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Vodafone saves the day as the high street struggles on

STRENGTH in <strong>Vodafone</strong> and defensive tobacco stocks pushed the FTSE 100 into positive ground yesterday, but gains were muted and offset by sliding commodity stocks. The index closed 2.40 points lower at 4,280.86, having closed down 50.11 points, or 1.2 per cent the previous session.<br /><br />Heavyweight mobile phone operator Vodafone was the biggest positive impact on the index, gaining 2.4 per cent, equivalent to a 6 points on the index as investors looked to buy into stocks perceived as safe havens.<br /><br />The index is down 3.5 per cent this year but has gained 23.7 per cent since its trough in March, although it has retreated by 3.6 per cent so far this week.<br /><br />Defensive stocks and banks were also in demand with <strong>British American Tobacco</strong> up 1.8 per cent. <strong>Lloyds Banking Group</strong> gained 3.3 per cent, reflecting index re-weighting factors, while <strong>Royal Bank of Scotland </strong>gained 2.7 per cent.<br /><br />British retail sales fell unexpectedly in May as shoppers tightened their belts after splashing out over the Easter holidays, while government borrowing hit a record high, official data showed. The Office for National Statistics said retail sales volumes fell 0.6 per cent in the month, against a forecast of a 0.4 per cent gain. <br /><br />Retailers were mostly weaker, with <strong>Home Retail Group</strong>, <strong>Next</strong> and <strong>Kingfisher</strong> shedding between 0.4 and 2.3 per cent. But <strong>Marks &amp; Spencer</strong> bucked the trend, adding 1.1 per cent.<br /><br />Adding to the negative tone for the outlook on the economy, factory orders fell slightly more than expected in June as export orders had their biggest drop in more than a decade, the Confederation of British Industry said. <br /><br />Weak energy shares were the biggest drag among the blue chips as oil prices held around $71 per barrel, with <strong>BP</strong>, <strong>Royal Dutch Shell</strong> and <strong>BG Group</strong> losing 0.5 to 1.2 per cent.<br /><br />Miners saw some early gains reversed as metal prices remained weak amid demand concerns.<br /><br /><strong>Rio Tinto</strong> was the worst off, down 4.9 per cent reflecting its recent rights issues, while <strong>Lonmin</strong>, <strong>Antofagasta</strong> and <strong>Kazakhmys</strong> lost 0.6 to 1.3 per cent.<br /><br /><strong>Xstrata</strong>, however, held firm, up 1.7 per cent supported by two broker upgrades. Morgan Stanley raised its rating for the miner to &ldquo;overweight&rdquo; from &ldquo;equal-weight&rdquo;, while Citigroup upped its stance to &ldquo;buy&rdquo; from &ldquo;hold&rdquo;.<br /><br />Aircraft engine producer <strong>Rolls-Royce</strong> benefited as well, adding 1.7 per cent.