Chilly wind on high street hits FTSE

High street chains Next and Marks & Spencer led the decline as investors reacted to a worse-than-expected update from Sweden's H&M, which revealed that higher cotton prices were eating into profits.

Trading on the Footsie was lacklustre, closing down 4.13 points at 5,965.08, following Wednesday's surge. The market had touched 5,997.33 earlier in the day.

Wall Street's Dow Jones Industrial Average was struggling to make headway in early trading after the US labour department said the number of workers filing claims for unemployment benefits unexpectedly surged last week by 51,000 to 454,000.

This offset positive news on profits from the likes of Caterpillar and Time Warner and affected sentiment in London.

Will Hedden, sales trader at IG Index, said it had been a "scrappy day's trading". He added: "At the moment, this pause for breath in stock markets is nothing out of the ordinary - and it would not be a surprise for a run of weakness to occur over the next few days as stock markets unwind at least some of the sharp gains seen this week."

The pound eased back after strong gains on Wednesday following news that two Bank of England policymakers voted for a rate hike in January. Sterling fell to $1.59 and €1.16.

Among stocks, Next fell 3 per cent or 57p to 2,028p. The group was followed by rivals M&S down 5.3p to 360.7p and AB Foods - which owns discount clothing chain Primark - off 12p to 1,087p as disappointing January retail sales figures from the CBI added to the H&M result.

But BSkyB shares nudged up 0.7 per cent as strong half-year results heaped more pressure on Rupert Murdoch's News Corporation to seal a deal for the broadcaster.

With BSkyB posting a 26 per cent rise in half-year operating profits to 520 million, shares rose 5p to 762.5p and are well above the 700p proposed by Murdoch in the summer before it embarked on its quest for regulatory approval.

Pharmaceuticals giant AstraZeneca failed to hold on to gains, closing down 31.5p to 3,042p despite reporting a smaller-than-expected drop in fourth quarter profits of 5 per cent to $2.7 billion (1.7bn).It warned of a challenging few years for the industry, but Astra said it continued to plan for annual revenues in the range of $28bn and $34bn.

Outside the top flight, shares in pub companies were on the front foot after bar and restaurant operator Mitchells & Butlers kicked off the sector's reporting season with bumper sales figures for Christmas and New Year.

Like-for-like sales jumped 6.7 per cent in the key 12-day trading period and helped the firm to overcome weather disruption in the early part of December.M&B's shares were 14.2p higher at 357p as it revealed a 2.5 per cent rise in like-for-like sales for the nine weeks to 22 January.

There was a knock-on effect for other pub companies as Greene King - which owns the Belhaven brewery and is due to report figures on Monday - lifted 9p to 456.7p and Marston's added 2.3p to 103.8p.