September 4, 2015 / 10:54 AM / 2 years ago

Retail stocks lead Britain's FTSE lower, with focus on U.S. jobs

* FTSE 100 down 1.7 pct, all stocks negative

* Next, Dixons Carphone fall on Exane BNP Paribas downgrades

* Fed rate rise question in focus ahead of non-farm payrolls (Updates prices, adds quote)

By Alistair Smout and Kit Rees

LONDON, Sept 4 (Reuters) - Britain's top share index fell on Friday, led lower by weakness in retail stocks, with the focus on U.S. jobs data later in the session that could provide clues about when the Federal Reserve might raise interest rates.

Britain's FTSE 100 was down 103.72 points, or 1.7 percent, at 6,090.38 by 1030 GMT, with all stocks in negative territory. It gave away most of Thursday's 1.8 percent rise, leaving the index down 2.6 percent for the week.

Top faller was Next, down 3.7 percent after Exane BNP Paribas cut its rating on the fashion retailer to "underperform" from "neutral", slashing its target price by 4 percent.

"UK consumer tailwinds are fading. Fiscal drag and stabilising commodity costs are set to weigh on cashflow from here," the Exane BNP Paribas analysts said in a note, adding they had become incrementally more cautious on investment cases predicated on UK consumer strength.

Electronics retailer Dixons Carphone also suffered from a downgrade from Exane BNP Paribas, falling almost 3 percent.

Other retail stocks came under pressure after data which showed August was the worst month for British retail sales since the global financial crisis of 2008.

The FTSE 350 General Retailers index was down 1.9 percent.

"The UK has been seen as a safe haven until quite recently, but weakness in retail is putting that into question," said Mike McCudden, head of retail derivatives at Interactive Investor.

Thursday's market rally was fuelled by the European Central Bank (ECB), after ECB President Mario Draghi said he would change or extend the central bank's bond-buying stance if necessary.

Markets are also hoping for similarly dovish signals from the Federal Reserve. U.S. non-farm payrolls data, due at 1230 GMT, is the last major jobs data before the Fed meets in two weeks' time.

Economists polled by Reuters expect the U.S. economy to have produced 220,000 new non-farm jobs last month, continuing the robust rate of employment creation of the past five years, although a weaker reading may support the view that the Fed will keep rates low for longer.

Investors have pushed their predictions of a U.S. rate rise back to later in the year or even 2016 after a bout of market volatility, triggered by concern over China's growth, which has sent the FTSE around 10 percent lower since the start of August.

"The market has been under pressure due to predictions of a rate rise, but because of everything else that's going on, it's still highly unlikely. So the sort of weakness we see today could present a buying opportunity," Interactive Investor's McCudden said. (Editing by Alison Williams and Mark Potter)

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