Fears over consumer climate send retailers and FTSE down

BRITAIN’S top share index closed lower yesterday, with retailers weak as Next posted falling sales, while banks gained ground after Lloyds Banking Group poached Santander UK’s head as its new CEO.

Investors were reluctant to take big positions ahead of a Federal Reserve decision on further monetary policy easing later yesterday. Markets are pricing in a commitment to buy at least $500bn in Treasury debt over five months.

The FTSE 100 ended 8.46 points, or 0.2 per cent, lower at 5,748.97, having risen 1.1 per cent on Tuesday.

Retailers were out of favour after Next, Britain’s second-largest fashion retailer, said consumers are facing near double-digit price rises for clothes next year, as it posted a slightly bigger-than-expected fall in third-quarter sales at its shops. Its shares fell 2.2 per cent.

Marks & Spencer shed 1.9 per cent, pressured as RBS repeated its “sell” rating on the stock. Tesco, Wm Morrison Supermarkets and J Sainsbury dropped 0.6 to 1.8 per cent.

But the main focus was on the United States, with many traders feeling there are potential downside risks from the Fed decision, due after the close, particularly on the back of recent strength in the markets in anticipation of a large bout of quantiative easing.

“(Investors) are bracing themselves for a decision on QE (quantitative easing) and are poised for a surprise number,” Yusuf Heusen, senior sales trader at IG Index, said.

“There is a strong feeling that there will be a ‘sell the number’ effect given recent strong gains, hence the slide in the FTSE late this afternoon,” he said.

British aerospace electronics group Cobham slid 9.5 per cent after a disappointing third-quarter update and downbeat outlook hit by U.S. contract delays.

BANKS LIMIT LOSSES
Buyers came in for banks, led by Lloyds Banking Group, up 2.7 per cent, after it poached Antonio Horta-Osorio, head of Santander’s fast-growing British division, to be its next chief executive in a coup that dealt a blow to its Spanish rival.

And the sector was given a fillip as French peer Societe Generale posted forecast-beating quarterly results, and said it would not need a capital increase to meet tougher industry rules.

HSBC, set to issue a trading update on Friday, rose 1.8 per cent, with Standard Chartered up 2.1 per cent, while Barclays , ahead of its update on 9 November, climbed 1.6 per cent.

Car insurer Admiral put on 2.6 per cent after saying it was on course to meet profit forecasts for the year after third-quarter turnover rose more than 50 per cent.

Miners and energy stocks were mixed. BP performed strongly, gaining 1.8 per cent, after Goldman Sachs upgraded the oil company to “buy” from “neutral” on the basis of strong third-quarter results yesterday, the dividend outlook and an attractive valuation.