and Randgold Resources cheered 25p to 6270p.

The recent flurry of buying interest in the retail sector came after fashion and homewares chain Next yesterday flagged the possibility of long-term growth in shareholder returns of between 9% and 15% a year.

Next shares, which rose 7% on Wednesday, slipped 7p to 2169p while Marks & Spencer surrendered an early gain to stand 3.5p lower at 376.1p.

Kingfisher remained in positive territory, up 4.9p to 223.8p, 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 1.2p to 213.3p while Kesa Electricals lifted 1.2p to 136.6p in the FTSE 250 Index after reporting strong first quarter sales from its Comet business in the UK.

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 4.5p to 139.9p.

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 £16 (€19,1m) 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.

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