Next and Co plunge as price of cotton hits a record high

With the raw material at an all-time high, Next landed the FTSE 100's wooden spoon, off 71p to 1992p, Marks & Spencer shed 8.6p to 363p and Debenhams dipped 0.5p to 64.7p.

Cotton rocketed above $1.90 a pound this morning after India kept its current export cap to support its own textiles industry. Industry experts attributed the rise in the fibre's price to speculative buying, rather than mills stocking up. Next first warned of rising costs last August when cotton was just $0.85.

Liberum Capital analyst Simon Irwin, who rates the clothing chain's shares a "hold", said: "Although we expect Next to be pragmatic in passing on higher input costs, we have less confidence in peers, and commodity prices have been moving well ahead of guidance.

"[Rising] cotton prices [have added] another 6% to garment prices on top of the existing pressure from labour, currency and tight manufacturing capacity." Irwin has cut his forecasts for pre-tax profits next year by 6.3% to £544 million and trimmed his target price to 2020p.

London's equities fell, with the FTSE 100 extending its losing streak into a third day. The benchmark dropped 38.09 points to 5981.92.
Barclays was another drag, losing 6p to 307p. The lender kicks off the bank-reporting season on Tuesday and Evolution Securities warns that it will be new chief executive Bob Diamond's responsibility to offer "a radical shift in its business mix".

The broker is a seller of Barclays' shares, with analyst Arturo De Frias Marques saying: "Project Merlin is good news but the next obstacle - capital - will be far more difficult to negotiate." He reckons Barclays needs £7 billion of fresh capital in order to meet expected demands from UK regulators on capital requirements.

Legal & General took gold among the blue-chips thanks to a bullish note from Nomura. The insurer's shares jumped 2.8p to 121.6p as the Japanese broker said the market is underestimating growth potential at its asset management arm.

On the mid-tier, Ocado was the day's unloved stock after John Lewis's pension fund sold its 10.4% stake in the internet grocer. Ocado dropped 48p to 237p.

Centamin Egypt lost 7½p to 132½p after yesterday's reports that Egyptian president Hosni Mubarak would step down immediately proved false. The gold miner's shares surged yesterday afternoon on the inaccurate claims.

Northumbrian Water ticked up a further 1.6p to 315.7p. Gossips reheated bid whispers yesterday afternoon about the utility group, with its biggest investor, the Ontario Teachers' Pension Fund, once again mooted as a suitor with a sovereign wealth fund.

Rentokil Initial slipped back 2.6p to 99.3p as Deutsche Bank cut its rating on the rat-catcher from "buy" to "hold". Analyst Tom Sykes warned of the impact of rising textile and fuel costs and believes that December's snow may have exacerbated problems at its City Link parcel delivery arm.

Among the small caps, Sound Oil surged 0.4p to 2.76p after a morning of presentations to the City. The energy explorer raised £3.2 million last month for its drilling campaigns.