Just Who To Believe...

*** So just who is right?

*** Those damned 'savvy' British consumers...

*** The LSE's lunch dates...bland clothing...how SriLanka can cope...and more.. ------------------ High Street fashioners Next on Wednesday confessedfestive season sales look dire. Just minutes later, theConfederation of British Industry said retail salesshot up at their fastest rate in six months in earlyDecember. So who did investors believe?

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Next, it seems, were the most convincing, asshareholders dumped 3% of the retailer's share value.Despite same-store sales between August and lateDecember rising 3%, Next lowered its full-year pretaxprofits by £5m to £415m.

According to Next CEO Simon Wolfson, festive saleswere 'below where we would expect a normal Christmas tobe', and blamed a bland menswear range which was 'toosimilar to the previous year'.

So why were investors and Money Morning caughtoff-guard by Next's poor figures? Well, not leastbecause of the sheer numbers that your editor witnessedshopping in the chain during post-Christmas salesmania. But it seems analysts have underestimated theBritish shopper.

'The consumer is very, very savvy these days,'Woolworths CEO Trevor Bish-Jones said earlier thisweek. 'The reality is the consumer out there on theback of interest rate rises and increasing utilitybills etc was looking for a deal this Christmas.'

Festive gloom and prospective US interest rate hikesalso knocked the FTSE100 41 points lower on Wednesday,to close at 4,806. And the mid-cap index plunged 1%, totrade at 6,915.

'FTSE is down on the back of the U.S. Fed minutes,which were slightly more hawkish than expected, andwe've seen a bit of follow-through to what went on inthe U.S. overnight,' HSBC's Robert Parkes saidyesterday.

The general retailer sector fell 2% yesterday. Next'sdisappointing sales pulled Marks & Spencer down by 2%,while Boots and Sainsbury fell more than 2%. Evensuperstore giant Tesco traded around 1% down afterbeing lured into a petrol price war with rival Asda.

According to a Tesco spokesman, 'We won't be beatenon the price of fuel in any location and prices in ourstores will fall from [Wednesday].' Asda announced it'sto shave 3p off a litre of unleaded petrol taking theprice to 76.9p per litre.

Casino operator Stanley Leisure plunged more than 11%- as the group issued a profit warning yesterday. Thethorn in Stanley's side? Well, that would be one luckygambler who won £3m at one of its London casinos. Thecasino group also said unpaid gaming debts may not becollected before the financial year-end. ------------------ London Stock Exchange chief Clare Furse has a busyweek ahead of her. Furse is supposed to be meeting herDeutsche Boerse counterpart, Werner Seifert today, tohear his plans for the LSE should the Germans succeedin their takeover bid. Deutsche Boerse has alreadyoffered £1.3bn for the LSE although the bid wasrejected as being too low.

Then Friday Furse is due to meet the Germans' rival,Euronext the French stock exchange also after theLSE. The French are yet to make an official bid for thegroup, although they're expected to do so in the nextfew weeks. In fact, the LSE chief must be enjoying hernumerous lunch dates.

'The LSE is in a very comfortable position and canplay Deutsche Boerse and Euronext against each other,'one analyst said yesterday, 'waiting relaxed for thebetter offer.'

The LSE may be comfortable, but the group'sshareholders were less so. The LSE's share price shed0.5% to close at 585p yesterday although it stilltraded well above the 530p-per share offered by theGermans.

Bid speculation even pushed retail struggler JJBSports 1% higher despite the market predictingflailing festive sales for the sports store. Bothinsurer Royal & Sun Alliance and health stock SSLInternational traded around 1% into the black, alsotickled higher by takeover gossip.

And what happened in the middle of the market bustleyesterday? Well the entire City and the whole country came to a 3-minute halt around midday in memory ofthe tsunami victims. This as Sri Lanka the countrywith the second-highest death toll faces a £691m billfor reconstruction this year alone. And the amount isexpected to climb in 2006.

In fact, of all the countries hit by the tsunamis,Sri Lanka heavily reliant on tourism may suffer themost. How bad could it be? Well, perhaps economicallyanyway, things could have been worse.

Economists reckon the country's GDP could still growat 5.5% this year just 0.5% less than initiallypredicted. Even the Colombo All Share index has heldstrong, trading 1.5% up yesterday to close at 1,548.

What's more, reconstruction in the country could justgenerate new economic activity thereby buffering morelosses Until tomorrow Heather D'AltoMoney Mornin