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US fiscal cliff talks slow FTSE progress

European markets lagged behind Wall Street today as speculation over talks in the US on the looming fiscal cliff continued to drive sentiment.

Comments from House Speaker John Boehner that suggested discussions are making progress offered some comfort to US traders, with the Dow Jones Industrial Average up by 0.5% at the time of London's close.

But the improvement was too little to keep London's FTSE 100 Index out of the red as it closed 9.6 points down at 5912.1.

The outcome of the talks are pivotal to the progress of world markets in 2013 as the US looks to avoid an automatic package of steep tax hikes and budget cuts on January 1.

The pound was up against the US dollar at 1.62 amid the uncertainty, and was also up against the euro at 1.23.

In London, one of the market's rising stars of recent years was dimmed by a second gloomy update in the space of as many months. Temporary power provider Aggreko's warning that its 2013 performance was likely to be lower as it struggles to fill the void left by its £59 million London Olympics contract, caused shares to slide by one-fifth.

The decline of 461p to 1664p took the company's price back to near where it started in 2012.

Vodafone put pressure on the top flight as shares fell 2.75p to 158.2p after Dutch authorities raised £3 billion from an auction of the 4G spectrum, fuelling speculation that the UK version will reap more than forecast.

Brian Potterill, PwC's director of telecoms strategy, now expects the UK's 4G auction will raise the high-end of his previous £2bn to £4bn estimate.

Elsewhere in the top flight, shares in National Grid were 1% lower after Ofgem said it would allow companies to spend £24.2bn on new and upgraded infrastructure, more than the £22.7bn proposed by the regulator in July. But the figure is still short of the £29.4bn originally requested by the industry, raising the prospect of a drawn out referral to the Competition Commission.

National Grid ended the day 5p lower at 703p.

Meanwhile, retailers were doing well as analysts gauged the performance of the sector in the final days before Christmas.

Many shopping centres reported a busy weekend and John Lewis said it posted record weekly sales of more than £140m for the second week in a row.

Primark owner Associated British Foods added 12p to 1530p, while outside the top flight Dixons Retail Group improved 0.5p to 28p, Sports Direct International was up 13.8p at 381.2p and Debenhams rose 0.8p to 115.5p.

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