LONDON (ShareCast) - London's blue chips have bounced back into the blue despite poor retail sales data and a sharp jump in inflation in July.

ITV leads the risers, helped by continued bid talk. InterContinental Hotels is also going well helped by a 29% rise in first-half operating profits to $284m, in line with forecasts.

Retailers are under pressure after retail sales fell again in July, making it four down months out of five now, with “frivolous shopping off the agenda”, according to the British Retail Consortium.

Things could get worse, warned the BRC, as like for like sales dropped 0.9% last month, while total sales were up just 1.7% against last July, one of the worst performing months of 2007. M&S, Next and Kingfisher are all lower.

In the FTSE 250, housebuilders started well following strong gains yesterday but are now marginally ahead. Barratt, is one of the gainers helped by stake-building by US firm Polaris.

The experience of the US does not bode well for the UK newspaper sector, JP Morgan said as it lowered its rating on Trinity Mirror to ‘underweight’ from ‘neutral’. The Mirror publisher is also among the heaviest fallers.

UBS has lowered its rating on Old Mutual to ‘neutral’ from ‘buy’ and cut its target price to 108p from 132p, following the South Africa-exposed insurance company’s interim results last week.

Merrill Lynch predicts a worsening trading environment for Speedy Hire over the next couple of years and downgrades its rating on the tool hire specialist to ‘neutral’ from ‘buy’.

Grainger has given the sector a lift with a trading statement. Trading reamns tricky it said, but it is still achieving sales of its residential properties.

Elsewhere, Tesco has announced plans develop a wholesale cash-and-carry business in India, with an initial investment of up to £60m in the first two years. The new wholesale outlets will be designed for the Indian market following local research. Tesco is also entering into an exclusive franchise agreement with Trent, the retail arm of the Tata Group.

Broker and bid target Collins Stewart's profits slumped by 82% in the first half to £9.6m from £52m. "Market conditions are obviously challenging and have adversely affected the Capital Markets division, " chairman Terry Smith said. The interim dividend falls to 1.3p from 2.5p.

Glasgow based engineer Weir delivered an 85% rise in half year pre-tax profit and is confident of achieving further growth for the full year.

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