December 1, 2016 / 10:30 AM / 3 years ago

FTSE slips as higher costs hit consumer goods firms

LONDON (Reuters) - Britain’s top equity index slid on Thursday, pulled down by more evidence of the weak pound damaging consumer goods companies and by some stocks trading without rights to their latest dividend payouts.

A man walks through the lobby of the London Stock Exchange in London, Britain August 25, 2015. REUTERS/Suzanne Plunkett

The blue-chip FTSE 100 index .FTSE was down 0.5 percent, its lowest close since Nov. 17. The benchmark index is still up 8 percent so far in 2016.

Consumer stocks suffered after the Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) showed prices paid by factories for materials and energy had shot up in November at a rate just shy of October’s near six-year high, due to the slump in the value of sterling after Britain voted to leave the European Union.

“The concern is firms will eat the higher costs, at the expense of profits, to offer competitive prices over Christmas,” said Jasper Lawler, an analyst at CMC Markets.

Coca Cola HBC (CCH.L) and Unilever (ULVR.L) were among the biggest fallers, down 3.9 percent and 3.1 percent respectively.

The index also came under pressure from several stocks that traded without rights to their latest dividends.

Water utility Severn Trent (SVT.L) fell 3.4 percent, while Land Securities (LAND.L) slipped 3.2 percent and British Airways-owner IAG (ICAG.L) was down 2.6 percent.

A constitutional reform vote in Italy also kept investors cautious. Prime Minister Matteo Renzi has said he would resign if he loses the referendum, opening up policy uncertainty.

“Sentiment is neutral - however, there might still be some position squaring to take place ahead of Sunday’s Italian referendum,” said Markus Huber, a trader at City of London Markets.

Electronics retailer Dixons Carphone rose 3.8 percent after upbeat assessments from analysts at Credit Suisse and UBS.

Energy stocks also rose as crude oil prices soared 5 percent to trade around $54.40 per barrel, extending the gains that followed Wednesday’s deal by OPEC and Russia to curb a global supply glut.

The UK oil and gas index .FTNMX0530 hit a one-month high and finished 2.5 percent higher, helped by a 2.3 to 5.9 percent rise in shares of BP (BP.L), Royal Dutch Shell (RDSa.L) and Tullow Oil (TLW.L).

However, “filtering the knee-jerk reaction, we have doubts about the mid-term potential in the oil recovery,” said Ipek Ozkardeskaya, senior analyst at London Capital Group.

“A supply-induced recovery will face two major issues. First, the oil recovery will certainly hit the barrier of low global demand before it reaches the $55 level. Second, the higher prices will inevitably bring in new international players.”

Reporting by Atul Prakash and Peter Hobson; Editing by Ruth Pitchford

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