* FTSE 100 drops 1 pct, hits new 1-month low
* Index down for 5th session on worries about Ukraine, China
* Morrison's slump also hits Sainsbury, Tesco and M&S
* General retailers gain on Home Retail outlook
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 11.9 percent, and its revised outlook
triggered a sell-off among rival food retailers, with
Sainsbury's tumbling 8.5 percent and Tesco and
Marks & Spencer falling by 5 percent and 3.1 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 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 1.1 percent.
A Datastream 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 six and
seven times their averages for the past three months,
respectively. The volume on FTSE stocks as a whole was 30
percent above the index's average.
The blue-chip FTSE 100 index fell 1 percent to
6,553.78 points, hitting a new one-month low on growing concerns
about a conflict in the Ukraine and jitters in the Chinese
The FTSE extended losses in late trade as Ukraine's acting
president said that Russian forces were concentrated on the
border "ready to invade", although he believed international
efforts could end Moscow's "aggression" and avert the risk of
Also hitting stocks and especially those of mining
companies, 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 late sell-off 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.