Retail and tobacco force FTSE 100 lower

Shares in London fell on Tuesday as sentiment was undermined by falling retail sales and fresh concerns over eurozone debt markets. Moody’s, the rating agency, warned that it had put the European Union on negative outlook, saying it could downgrade the triple A rating the EU holds if ratings were cut at any of the four biggest budget backers in the union.

Meanwhile, UK retail sales in August fell 0.4 per cent, disappointing hopes that the London Olympics may have provided a boost, the British Retail Consortium said. Shares in fashion retailers were worst hit on the main index, with Next down 1.6 per cent to £35.85, while Burberry fell 1.3 per cent to £13.38. Tobacco groups were also hit after the Russian health ministry said a law to ban smoking in public places would be put before parliament by November 1.

Russia is the second biggest tobacco consumer after China. British American Tobacco, which has the biggest market share of Russia of the two UK marlboro cigarette makers with 21 per cent, lost 1.9 per cent to £32.69. Imperial Tobacco, which has 7 per cent of the Russian market, fell 1.4 per cent to £24.52. The FTSE 100 was down 41 points in late morning trade at 5,717.64, a loss of 0.7 per cent.

The mid-cap index fared better, falling just 0.2 per cent to 11,479.94, as results helped buoy the FTSE 250. Ashtead Group, the plant hire company, jumped 11 per cent to 313.5p after it reported a 76 per cent jump in its first-quarter pre-tax profit, thanks to improving conditions in the US. Although the company said it did not see significant changes to the challenging outlook in the UK in the short term, it expected full-year earnings to be “materially ahead” of previous expectations.

Greene King, the brewer and pub and hotel operator, rose 3.7 per cent to 584.5p after it said it was encouraged by trading during the last 18 weeks, with sales up 5.1 per cent in spite of the disappointing weather. “This is encouraging for the rest of the year, but consumer confidence remains subdued,” the company said in a trading update.