FTSE starts 2016 with weakest first week since 2000

LONDON (Reuters) - Top UK shares took their biggest tumble in the first week of a year since 2000 on Friday, as China’s decision to let the yuan weaken rattled global markets.

People walk through the lobby of the London Stock Exchange in London, Britain November 30, 2015. REUTERS/Suzanne Plunkett

The UK's FTSE 100 .FTSE had opened higher after Chinese stocks regained some poise following a plunge the previous day.

However, traders said the unpredictability of the previous week prompted investors to sell out of their positions before the weekend for fear of being caught in volatility on Monday.

“We saw a bit of buying early doors, but that seems to have petered out, as no one wants to go into the weekend holding long positions, given how volatile crude oil and other commodities are at the moment,” said Manoj Ladwa, head of trading at TJM partners.

Oil shares came under pressure as Brent gave up early gains to trade near an 11-1/2 year low. Royal Dutch Shell RDSa.L fell 5.5 percent, while BP BP.L retreated 2.7 percent.

In all, the energy sector trimmed 26 points off the index, which closed down 41.64 points, or 0.7 percent, at 5,912.44, with losses sharply extended in the last hour of trade.

Mining stocks .FTNMX1770 gave back early gains as copper turned lower, with the sector touching its lowest level in more than 11 years and ending 2.4 percent lower.

The FTSE 100 hit a three-week low on Thursday, when 33 billion pounds was wiped off its market capitalisation as stocks in China sank and Beijing allowed the biggest fall in the yuan in five months.

The index was down 5.3 percent on the week, in its biggest weekly slump since last August, when China similarly roiled stock markets by allowing its currency to weaken.

A surge in U.S. payrolls could not support the market for long. Despite sharp revisions higher to job numbers for the previous two months, some traders expressed concern about a lack of wage growth.

The stand out individual stock mover was Sports Direct SPD.L, Britain's biggest sportswear retailer, which dropped 15.4 percent after it warned on full-year profit.

“We are confused by the warning... This feels like a clearing of decks exercise, but we need to shed more light on some key issues,” analysts at Jefferies said in a note, adding it was putting its “buy” rating on the stock under review.

Rising to the top of the British blue-chips was grocer Tesco TSCO.L, gaining 5.5 percent on a broker upgrade by Barclays.

Editing by Ruth Pitchford