Britain's FTSE lags after Unilever warning

Tue Oct 1, 2013 7:04am EDT

* FTSE 100 down 0.2 pct, lags other European markets
    * Unilever sales warning hits Reckitt, SABMiller
    * Investors calm over U.S. government shutdown

 (Updates prices, quotes, adds detail)
    By Alistair Smout
    LONDON, Oct 1 (Reuters) - Britain's top share index fell on
Tuesday, lagging other European bourses after a sales warning
from Unilever that also hit other companies exposed to
emerging markets.
    Unilever fell 3.6 percent to an 11-month low after the
consumer goods company said a slowdown in its emerging markets
business had accelerated, prompting a cut to its third quarter
sales expectations. 
    Consumer staples such as Unilever had been the share
market's outperformers this year, up 20 percent by July.
    "There's an enormous gulf between emerging market index
performance and the performances of stocks like Unilever and
Diageo, which have traded at premium multiples," Andy Ash, head
of sales at Monument Securities, said.
    "Having said that, concerns with emerging markets for these
stocks aren't anything new, and we're now 20 percent from the
(2013) top in Unilever, so anyone selling today is a little bit
late to the idea," he added.
    He said he expected support for the stock around 22.50
pounds.
    Analysts at Nomura cut their earnings per share forecast and
target price on Unilever by 6 percent and said the warning
"creates uncertainty for some peers" such as Reckitt Benckiser
. Shares in Reckitt were down 1.5 percent.
    Drinks companies SABMiller and Diageo also
suffered, down 2.9 and 1.7 percent, respectively. The four
companies were in the top five fallers on the FTSE 100.
    At 1040 GMT, the FTSE 100 was down 12.71 points, or
0.2 percent, at 6,449.51, with consumer staple stocks wiping
over 16 points off the index.
    Unilever was the 17th least shorted stock on the FTSE 100
with just 0.55 percent of the shares available out on loan,
according to Markit, well down from just below 4 percent in
June, suggesting the market was not anticipating the warning.
    "Our client base trades Unilever from the long perspective,
because of its quality brands ... but it seems that consumers
are going for the budget brads over the premium ones," said
Jordan Hiscott, trader at Gekko Global Markets. 
    "So the move down this morning has caught some of our
clients out. We've got liquidations of long positions."
    The FTSE 100 underperformed every major index in Europe,
which managed gains as investors took a sanguine view of a
partial shutdown of the U.S. government that began overnight,
potentially putting up to 1 million workers on unpaid leave,
closing parks and stalling medical research. 
    Although there were no signs of a resolution on the budget -
which is needed to resolve the shutdown - analysts took the view
that a compromise will be found soon, and that politicians will
also agree over raising the debt ceiling later this month, thus
avoiding a U.S. sovereign default.
    "As long as they can get a deal in before Friday, I think
the volatility of the market should decrease," said Hiscott.
    The shutdown might also further delay the U.S. Federal
Reserve's plans to start tapering its monetary stimulus, some
investors speculated.
    ($1 = 0.6175 British pounds)

 (Additional Reporting by David Brett and Toni Vorobyova;
Editing by John Stonestreet)