London - Britain's top equity index slid on Monday, led lower by supermarket retailer Tesco which slumped after finding a fault in its accounts that led it to overstate its first-half profit forecast.
The blue-chip FTSE 100 equity index, which rose 0.3 percent on Friday on relief that Scotland voted against breaking away from the UK, was down 0.5 percent at 6,800.48 points in early trading.
The FTSE 350 Mining Index was down by 2.8 percent, on concerns that a flash manufacturing PMI reading from China, the world's biggest metals consumer, could come in below the 50 point level on Tuesday, indicating that manufacturing activity is contracting.
A 7.7 percent fall at Tesco took the most points off the FTSE 100, after it lowered its profit forecast by 250 million pounds (R4.5 billion) in its third warning this year.
Traders said Tesco's admission would add more pressure to a company that has lost market share this year to discount rivals.
“Tesco used to be the most innovative store in the grocery market but given that Aldi and Lidl have taken its customers by cutting the price of their products without compromising too much on quality, Tesco has been extremely slow to respond to those changes. Today's news is another disaster for the company,” said AvaTrade chief market analyst Naeem Aslam.
MINING STOCKS FALL
A decline in the shares of major miners such as Anglo American and Glencore, also pegged back the FTSE.
Basil Petrides, a sales trader at Beaufort Securities, said the mining sector would underperform as long as there were concerns about a Chinese economic slowdown and a fall in the price of iron ore.
“I'm not buying the dips on miners at present. The miners are going to come under pressure as the iron ore price continues to fall,” said Petrides.
Glencore's shares were also impacted after smaller rival London Mining said the two firms were embroiled in a contract dispute.
Some traders remained optimistic that the FTSE 100 would gradually rise towards the end of the year to challenge the 7,000 point level, which would mark a record high.
The FTSE has been supported over the course of this year by Britain's economic recovery, and a pick-up in corporate takeover activity.
“I would be simply amazed if the FTSE failed to test 7,000 points,” said InterTrader chief market strategist Steve Ruffley. - Reuters