By This Is Money Reporters

PUBLISHED: 03:46 EST, 27 March 2014 | UPDATED: 12:42 EST, 27 March 2014

17.30 (CLOSE): Fading hopes for a round of economy-boosting measures in China weighed on global markets today in a lacklustre session for stocks.

The FTSE 100 Index drifted 17 points lower to 6588.3 despite official figures showing a far stronger-than-expected bounce back in retail sales on Britain’s high streets last month.

America’s Dow Jones Industrial Average also struggled to make headway in early trading as the stimulus programme expected to prop up China’s flagging economic growth has so far failed to materialise.

Boost: There was welcome news for retailers following a 1.7 per cent rise in sales volumes last month.

But the pound enjoyed another robust session after the Office for National Statistics announced a 1.7 per cent leap in retail sales volumes last month – smashing expectations for a 0.5 per cent rise.
Sterling rose a cent to 1.21 euros and held firm at 1.66 US dollars.

Among stocks, the major focus of the session was on the energy sector after regulator Ofgem announced plans for a full-scale competition probe.

Ofgem said the proposed study by the Competition and Markets Authority would ‘consider once and for all’ whether there are barriers to competition.

Among the biggest fallers, SSE slipped 2%, off 31p to 1487p, although this included much of the previous session’s rally seen after it stole ground on rivals by announcing a price freeze until January 2016.

There are fears that a potential two-year long investigation will have a damaging impact on investment decisions and profitability in the sector.

Rival company Centrica, which owns British Gas, fell in the wake of SSE’s announcement yesterday but was up 2.1p at 325.2p today.

The disappointment over a lack of stimulus measures from China saw miners such as Fresnillo and Randgold Resources suffer losses, down 35p to 837.5p and 122p to 4486p respectively.

Elsewhere, shares in Thomas Cook edged 0.2p lower to 181.2p in spite an upbeat assessment of trading in recent weeks from the group.

It said customer bookings for the summer season have shown an improving trend, with 50% of holidays already sold – slightly higher than a year earlier.

The tour operator said bookings at its burgeoning range of more personalised and exclusive hotels run by the group were 49% higher year-on-year.

The biggest faller in the FTSE 100 Index was Babcock International after it announced a deal worth 920 million to buy Avincis, which operates as Bond Aviation in the UK and provides helicopter and fixed-wing services for medical, search and rescue, firefighting and civil protection in Europe.

Babcock shares fell 7 per cent or 91p to 1275p after it said it would pay for the acquisition by raising 1.1 billion from shareholders in a rights issue.

The purchase comes with 705million of debt and potential damages claims related to the Glasgow helicopter crash in November, in which Police Scotland’s helicopter leased from Bond crashed into the Clutha pub, killing 10 people.

The biggest FTSE 100 risers were Aberdeen Asset Management up 9.6p to 396.9p, SABMiller ahead 54.5p to 2992.5p, British American Tobacco 52p higher at 3287p and BSkyB 14p stronger at 930p.

The biggest FTSE 100 fallers were Babcock International down 91p to 1275p, Fresnillo off 35p to 837.5p, Standard Life 13.7p lower at 386.3p and Mondi 35p weaker at 1042p.

16.20: The FTSE 100 index was 25.3 points or 0.4 per cent lower at 6,580, dragged lower by miners – hurt by weaker metals prices following an economic slowdown in China – and banks.

High-profile fallers in the sector included Rio Tinto, which was 61.75p lower at 3242p, while Randgold Resources was down 116p at 4492p.

‘The outlook for commodity prices has changed quite substantially as the supercycle that we saw in China is coming to an end,’ said Henk Potts, strategist at Barclays Wealth.

‘There has been a huge amount of investment in the mining sector during the boom years and that supply is just about to come through at a time when demand has been slowing down.’

Energy drain: SSE and Centrica were big fallers after Britain’s energy watchdog said it would refer the Big Six firms for a full-scale competition probe

The energy sector was in the spotlight after regulator Ofgem announced plans for a full-scale competition probe. Ofgem said the proposed study by the Competition and Markets Authority would ‘consider once and for all’ whether there are barriers to competition.

Among the biggest fallers, SSE slipped more than 2 per cent, off 35p to 1,483p, although this included much of the previous session’s rally seen after it stole ground on rivals by announcing a price freeze until January 2016.

There are fears that a potential two-year long investigation will have a damaging impact on investment decisions and profitability in the sector.

Rival company Centrica, which owns British Gas, fell in the wake of SSE’s announcement yesterday but was up by a penny at 324.2p today.

Elsewhere, shares in Thomas Cook rose 2.6p to 184p after it issued an upbeat assessment of trading in recent weeks. It said customer bookings for the summer season have shown an improving trend, with 50 per cent of holidays already sold – slightly higher than a year earlier.

The tour operator said bookings at its burgeoning range of more personalised and exclusive hotels run by the group were 49 per cent higher than a year earlier.

The Federal Reserve blocked the US units of Royal Bank of Scotland (down 1.7 per cent) and HSBC (down 0.7 per cent) from paying higher dividends or buying back their own shares. Under the Fed rules, foreign banks will have to ringfence their American units and meet tougher capital requirements.

‘It’s a watching brief for UK banks … but with any further downside they’re likely to attract buyers,’ said Matt Basi, head of sales trading at CMC Markets.

‘All of these things are done by negotiation, so it’s not a case of HSBC and RBS making a proposal, the Fed saying no, and that being the end of it. It’s a back-and-forth process, and we expect there to be a resolution at some stage in the near-term.’

The Bank of England also today urged banks to consider the risk of future spikes in interest rates when approving mortgages, and prepared tools to rein back potentially dangerous lending.

But engineering services group Babcock International topped the losers’ board, falling 6.8 per cent after it would fund the takeover of helicopter firm Avincis with a 1.1billion rights issue.

The purchase comes with 705million of debt and potential damages claims related to the Glasgow helicopter crash in November, in which Police Scotland’s helicopter leased from Bond crashed into the Clutha pub, killing 10 people.

Despite recent weakness in the London market, analysts said the market outlook remained positive.

‘Longer-term, there is still an increased appetite for equities. We like the energy sector because it is unloved, attractively valued, has got a very good dividend yield and there has been a re-focus on greater capex discipline, which is more shareholder friendly,’ said James Butterfill, global equity strategist at Coutts.

‘We also like the pharmaceuticals sector, which is a good defensive play and has got attractive dividend yields.’