Burberry update and housebuilders knock FTSE off 2016 high

LONDON (Reuters) - Britain's top share index edged down on Thursday from its highest close this year, driven by a tumble in fashion firm Burberry BRBY.L after it reported falling sales and warned of tough trading conditions.

People walk through the lobby of the London Stock Exchange in London, Britain August 25, 2015. REUTERS/Suzanne Plunkett

Burberry slid 5.1 percent after it said a drop in tourist spending in continental Europe and weak demand in Hong Kong had depressed sales.

The group was also not optimistic for the current year, saying profit would come in towards the bottom of forecasts.

“Burberry has suffered of late due to its dependency on Hong Kong and China ... and it looks like the company’s issues have no end in sight,” Connor Campbell, financial analyst at Spreadex, said in a note. Burberry is suffering from weakness in both retail and wholesale divisions, he added.

However, housebuilder Persimmon PSN.L was the top faller on the FTSE 100 .FTSE, dropping 6.1 percent after reporting its latest results. Analysts at UBS cited concerns that Britain's referendum in June on the country's EU membership could be an overhang for the sector.

“This is a solid but largely unexciting update that does not change our stance on the stock or the sector. The risks are rising for the house builders ... and we remain concerned about the longer-term sustainability of the very favourable market conditions,” Robin Hardy, analyst at Shore Capital Markets, said in a note.

Fellow housebuilders Berkeley Group BKGH.L, Barratt Developments BDEV.L and Taylor Wimpey TW.L were also down by 2.8 to 4.2 percent.

The FTSE 100 index was 0.2 percent lower at 6,350.03 points by 1356 GMT, having posted its highest close of 2016 on Wednesday.

Much of the index’s recent strength has been due to gains in the mining sector, which pulled back on Thursday to be the biggest sectoral faller.

Miners .FTNMX1770 dropped 0.9 percent, sliding off a one-month high, as copper prices also eased off a recent peak.

Among outperformers, chemical company Johnson Matthey JMAT.L rose 2.4 percent, the top FTSE 100 riser, after Credit Suisse lifted its rating on the stock to "outperform".

In the mid-caps, Debenhams DEB.L, Britain's second-largest department store group, rose 3.2 percent after it said it was close to naming a new boss and beat forecasts with an 5.5 percent rise in first-half profit. That put Debenhams on track to meet full-year expectations.

“Interim results came in better than our forecast,” analysts at Cantor Fitzgerald said in a note. It said the stock was not expensive but that longer-term concerns remained, warranting a continued “hold” rating on the stock.

“We remain concerned that the department stores are capital intensive and need to be furbished to a higher standard to attract shoppers,” Cantor Fitzgerald added.

Entertainment One ETO.L surged 13.6 percent after a report that ITV ITV.L was in talks to buy the Canadian broadcaster. Entertainment One said it had not received an approach, and ITV was broadly unchanged.

Hays HAYS.L rose 7.1 percent after the firm reported solid results, even as it said it expected cautious client sentiment ahead of Britain's EU referendum.

Reporting by Alistair Smout; Editing by Mark Heinrich and Susan Fenton