Banks and miners lift FTSE but retail shares take a dive

STRENGTH in miners helped Britain’s top share index to a 0.5 per cent rise by yesterday’s close after soaring output figures from Rio Tinto boosted the sector, but retailers fell on weak trading updates.

The FTSE 100 ended 24.72 points higher at 5,498.20 after falling for two days, pressured by China’s decision to tighten banks’ reserve requirements.

Miners added most points to the index after Rio Tinto bolstered investor sentiment on the sector by beating its own forecast for iron ore output in the fourth quarter.

Rio added 2.2 per cent, while ENRC, BHP Billiton, Kazakhmys, Fresnillo and Vedanta Resources were up 1.2 to 2.6 per cent.

Xstrata rose 4 per cent after Investec started coverage with a “buy”.

But volumes were thin, with many investors waiting on the sidelines ahead of quarterly figures from chipmaker Intel yesterday and JPMorgan Chase on today.

“There’s not much money behind the moves, there’s a bit of complacency coming in that markets are going to grind higher,” said Nick Serff, market analyst at City Index.

“But people are waiting for the Intel figures before taking big positions.”

Banks were mostly higher ahead of the fourth-quarter figures from JPMorgan Chase.

Barclays, Standard Chartered, Lloyds Banking Group and Royal Bank of Scotland added 1.1 per cent to 2.7 per cent. But heavyweight HSBC retreated 0.4 per cent.

With uncertainty about the outcome of the earnings season, defensive sectors like pharmaceuticals and food producers were in favour.

AstraZeneca rose 2 per cent, supported after Deutsche Bank upgraded its target price. GlaxoSmithKline added 0.6 per cent and Shire was up 0.5 per cent.

Associated British Foods gained 1.1 per cent after a positive trading update and Cadbury added 1.2 per cent on hopes that US chocolate maker Hershey might top Kraft’s $17 billion hostile takeover offer.

Retailers were hit as a raft of firms reported trading updates. Home Retail was the FTSE 100’s biggest faller, down 6.2 per cent after the group, which runs catalogue-based Argos stores, warned trading would stay tough in the coming year. City analysts cited fears over progress so far for the sell off.

Other large-cap retailers, Kingfisher, Marks and Spencer and Next also shed 0.8 to 3.3 per cent.

Mid-cap HMV Group and Mothercare dropped 8 and 4.5 per cent respectively, after both issued trading updates.

Food retailers also fell as investors booked profits following a raft of strong Christmas trading updates.

Wm Morrison Supermarkets, J Sainsbury and Tesco fell 0.2 to 0.7 per cent.

US retail data outlined the gloomy global outlook for the sector. Sales unexpectedly fell in December as consumers spent less on vehicles and an array of other goods.