BoE revision of GDP forecasts for this year and next leaves markets weaker

FTSE: 5,976.00 (-42.89) Mid-250: 12,017.87 (-37.28) Small Cap: 3,281.47 (-17.57):THE LONDON market closed in the red yesterday as a weaker outlook for UK growth and a widening US trade deficit painted a gloomy picture of the global recovery.

The Bank of England said UK GDP would only rise 1.7 per cent in 2011, compared with a previous forecast of 2 per cent, while it also revised next year’s growth to 2.2 per cent from 3 per cent.

Sainsbury’s delivered solid annual profits of £665 million, an increase of 9 per cent, which saw its shares rise 1.3p to 357.1p. This was despite chief executive Justin King’s warning that he expected another challenging year.

Marks Spencer was also up nearly 1 per cent, or 3.3p to 399.2p, after JP Morgan Cazenove increased its target price to 460p and said the company’s proactive pricing strategy was reaping rewards in the tough climate.

Morrisons shares slumped after the company went ex-dividend, meaning new investors will no longer be eligible for a payment. Shares dropped 5.5p to 301.7p.

British Gas owner Centrica was boosted by chatter that the Qatari Investment Authority may be eyeing a buy-out, helping shares to jump 3p to 311.7p.

ITV sank to the bottom of the index after it reported an 11 per cent rise in first quarter revenues but warned it may underperform over the first half of the year due to comparisons with a strong period last year. Shares were 4p lower at 71.9p, or 5 per cent.

HSBC was also under pressure after it put its US branch network and credit cards business under review as part of a multi-billion dollar cost cutting plan. It also confirmed it would exit Russia and focus on wealth management and retail banking in newer markets such as Mexico, Brazil and Turkey. Shares were down 10.1p to 646.1p.

Outside the top flight, shares in supermarket delivery firm Ocado slumped nearly 10 per cent, or 22p, to 211p after a trading update fuelled concerns in the City that trading conditions had toughened for the stock market newcomer.

It reported sales growth of 21 per cent for the half-year but said the second quarter was weaker due to capacity constraints and the additional bank holidays.

The biggest Footsie risers were Burberry up 36p at 1365p, Shire ahead 43p at 1922p, International Power up 5.9p at 330p and Reed Elsevier up 10p at 559.5p.

The biggest fallers were ITV, Fresnillo, off 60p at 1411p, BG Group, down 45.5p at 1367p and Kazakhmys, off 36p at 1265p. – (PA)