February 10, 2015 / 4:56 PM / in 3 years

Britain's FTSE underperforms euro zone as commodity shares drop

* FTSE 100 down 0.1 pct
    * New signs of Chinese economic weakness impact miners
    * HSBC leads banks lower as pressure builds over Swiss unit
    * Tesco up as grocers see sales improvements

 (Updates with closing prices)
    By Alistair Smout
    LONDON, Feb 10 (Reuters) - Britain's top equity index
drifted lower on Tuesday, hit by a drop in banks and commodity
stocks, although improved sales for battered supermarkets lent
support to the market.
    Fresh signs of economic weakness in China, the world's
biggest consumer of metals, hit mining companies, with the FTSE
350 Mining Index down 2.8 percent. 
    Data on Tuesday showed China's annual inflation fell to a
five-year low in January and factory deflation worsened.
 
    Concern over weakening demand from China weakened oil and
gas stocks, which fell 2.8 percent. The price of
Brent crude fell below $58 a barrel as the International Energy
Agency (IEA) predicted supply may hit a record high despite
subdued demand. 
    "The weakness in the price of oil is not purely down to
excess supply. The weakness we're seeing in macro data, in China
and elsewhere suggests there is a demand aspect to this, too,"
said Jeremy Batstone-Carr, market analyst at Charles Stanley.
    In all, mining and energy stocks combined to trim over 30
points off the FTSE 100, which closed down 8.03 points,
or 0.1 percent.
    It underperformed the euro zone's EuroSTOXX 50,
up 1 percent, which benefited from its low exposure to commodity
stocks as well as a rally in Greek assets. 
    Greek stocks extended gains after several press reports
pointed to a possible debt agreement between Greece and its
creditors, with one report citing a six-month debt extension.
 
    Royal Mail declined by 4.8 percent -- the worst performing
FTSE stock in percentage terms -- after investment bank JP
Morgan cut its rating to "neutral" from "overweight".
 
    Grocers provided some support to the market, however, after
Kantar trade data showed that Tesco posted its first
sales growth in a year. 
    Britain's biggest supermarket rose 3.6 percent, although it
remains down over 25 percent since the beginning of 2014.
    Wm Morrison rose 3.4 percent after posting its best
sales since December 2013. Marks & Spencer rose 4.9
percent, making it the index's top gainer, after brokerage RBC
upgraded the stock to "outperform" from "sector perform".
 

 (Editing by Larry King)
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