Consumer stocks lead FTSE 100 retreat as US debt talks drag

Wed Oct 16, 2013 7:38am EDT

* FTSE 100 down 39.17 points at 6,509.94

* Consumer stocks hit as Danone cuts 2013 goals

* Miners erase previous session's gains on US debt worries

* IMI rallies after selling beverage business

By David Brett

LONDON, Oct 16 (Reuters) - UK consumer-focused stocks fell on Wednesday after a handful of weak updates from major European producers dented sentiment in the sector, while the broader index suffered again from debt wrangling in the United States.

Consumer staples and discretionary stocks combined to take 15 points off the FTSE 100 after Danone, the world's largest yoghurt maker, cut its 2013 goals as problems in China hit third-quarter sales.

Also feeding in to a bearish morning for the sector were surprisingly poor sales from the world's biggest luxury goods maker, Louis Vuitton owner LVMH, and French advertising group Publicis.

UK-listed fashion firm Burberry, which warned on Tuesday that the slowdown in Chinese markets may not be temporary, fell a further 2.4 percent having shed 7.6 percent in the previous session.

By 1044 GMT, London's blue chip index was down 39.17 points, or 0.6 percent at 6,509.94, with investors generally in anxious form after a chaotic day of Congressional wrangling in Washington failed to result in a deal to avert a U.S. debt default as the Oct. 17 deadline loomed.

"I am cognisant of the downside risks here," Dan McCormack, analyst at Macquarie, said. "A default is highly unlikely because nobody wants it  but there could be a larger fiscal tightening than the market is assuming."

"In the near term it's going to be a kick the can down the road exercise as the most likely outcome which just means we go through all this again in three to six months, and it does push uncertainty out for longer."

Having rallied on Tuesday on the belief that U.S. lawmakers were nearing a deal the FTSE 100 erased all the previous session's gains around midday on Wednesday with the miners , a sector acutely exposed to fluctuations in the perception of the global economy, among the heaviest retreaters, down 1.4 percent.

Capita slipped 1.4 percent, extending weakness from the previous session when it was announced that Invesco Perpetual UK equities fund manager Neil Woodford would leave the company after 25 years.

Although Woodford, who will be replaced by Mark Barnett, is not due to leave the company until April 2014, stocks in which his fund has a major holding have weakened on worries that positions could be scaled-back.

Despite the session's retreat technical analysts said that the index's recent uptrend remains intact boosted by rising lows since Oct. 10, which are providing support for now.

Near-term support was seen at 6,525 and there was little resistance expected before 6,665 for any resulting relief rally if and when Washington finally delivers what the markets want, a technical analyst said.

Thin trading volumes suggest many investors are sticking to the sidelines pending fresh developments in Washington. Halfway through the month, the index has traded just over a third of the volume seen for the whole of September.

Reckitt Benckiser was the top weighted faller, down 2.3 percent, while drinks firm SAB Miller, which reports on Thursday, shed 1.3 percent.

On the upside, IMI climbed 2.3 percent to 1,533 pence, topping Britain's FTSE 100 index in brisk trade after the engineer announced the sale of its beverage dispense and merchandising business for 690 million pounds ($1.1 billion).

"We see the disposal as a positive catalyst for the share price given the company strategy to move into higher margin areas... (and) see upside from these levels to trade at close to 17 pounds," Atif Latif, director at Guardian Stockbrokers, said. (Reporting by David Brett)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.