The FTSE 100 was flat on Wednesday as a results-driven rally for retailers proved too weak to inspire a market hamstrung by beverage stocks turning ex-dividend and resource stocks stumbling through a difficult week.
"A fairly lacklustre day with stocks going ex-div and fresh weakness in oil prices taking the shine off some strong results," said one trader.
Next shares soared 7.6 percent and the company attracted positive broker comment after it reported first- half results well above consensus estimates. Sector peers benefited, with Kingfisher up 0.7 percent and Marks & Spencer up 2.6 percent, driven also by unconfirmed talk it was revaluing its property portfolio. DSG International added 2.1 percent.
"Next came in ahead of expectations," said Robert Parkes, UK equity strategist at HSBC. "While the retail side is still struggling, online sales were very, very good."
The FTSE 100 index of Britain's leading shares fell 3.3 points, or 0.06 percent, to 5,892.2, underperforming continental European markets and a firm start on Wall Street. The index failed to move on news British pay growth was less than forecast in the three months to July - but still at its fastest rate in over a year - while claimant count unemployment showed its biggest fall in 18 months. The market was not surprised at this after Prime Minister Tony Blair told the Trade Union Congress on Tuesday that he expected a "welcome" fall in unemployment.
Resource stocks recovered some ground after a weak start, but continue to drag on soft commodity prices. Rio Tinto and Xstrata each fell more than 1 percent after a gold bounce ran out of steam. Base metals were under pressure as fund liquidation spilled over from the previous session, but traders said metals fundamentals had not really changed.
Oil dipped back below $64 a barrel as traders awaited the debate among members of the UN nuclear watchdog over Iran's atomic work, although prices climbed off lows when US stocks of refined products were shown to have risen in the past week. BP rose 1.2 percent after J.P. Morgan raised the company to overweight from neutral but Royal Dutch Shell was down 0.6 percent after it received a fine of 108 million euros from the EU commission, one of a number of firms fined for fixing prices of road-surface bitumen in the Netherlands.
Companies going ex-dividend hit the index, with Diageo down 1.5 percent and Scottish & Newcastle 1.3 percent lower, although Shire Pharmaceuticals managed to rise 1.5 percent. "With volumes still light, the ex-divs have an abnormal prominence in the list of losers," said a second trader.
Man Group suffered after the hedge fund operator downgraded the net asset value of its flagship AHL Diversified Futures fund. Mirroring its fall, competitor Schroders fell 2.4 percent to lead the list of decliners.
Centrica fell 1.9 percent despite Nigeria's oil minister and an executive from Italy's ENI saying an agreement to open Nigeria's Brass Liquefied Natural Gas project to BG Group and Centrica would be signed next week.
Among the gainers, Brambles climbed 2.8 percent after the dual-listed Anglo-Australian group's shares rose almost 4 percent in Sydney. The logistics company said it expects pallet distribution and data storage operations to continue to support growth in the year ahead.
Housebuilder Wolseley Group gained 2.7 percent after San Francisco Federal Reserve President Janet Yellen said that the US housing market was slowing roughly as the Federal Reserve had expected. Relieved investors also returned to Slough Estates, which gained 1.3 percent after Goldman upped its price target on the stock.
Meanwhile shares in Hanson rose 4.2 percent as traders cited speculation in the market that Mexico's Cemex may make a bid for the building materials firm.
Vodafone added 0.4 percent after UK telecoms regulator Ofcom said it had proposed new controls on wholesale mobile voice call termination charges that would come into effect when the current regulation expires in March 2007. BT rose 0.5 percent.
But among mid-cap stocks, MyTravel Group fell 6.4 percent after it warned that its annual profit would be less than expected amid difficult trading conditions.
"We're now looking to third quarter results from the US, and already some investment banks are reporting a strong performance," said HSBC's Parkes. "That has been well-received so I'd say we're looking to the upside going into the fourth quarter."
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