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M&S drops amid pre-Christmas retail fears

Marks & Spencer endured a poor pre-Christmas session as retail stocks were hit by investor worries over the scale of festive discounting.

The department store chain fell by 2%, while the UK's three major listed supermarket businesses were also under pressure - led by Sainsbury's at the top of the fallers' board.

The retail turbulence came during a nervy session for the wider market as the FTSE 100 Index went sideways, edging just 5.9 points ahead to 6492.1 following a topsy-turvy start to the last full week of trading before the break.

Nerves have been jangling ahead of the imminent decision by the US Federal Reserve on whether to pare back America's vast economic stimulus drive.

The verdict on whether the US would continue pumping 85 billion US dollars (£53 million) a month into the world's biggest economy was due after the close in the market and would mark the swansong of outgoing Fed chairman Ben Bernanke.

In New York, the Dow Jones Industrial Average had also failed to move much by the time of close in London as traders waited for the announcement.

However, the Fed decision appeared to hold no fears for investors across the channel, buoyed by signs of optimism in Germany that helped Frankfurt's Dax and Paris's Cac 40 each climb around 1%.

On currency markets, sterling was boosted by a sharp fall in the unemployment rate from 7.6% to 7.4%. It climbed a cent against the greenback to 1.64 US dollars and a cent against the euro to 1.19 euros.

In London, Centrica was among the risers on the FTSE 100 after it offered a pre-Christmas gift to shareholders following the sale of its Texas gas-fired power stations to private equity firm Blackstone for 685m US dollars (£420m).

Shares rose 5.6p to 328.7p as the British Gas owner said it would return the proceeds to investors through an extension of its share repurchase programme.

The retail sector provided a drag on the top flight on fears that efforts to drum up festive trade following a weak autumn would have an impact on margins.

Marks & Spencer was 10.8p lower at 441.5p as UBS cut its rating on the stock to 'neutral' and lowered its target price to 475p.

Highlighting its concerns about recent promotional activity, UBS also cut its profits estimate for this year by £25 million to £650 million.

The supermarket sector saw blue-chip grocers suffer a second day of losses after the latest Kantar Worldpanel market figures showed that half of UK households shopped at discounters Aldi and Lidl in the past 12 weeks.

The increased competition threat triggered a fall of 13.5p to 365.1p for Sainsbury's, while Tesco was 5.4p lower at 319p and Morrisons dropped 3.5p to 253.2p.

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