October 4, 2018 / 8:52 AM / 2 months ago

Britain's FTSE set for biggest drop in a month, U.S. yields weigh

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* FTSE 100 down 0.8 pct

* British American Tobacco falls 3.8 pct

* Aston Martin extend post- IPO losses

By Tom Wilson

LONDON, Oct 4 (Reuters) - The UK’s top share index fell on Thursday morning, dragged down by the defensive consumer goods sector as strong U.S. economic data lifted Treasury yields to their highest since mid-2011, putting pressure on global markets.

The FTSE 100 fell 0.8 percent to 7,450.15 points by 0839 GMT, on course for its biggest daily loss in a month and mirroring overnight weakness in Asia and across major European indexes as markets digested prospects of a U.S. interest rate hike.

“Markets across Europe and Asia tripped up on Thursday after a rise in U.S. Treasury yields to levels not seen since 2011”, Russ Mould an investment director at AJ Bell wrote to his clients.

“The Treasury yield is commonly seen as the risk-free rate for investing, so an increase tends to be negative for other asset classes including shares”, he added.

Weighing heaviest was the defensive consumer staples sector. British American Tobacco, which was trading without entitlement to its latest dividend pay-out, was the biggest faller of the day, shedding 3.9 percent.

All major sectors apart from financials, as banks typically benefit from rising rates and bond yields, were in the red.

Healthcare and consumer discretionary were the second- and third-biggest fallers respectively.

The domestically focused mid cap index also fell, shedding 0.5 percent.

There, shares of Ted Baker fell 10.4 percent after the British clothing retailer warned of a “challenging” remainder of the year as it posted a 3.2 percent drop in pretax profit for the first half.

Among other retailers, DFS Furniture shares fell as much as 10 percent, before recovering most of its losses, after it said full-year pretax profit fell by nearly half after Britain’s summer heatwave.

Luxury carmaker Aston Martin was down 0.9 percent, extending losses from its stock market debut on Wednesday. It had priced its shares at 19 pounds each, giving it a valuation of $5.6 billion.

British new car sales fell by roughly 20 percent in September, preliminary data showed, as carmakers struggled to adjust to stricter emissions standards.

Separately, Japanese carmaker Nissan said there would be “serious implications” for Britain’s manufacturing industry if the United Kingdom fails to secure a trade deal with the European Union. (Reporting by Tom Wilson Editing by Keith Weir)

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