* FTSE 100 slips 0.7 pct, hits new 1-month low
* Morrison's slump also hits Sainsbury, Tesco and M&S
* General retailers gain on Home Retail outlook
* Worries about Ukraine, China drag on index
By Francesco Canepa
LONDON, March 13 British shares fell for a fifth
straight session on Thursday, dragged down by supermarket stocks
after WM Morrison cut its profit outlook, as well as by
escalating tensions between Russia and the West over Ukraine.
Morrison's was the worst performer on the FTSE 100
index, plunging 11 percent, and its revised outlook
triggered a sell-off among rival food retailers, with
Sainsbury's, Tesco and Marks & Spencer
all falling by between 3 percent and 4.6 percent.
Morrison's said it would spend 1 billion pounds ($1.66
billion) on price cuts over three years. That fuelled concerns
about pressure on margins in the sector, which faces stiff
competition from discount chains such as Lidl and
"Everyone feels Morrison's and some of the other
supermarkets have to take on the Aldis and Lidls of this world
and ... get their prices down, and that's not good for profits,"
said Mike Franklin, investment strategist at Beaufort
Securities. "I'd wait a bit for the food retailers to get out of
this particular patch (before considering buying)."
Despite signs that Britain's economic recovery is gaining
momentum, profit worries have kept investors cautious about food
retailers. They have preferred other sectors exposed to the UK
economy, such as general retailers or house builders.
That continued on Thursday. Shares in Home Retail Group
jumped 5.8 percent after the owner of retailers Argos
and Homebase said annual profit would exceed the top end of
market forecasts. Kingfisher, Europe's biggest
home-improvement retailer, rose 1.8 percent.
Datastream's index of UK food retail stocks fell 5 percent
between the start of the year and March 12, underperforming a 10
percent rise for general retailers. Food retailers were left
trading at a 24 percent discount to general retailers based on
their price-to-earnings ratios, the widest gap since 1999.
"If you wanted to pick up something relatively cheaply and
you're prepared to hold on to it for some time, then they (UK
foods retailers) may be quite attractive, but it may take some
months to see the benefit of that," Beaufort's Franklin said.
Trading volumes in Morrison's and Sainsbury's were five and
six times their averages for the past three months,
respectively. The volume on FTSE stocks as a whole was 91
percent the index's average.
The blue-chip FTSE 100 index slipped 0.7 percent to
6,571.60 points and hit a new one-month low on growing concerns
about a conflict in the Ukraine and jitters in the Chinese
Russia announced on Thursday it had started military
exercises near the border with Ukraine and Interfax reported
Moscow had sent six Su-27 jet fighters and three military
transport planes to ally Belarus.
These moves were likely to be seen as a show of force in the
standoff with Kiev and the West ahead of a referendum in Crimea
on Sunday, when residents of the region will vote on whether to
secede from Ukraine and join Russia.
Hitting UK mining stocks in late trade, Chinese banking and
industry sources told Reuters that banks in the world's No. 2
economy and top metals' consumer have cut lending in some
sectors by as much as 20 percent.
The drop in mining stocks dragged the FTSE down through
chart support at 6,580, which corresponds to its 200-day moving
average, triggering automated sell orders from technical
"Geopolitical risk (is) overtaking market technicals," Ed
Woolfitt, head of sales at Galvan, said.
The FTSE 100 rose 14.4 percent in 2013, its best annual gain
since 2009. It reached its highest level in around 13 years in
early January this year.
"Investors are running for cover at the moment. I could see
the FTSE falling down to the 6,500-point level soon," said
Berkeley Futures associate director Richard Griffiths.