* FTSE 100 index falls 0.3 percent
* Tesco hit by multiple target cuts a day after update
* ITV special dividend not enough to halt profit-takers
* Diageo also a drag as it trades ex-div
By Simon Jessop and Atul Prakash
LONDON, Feb 26 A batch of analyst cuts prompted
a rush to the exits for investors in retailer Tesco
that weighed on the blue-chip FTSE 100 on Wednesday,
dragging it further away from a recent multi-year high.
Nomura, Oriel, Cantor and Jefferies were among those that
cut ratings or price targets on Tesco, the world's third-largest
retailer, a day after it flagged price cuts and scaled back its
operating margin goal.
Demand to sell out of the stock was strong enough to leave
Tesco down 3.9 percent and on course to post its biggest daily
fall since June 2013. There was heavy volume on the stock just
shy of its three-month daily average and three times that in the
"You have to ask why investors need to be in this stock at
the moment. I would advise caution on the stock," said Graham
Jones, analyst at Panmure Gordon. "At least in the next six
months, I don't see what's going to change at Tesco to make
investors' sentiment more positive."
The scale of the weakness in Tesco weighed on the broader
European retail sector and caused the STOXX Europe 600 Retail
index, down 1.1 percent, to lag sectoral peers.
Tesco's heavy weighting within the FTSE meant it acted as a
drag on the parent index and left it down 0.3 percent, or 20.3
points, at 6,810.14 points by 1042 GMT, although fund flows into
Europe remain positive and many expect the fresh 14-year closing
high hit on Monday to be extended in the coming weeks.
"Investors have become cautious as they think the market is
due for a correction after rising too far, too fast. They are
waiting for some catalysts before pushing the FTSE 100 towards
record highs," Tom Robertson, senior trader at Accendo Markets.
"If we test 6,850, then we could be set for higher highs and
the next target would be the all time high of 6,950.60. But if
we fail to break through the 6,850 level in the near-term, the
market would become vulnerable to more profit taking."
Also feeling investors' ire, and leading the FTSE 100
fallers in spite of plans to issue a special dividend, was
broadcaster ITV, down 4.9 percent in volume twice its
three-month average after less than three hours of trade.
That left the stock on course for its biggest daily fall
since May 2012, with some traders pointing to comments around
future investment as a reason to take profits on a stock that
has been one of the best FTSE performers over 6 months.
"(The) results are all good but the extra investment in
programming that they have announced today means no upgrades
which is likely to take the gloss off their performance," an
equity sales trader at a UK brokerage firm said.
Compounding the early weakness were falls for Diageo
and easyJet, down 1.5 percent and 2.4 percent,
respectively, after they began to trade without entitlement to
the latest dividend payout.