* FTSE 100 ends day down 1.3 pct at 6,738.45 points
* Airlines slump after Air France profit warning
* M&S falls after latest sales drop
* Shire down as latest Abbvie offer fails to convince
* Slump in UK factory output also weighs on sentiment
By Sudip Kar-Gupta
LONDON, July 8 Britain's top equity index
dropped on Tuesday after airline stocks such as International
Consolidated Airlines Group were hit by a profit
warning from Air France-KLM.
The blue-chip FTSE 100 index fell 1.3 percent or
85.06 points to 6,738.45 points.
International Consolidated Airlines Group - the owner of
British Airways - slumped 7 percent after Air France-KLM's
profit warning, making ICAG the worst-performing FTSE 100 stock
in percentage terms.
Low-cost airline easyJet also fell 5.8 percent after
Air France-KLM warned its 2014 profits could be as much as 12
percent lower than previously predicted because of over-capacity
and weak prices.
"The profit warning just before the busy summer months for
the airlines sector has dampened investors' sentiment. It's a
confirmation that, generally, the last three months had been
difficult for the sector," said Accendo Markets' senior trader
SHIRE AND M&S FALL
Clothing and food retailer Marks & Spencer fell 1.3
percent after the company reported that first-quarter sales had
been held back by its transition to a new website.
M&S kept its full-year profit guidance, but many analysts
said the company remained under pressure, with its results on
Tuesday showing a 12th consecutive quarterly drop in overall
general merchandise sales.
"I think M&S has got its work cut out," said Beaufort
Securities sales trader Basil Petrides, who had sold M&S shares
in the run-up to Tuesday's business update.
Drugmaker Shire also fell 2.6 percent as traders
expressed disappointment at rival Abbvie's latest offer
for Shire, with some saying they wanted Abbvie to offer more
Traders said a surprise slump in UK factory output in May
was also putting pressure on the FTSE.
Previous rallies this year have failed to get the FTSE past
6,900 points, which is considered a necessary hurdle to jump
before it can move on to record highs.
"The UK data certainly has not helped. The FTSE just
continues to underwhelm", said Hantec Markets analyst Richard
(Additional reporting by Atul Prakash; Editing by Hugh Lawson)