UK shares fall as trade talk hopes fade; weak Christmas hurts retail

(Reuters) - British shares were lower on Thursday, moving off one-month highs as a lack of detail from trade talks between Washington and Beijing dented investor confidence, and weak news from the high street renewed worries about the retail sector.

The main index (FTSE) dipped 0.4 percent and the midcaps were 0.2 percent lower at 0939 GMT, after touching their highest in roughly a month in the last session when hopes of a trade deal lingered.

European and Asian markets pulled back when the world's two largest economies failed to give concrete details of efforts to end their trade war, and on growing concerns of political instability in the United States.

President Donald Trump stormed out of talks with Democratic congressional leaders on Wednesday over funding for a border wall with Mexico and reopening the government.

Amid growing uncertainty around Brexit, British Prime Minister suffered a further blow late on Wednesday when parliament demanded her government come up with a "Plan B" within days if she loses a vote next Tuesday on her divorce deal, as the March 29 exit date ticks closer.

Business minister Greg Clark said a no-deal Brexit would be a disaster and partners such as Japan need assurance that it will be avoided.

IG analyst Chris Beauchamp said forex and stocks were "still, oddly, ignoring the (political) chaos, with the business secretary’s intervention about avoiding 'no deal' also helping."

Adding to signs of an economic slowdown ahead of the deadline, data from the British Retail Consortium (BRC) showed retailers failed to increase their Christmas sales for the first time since the depths of the financial crisis a decade ago.

Tesco (L:TSCO), Britain's biggest retailer, bucked the trend with a 2 percent rise in its share price after a 2.2 percent rise in UK like-for-like sales over Christmas. Jefferies analysts said the trading update confirmed Tesco as the "clear 2018 UK Christmas winner".

Otherwise, the largely downbeat trading updates from high street staples - Marks & Spencer (L:MKS), Debenhams (L:DEB) and Halfords (L:HFD) - deepened the gloom across the retail sector as shoppers reined in spending.

The index (FTNMX5370) snapped a 6-day winning streak.

Halfords, a cycling and car parts chain on the midcap index, slumped 18 percent to its lowest in more than six years while Card Factory (L:CARDC) plunged 10.5 percent to a life low after their trading updates disappointed investors.

Small-cap department store group Debenhams slid nearly 10 percent after saying it was looking for fresh funding as the 241-year-old group battles to survive.

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Dragging down the main index were miners (FTNMX1770), which are particularly sensitive to the trade situation, falling 1.4 percent after four sessions of gains on optimism leading up to the trade talks.

Burberry (L:BRBY) was one of the biggest fallers, another victim of concerns about China's slowing economy as the trade row rumbles on. A Berenberg downgrade also weighed.

Pub firm Mitchells & Butlers (L:MAB) brought some cheer to the mid caps with a 5.2 percent rise after reporting higher comparable sales for the three-week holiday season.

While Q2 may be tough as customers embrace 'dry January', Liberum reckons the pub group will meet 2019 like-for-like sales growth expectations of 3 percent.

"The improvement in trading, combined with the prospect of reducing pension payments flagged at the prelims, helps to allay some of our strategic concerns," Liberum analysts said.