Surprise fall in retail sales knocks pound

The pound fell this morning after UK retail sales showed a surprise 0.5% fall in August compared to July. This was the first fall in sales since January and confounded economists’ predictions of a 0.3% increase.

The pound dropped by 0.5% against the dollar to $1.55 minutes after the announcement by the Office of National Statistics.

Retailers like Next and John Lewis have also expressed concerns about the possible impact of the Government spending cuts on retail sales.

Price movements of individual firms on the FTSE 100 were generally driven by specific news and analyst recommendations leaving the index steady at 5546 points with 24 firms showing gains, 74 showing losses and the remainder unchanged.

The risers included Cable & Wireless, up 3% at 76p after an upgrade by Goldman Sachs analysts to ‘buy’ from ‘neutral’ saying that it sees the communications company as a possible takeover target.

DIY retailer Kingfisher’s shares were up 3.6% at 226.7p after reporting a 22% rise in pre-tax profits to £351 million. The chief executive of the B&Q owner said that trading conditions were 'likely to remain fragile for some time' but said he doesn’t see another ‘down-leg’ in the consumer environment.

Oil companies BP, Shell and Cairn Energy were all up this morning. BP shares were recovering from yesterday’s Financial Times report about safety fears over its North Sea rigs. It has been reported that Cnooc, China’s largest offshore oil explorer could offer BP $10.2 billion for its stake in Argentina’s Pan American Energy.

Among the FTSE 100 fallers were BT Group shares, down 3.2% at 140p after Morgan Stanley analysts downgraded its recommendation to neutral from buy. The change was based on fears about the company’s pension scheme.

Investec shares were down 2.25% at 498.5p after reporting that its first half profits are marginally higher .

Rolls-Royce shares were down 1.5% at 575p. Yesterday it was reported that problems with Rolls-Royce engines had halted tests on a new Boeing plane.