August 6, 2014 / 11:11 AM / 3 years ago

UK FTSE set for biggest fall in a month on Ukraine, economic gloom

* FTSE 100 down 1.2 pct to three-month low

* Index on course for sharpest daily fall in a month

* Disappointing economic data across Europe weaken demand

* Ukraine/Russia tensions hit global equity markets

By Francesco Canepa

LONDON, Aug 6 (Reuters) - Britain's top equity index was on track for its steepest one-day fall in a month on Wednesday, pummelled by disappointing economic data and mounting concern over the Ukrainian crisis.

The FTSE 100 index had fallen 78.02 points, or 1.2 percent, to 6,604.46 points by 1149 GMT. That put it on course for its biggest fall since July 8 and a three-month low of 6,588.43 points.

The index extended losses after gloomy data from Britain and continental Europe, two areas where British blue chips get about half their sales. Reports showed British industrial output and manufacturing grew less than forecast in June, Italy unexpectedly slid into recession in the second quarter and German industrial orders fell short of forecasts.

"The European equity indexes had been moving ahead of events," Chris Hiorns, fund manager at Ecclesiastical, said. "The economy recovery that this bull run in equities was based upon is not really that evident, and that has hurt sentiment."

Drugmaker Shire, down 4.6 percent, led declines on the FTSE after three prominent U.S. senators urged President Barack Obama to use his executive authority to reduce or eliminate tax breaks for companies that shift their headquarters overseas to cut their U.S. tax bills.

Shire has agreed to a $55 billion takeover by U.S. rival AbbVie. After buying Shire, AbbVie plans to locate the combined company in Britain, where taxes are lower.

Weighing on broader investor sentiment was news that Russia had massed around 20,000 troops on Ukraine's eastern frontier and could use the excuse of an humanitarian or peacekeeping mission to send them across the border, according to NATO.

"As the tensions mount, we'll see more of a correction on the equity markets. The mentality now is not to buy on dips but to sell on rallies," said Securequity sales trader Jawaid Afsar.

Eight British blue chips went ex dividend on Wednesday, shaving up to a further 14 points off the FTSE 100. (Additional Reporting By Sudip Kar-Gupta; Editing by Larry King)

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