FTSE stagnates amid interest rate fears

London shares trod water today after upbeat economic news fuelled fears of an interest rate rise in January.

By mid-morning, the FTSE 100 Index had failed to improve on its progress in the first hour, standing 8.1 points ahead at 4736.3 at 11.15am.

A rise in November’s retail sales figures due to a Christmas shopping surge set off jitters that the Bank of England would hike rates to 5% next month. The news followed figures earlier this week showing an increase in inflation.

Analysts were forecasting profit-taking on the other side of the Atlantic this afternoon after the recent bull run on Wall Street.

After rising 15 points yesterday to nearly 10700, analysts were tipping the Dow Jones Industrial Average to open between four and 10 points down.

While building materials group Hanson topped the Footsie risers and oil group Cairn Energy was leading the fallers ahead of its drilling report tomorrow, today’s big corporate news came from the second and third flights.

Avis Europe topped the fallers with a 14% or 7.75p loss to 47.25p after disappointing investors with news that trading was tough and it was not planning to pay a full year dividend.

In the FTSE 350, television set top box maker Pace Micro Technology was also on a downward slope after saying it was anticipating lower than expected full-year profits. Shares slipped 18% or 10.5p to 47.5p.