UK retail sales slump 3.2 in Dec vs est 0.5 drop
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FTSE 100 up 0.6, FTSE 250 adds 0.4

Jan 19 Reuters London39;s bluechip share index rose on Friday, as the pound came under pressure from a much weakerthanexpected retail sales data, which further swayed expectations around when the Bank of England would start cutting interest rates.

The FTSE 100 rose 0.6, extending its climb for a second day, but still on course for a weekly loss.

Data showed British retailers suffered the biggest drop in sales in almost three years during December, raising the risk that the economy entered a recession in the fourth quarter.

Retail sales volumes shrank 3.2 between December and November as people did their Christmas shopping earlier than usual. The numbers were worse than economists39; forecast for a 0.5 drop.

The BOE will become increasingly of the view that the economy is slowing quite dramatically and they need to start easing rates, said Roger Jones, head of equities at London Capital.

Inflation does look like it will continue in a downward path despite the data earlier showing a small tickup. In terms of the timing, we39;re speaking Q2 when the bank will probably be armtwisted to start cutting rates.

The sterling dipped 0.2 after the data was released, in turn lifting dollar earners such as Shell and AstraZeneca, which draw a large part of their revenue overseas.

The domestically focussed FTSE 250 index…