Britain's FTSE underperforms euro zone as commodity shares drop
* FTSE 100 down 0.3 pct
* New (KOSDAQ: 160550.KQ - news) signs of Chinese economic weakness impact miners
* HSBC leads banks lower as pressure builds over Swiss unit
* Tesco (Xetra: 852647 - news) up as grocers see sales improvements
(Adds detail, quote)
By Alistair Smout
LONDON, Feb 10 (Reuters) - Britain's top equity index
drifted lower on Tuesday, hit by a drop in heavyweight banks and
commodity stocks, although improved sales for battered
supermarkets lent support to the market.
Fresh signs of economic weakness in China, the world's
biggest consumer of metals, hit miners, with the FTSE 350 Mining
Index down 3 percent.
Data on Tuesday showed China's annual inflation hit a
five-year low in January while factory deflation worsened.
Concerns over weakening demand from China hit oil and gas
stocks, which fell 2.3 percent. The price of Brent
crude fell below $58 a barrel as the International Energy Agency
(IEA) predicted supply may hit an all-time high despite subdued
demand.
"The weakness in the price of oil is not purely down to
excess supply. The weakness we're seeing in macro data, in China
and elsewhere suggests there is a demand aspect to this too,"
said Jeremy Batstone-Carr, market analyst at Charles Stanley (LSE: CAY.L - news) .
In all, miners and energy stocks combined to trim nearly 40
points off the blue-chip FTSE 100, which was 19.33
points, or 0.3 percent, lower at 6,817.82 points by 1457 GMT.
It underperformed the euro zone's EuroSTOXX 50,
up 0.4 percent, which benefited from its low exposure to
commodity stocks as well as a rally in Greek assets.
Banks cut earlier losses and Greek stocks
extended gains after several press reports pointed to a possible
debt agreement between Greece and its international creditors,
with one report citing a six-month debt extension.
Royal Mail (LSE: RMG.L - news) declined by 4.7 percent -- the worst performing
FTSE stock in percentage terms -- after investment bank JP
Morgan (Other OTC: MGHL - news) cut its rating to "neutral" from "overweight".
Grocers provided some support to the market, however, after
Kantar trade data showed that Tesco posted its first
sales growth in a year.
Britain's biggest supermarket rose 3.2 percent, although it
remains down over 25 percent since the beginning of 2014.
Wm Morrison rose 3.7 percent after posting its best
sales since December 2013, while Marks & Spencer (Other OTC: MAKSF - news) rose 4
percent, the index's top gainer, after brokerage RBC (Other OTC: RBCI - news) upgraded
the stock to "outperform" from "sector perform".
(Editing by Gareth Jones)