FTSE stutters again; Next lends support

By Alistair Smout

LONDON (Reuters) – Britain’s top share index edged lower on Friday, extending a muted start to the year but supported by news of upbeat trading from Next in what has been a mixed Christmas for the UK retail sector.

The FTSE 100 fell 0.2 percent to 6,705.53, dipping further away from multi-year highs as sentiment for riskier assets took a hit from weak Chinese data for the second day running.

Next surged 10.3 percent after it raised its annual profit forecast. Britain’s second largest clothing retailer rose to an all-time high after it said fourth quarter sales came in significantly ahead of its expectations, helped by a policy of not discounting before Christmas.

Fellow retailer Marks and Spencer rose as much as 3.7 percent, the FTSE’s second top riser. It gives its next trading update on January 9.

The gains come the day after department store Debenhams fell 12.2 percent after a profit warning that revealed it had fared less well over the festive period than unlisted rivals John Lewis and House of Fraser.

“If we compare the performance compared to a few sector peers, we can see that Next has outshone these considerably,” Charlie Menegatos, director at Accendo Markets, said.

“Next has held back on sale items till after Christmas day, yet is still managing to turn a profit with seasonal items, as well as its Next online directory sales soaring 21 percent.”

The broader index struggled to make headway, however. It tracked Asian shares, which stuttered overnight after growth in China’s services sector fell to a four-month low in December, a government survey showed, adding to evidence that the world’s second-largest economy lost steam into the close of 2013.

The disappointing data coupled with reduced activity in a holiday-shortened week in London was cited by traders as crimping the start to the trading year, which is usually associated with good gains for equities, fuelled by annual inflows.

“Granted, markets won’t fully return to normal until next week, but if the numbers out of Asia – and especially China – continue to underwhelm then the outlook for stocks will likely remain relatively depressed,” said Patrick Latchford at Monex Capital Markets.

Friday marked thirty years since the formation of the FTSE 100, over which period the index has risen 570 percent. Thirty of the original companies are still members of Britain’s top share index, with 19 continuous constituents, according to FTSE.

(Editing by John Stonestreet)

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