* FTSE 100 down 0.4 pct, Tesco among worst performers
* Ex-dividend stocks take around 5.5 points off FTSE
* Tesco falls after drop in underlying sales
* Lingering bid talk lifts Smith & Nephew
By Sudip Kar-Gupta
LONDON, June 4 Britain's top equity index fell
on Wednesday, weighed down by Tesco after the
supermarket retailer posted its biggest quarterly UK sales drop
in 40 years.
The blue-chip FTSE 100 was down 0.4 percent, or
24.37 points, at 6,811.78 points going into the close of the
Tesco's 1.6 percent fall was one of the biggest setbacks for
the FTSE, after the retailer's figures ratcheted up the pressure
on boss Phil Clarke to show he can counter challenges in the
Brokerages Cantor Fitzgerald and Shore Capital both kept
"sell" ratings on Tesco.
Strand Capital managing director Kyri Kangellaris said the
fall in Tesco's shares made it worth buying as a long-term
investment, but Mirabaud Securities' equity research partner
Steve Clayton said Tesco did not look that good a bet for now.
"So far, to our eyes, Tesco's price-cutting strategy is not
benefiting the business in terms of profits or cash flow," he
A strengthening in sterling after data
showed an expansion in Britain's services sector also prevented
the FTSE from breaking into positive territory, since a strong
pound can curb British exports.
Stocks going ex-dividend, losing their entitlement for the
next payout, took around 5.5 points off the index.
Bucking the trend, medical devices manufacturer Smith &
Nephew (S&N) rose 2 percent. Traders attributed that to a
research note from JP Morgan, whose analysts said speculation of
a possible bid from rival Stryker could support the
stock over the next three to six months.
JP Morgan also mentioned comments from S&N's management that
the company could win market share due to disruption caused by
sector consolidation, such as Zimmer's bid for Biomet
The FTSE hit a peak of 6,894.88 last month, its highest
level since December 1999, but has so far failed to break the
6,900 level. Some traders saw it making little near-term
progress unless it gets past that barrier.
"If the FTSE remains above 6,770, then the trend is still
positive, but it needs to get over 6,900 to find new space for
another rally," said Carlo Alberto de Casa, senior market
analyst at online brokerage ActivTrades.
(Additional reporting by Atul Prakash; Editing by David