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FTSE -100 index closes mixed

LONDON: Britain's FTSE 100 index endured a roller-coaster ride only to end mixed on Thursday, in a session marked by an expected Bank of England interest rate rise and strong performances from leading telecom stocks.

And with stronger-than-expected U.S. retail sales figures aggravating concerns about higher rates across the Atlantic, the UK benchmark index ended down just 1.3 points at 6,531.5 -- some 398 points or 5.8 percent below its record closing high of 6,930.2 set on December 30.

Falls by pharmaceutical group Glaxo Wellcome and oil giant Shell Transport & Trading were the biggest drags on the leading index, while Cable & Wireless starred in the buoyant telecom sector, after the group unveiled a billion dollar push into the European Internet industry.

The FTSE 100 index had been up around 63 points moments after the Bank of England raised its key lending rate by a widely expected 25 basis points. Dealers said there was some immediate relief that the rate hike had not been 50 points, as a few market players had predicted.

But as the session wore on, dealers said investors were starting to fret that the UK central bank had not done enough to stave off inflation and further rate rises were inevitable.

"We are certainly not out of the woods in terms of concerns over economic activity and inflation, and subsequent interest rate rises," said Deutsche Bank equity strategist David McBain.

"And the punchy U.S. retail sales number only underlines the concerns about rates over there." However, worries over the U.S. sales figures were tempered by producer price data which met market expectations.

The Dow Jones average was up around 23 points at the London close, by which time UK market turnover had reached an impressive 1,574 million shares.

Elsewhere, home shopping group Great Universal Stores GUS.L brought some welcome relief to the troubled retail sector after the company reported a better-than-expected sales performance over Christmas. The stock rose 8.5 percent.

Clothing and food retailer Marks and Spencer rose 3.9 percent, helped by ongoing speculation the group will be taken over. Accounting software company Sage Group was the best FTSE 100 performer, helped by an earnings upgrade and a repeated "buy" recommendation from Credit Suisse First Boston. The stock gained 11.9 percent, building on Wednesday's gains following the successful placing of 43.7 million new shares. FTSE ends mixed as firm telecoms offset rate 3

Other notable gainers in the FTSE 100 index included BT BT.L, Colt Telecom and Vodafone AirTouch , as well as British American Tobacco The latter rose 3.6 percent, bouncing from 5-1/2 year lows as an interview with Chairman Martin Broughton helped focus attention on the stock.

On the downside, media and leisure company Granada Group continued its recent volatile run, falling 9.2 percent.

From a chart point of view, Deutsche Bank technical analyst Elizabeth Miller said the FTSE 100 could retrace higher in the short-term following its sharp downward move early in the new year.

"6,638 is a key level and if it broke that we are looking at resistance at 6,687 and 6,750," Miller said. "We could make it as high as 6,750 and then start coming off again."

The Deutsche analyst saw 6,400 as a critical support level for the FTSE 100, adding a break below that level could prompt a fall through 6,000. The FTSE 250 index of medium-sized stocks also had a mixed session, closing down 3.6 points at 6,528.5.

Engineering group was its biggest decliner, after unveiling plans to issue a debut euro-denominated bond worth between 300 and 400 million pounds. The stock dropped 8.4 percent.

Photo-Me International was the index's best performer, rising 24 percent on optimism ahead of the group's first half figures next week.

London Bridge jumped 16 percent on news of the software writer's worldwide distribution deal with U.S. firm Alltel Corp -Reuters.