(Sharecast News) - London stocks fell sharply in early trade on Friday amid escalating tensions between the US and China, although there was some encouraging news in the form of UK retail sales data.
At 0855 BST, the FTSE 100 was down 1.8% at 6,101.33.

Spreadex analyst Connor Campbell said: "Though it has felt like a weirdly aimless week, it seems the markets have settled on a direction - and it's not up.

"In a fairly predictable, if no less troublesome, move, Beijing ordered the closure of the US consulate in Chengdu, as retaliation for the Trump administration shuttering the Chinese consulate in Houston.

"The fear is that this might only be the start of a re-escalation in tensions between the two superpowers, especially as Trump seeks to distract from his disastrous domestic policies in the run-up to November's Presidential election.

"China has said that it 'does not want to see' the current situation, and that the 'responsibility rests entirely with the United States' regarding what happens next. Which, given the leadership stateside, has provided no comfort to investors at all."

On home turf, the latest figures from the Office for National Statistics showed that retail sales continued to recover in June as non-essential shops reopened amid the lifting of coronavirus restrictions.

Retail sales rose 13.9% on the month following a revised 12.3% increase in May, beating expectations of an 8% jump. On the year, retail sales were down 1.6% in June, which was a big improvement on the 12.9% decline seen in May and better than expectations of a 6.4% fall.

Jonathan Athow, ONS deputy national statistician for economic statistics, said: "Retail continued to recover from the sharp falls seen in April, with overall sales now almost back to pre-pandemic levels. But there are some dramatic differences in sales across the retail industry.

"Food sales continue above their pre-pandemic levels due to the closure of cafes, restaurants and pubs. Online sales have risen to record levels, and now count for £3 in every £10 spent. On the other hand, clothing sales remain depressed and across the high street sales in non-food stores are down by around one-third on pre-pandemic levels.

"The latest three months as a whole still saw the weakest quarterly growth on record."

Still to come on the macroeconomic front, Markit's services and manufacturing PMIs for July are due at 0930 BST.

In equity markets, Vodafone fell after it said first-quarter organic service revenue declined 1.3%, with total revenue down 1.4% to £10.5bn. The company also announced that it plans to list its towers infrastructure business in Frankfurt early next year.

Education publisher Pearson lost ground after saying it swung to a first-half loss due to the impact of the coronavirus, but that it expects to deliver adjusted operating profit broadly consistent with expectations.

Cineworld was under the cosh after Disney said it was delaying the release of Mulan and Spiderman indefinitely and pushing back the release of the Star Wars and Avatar films by a year.

On the upside, plumbing and heating supplies group Ferguson rallied after it said trading had improved steadily since the height of lockdowns in April.

Centrica surged to the top of the FTSE 250 as the British Gas owner said it was selling its US energy business to NRG Energy $3.6bn (£2.87bn) as part of a plan to turn the company around. It also reported a half-year loss of £135m due to the pandemic as it took a one-off charge of £1bn.

Engineer IMI was a high riser after it posted a jump in interim profit, thanks in part to a temporary surge in demand for ventilator parts due to Covid-19, and said it was reinstating its full-year dividend.

Market Movers

FTSE 100 (UKX) 6,101.33 -1.77%
FTSE 250 (MCX) 17,305.27 -1.05%
techMARK (TASX) 3,768.77 -1.98%

FTSE 100 - Risers

Ferguson (FERG) 6,996.00p 1.77%
Pennon Group (PNN) 1,059.50p 0.52%
Tesco (TSCO) 216.70p 0.32%
United Utilities Group (UU.) 874.60p 0.28%
Morrison (Wm) Supermarkets (MRW) 185.00p 0.14%
Sainsbury (J) (SBRY) 189.95p -0.03%
National Grid (NG.) 905.00p -0.07%
Severn Trent (SVT) 2,409.00p -0.08%
Phoenix Group Holdings (PHNX) 672.20p -0.09%
Unilever (ULVR) 4,665.00p -0.13%

FTSE 100 - Fallers

M&G (MNG) 165.30p -4.56%
Scottish Mortgage Inv Trust (SMT) 873.50p -4.38%
Vodafone Group (VOD) 123.36p -4.22%
Pearson (PSON) 527.80p -4.04%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,088.00p -3.94%
Evraz (EVR) 293.80p -3.92%
Melrose Industries (MRO) 105.15p -3.44%
Ocado Group (OCDO) 2,106.00p -3.35%
Burberry Group (BRBY) 1,300.00p -3.35%
Rolls-Royce Holdings (RR.) 262.80p -3.24%

FTSE 250 - Risers

Centrica (CNA) 49.92p 23.66%
Petropavlovsk (POG) 39.60p 7.61%
IMI (IMI) 1,070.00p 6.36%
PureTech Health (PRTC) 280.00p 3.70%
Watches of Switzerland Group (WOSG) 290.00p 2.29%
PayPoint (PAY) 605.00p 0.83%
Chemring Group (CHG) 245.50p 0.61%
Finsbury Growth & Income Trust (FGT) 849.00p 0.59%
Pershing Square Holdings Ltd NPV (PSH) 1,966.00p 0.51%
Cranswick (CWK) 3,700.00p 0.49%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 49.52p -6.48%
Cineworld Group (CINE) 50.20p -5.32%
Equiniti Group (EQN) 140.20p -5.27%
Allianz Technology Trust (ATT) 2,275.00p -5.01%
Trainline (TRN) 413.60p -4.66%
Edinburgh Worldwide Inv Trust (EWI) 267.00p -4.47%
National Express Group (NEX) 152.70p -4.32%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,088.00p -3.94%
Polar Capital Technology Trust (PCT) 1,960.00p -3.45%
Fidelity China Special Situations (FCSS) 296.50p -3.42%