July 23, 2018 / 9:06 AM / 5 months ago

Britain's FTSE falls as cyclicals slide, pound firms

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* FTSE 100 down 0.4 pct

* Cyclicals, consumer stocks fall

* Recovering pound weighs

* Ryanair results dampen sector

By Kit Rees

LONDON, July 23 (Reuters) - The UK’s top share index fell back on Monday as trade tensions weighed on cyclical stocks while a rising pound held back dollar earners.

With attention also focused on the unfolding earnings season, the blue chip FTSE 100 index was down 0.4 percent at 7,648.41 points by 0847 GMT, slightly lagging a broadly negative European market.

A stronger pound weighed on the FTSE’s dollar-earning exporters, with large consumer staples including British American Tobacco, Diageo and Reckitt Benckiser taking the most points off the index.

Cyclical stocks were also on the back foot, with financials, miners and heavyweight oil stocks all lower.

These stocks, which tend to experience relatively bigger price swings, have come under pressure as risk appetite has been dented by uncertainty over the outlook for global trade.

A U.S. threat to slap tariffs on all $500 billion of imported goods from China rattled markets on Friday.

Equity strategists at J.P.Morgan said that they were sticking with their “underweight” on UK stocks.

“The political situation will likely remain challenging, with a rather high probability of market adverse scenarios materializing... which in turn could hurt corporate sentiment,” they said in a note.

Disappointing results in the second-quarter earnings season also dampened the mood. Ireland’s Ryanair said average fares would be lower than expected during the summer due to high competition and uncertainty caused by strikes.

Ryanair’s shares tumbled 5.3 percent, and British peers easyJet and IAG, which owns British Airways, fell around 2 percent to the bottom of the FTSE 100.

“You could argue that easyJet is more immune to the crew disruption angle, given its better relations with unions,” Mike van Dulken, head of research at Accendo Markets, said.

“However, it’s difficult to argue that the other issues (Ryanair) CEO (Michael) O’Leary points to aren’t applicable to such a close peer. Hence why the sector as a whole is having a bad day.”

McColl’s Retail Group dropped 12.6 percent to the bottom of the small caps index after the convenience retailer gave a muted forecast and reported a drop in first-half like-for-like sales.

“More worrying is a drop in margins due to cutting prices in order to stay competitive,” Russ Mould, investment director at AJ Bell, said. (Reporting by Kit Rees; editing by John Stonestreet)

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