UK main index dips as M&S slumps on Ocado deal rights issue

By Muvija M

(Reuters) - British blue-chip stocks slipped again on Wednesday as Marks & Spencer tumbled after announcing a rights issue to fund an online food joint venture with Ocado, while plans for a cash call knocked Metro Bank to an all-time low.

The main index and the midcap bourse both ended 0.6 percent lower, underperforming their European peers.

M&S slumped 12.5 percent and was on course for its steepest one-day decline in more than 2-1/2 years after saying it would finance the Ocado deal from a rights issue to raise up to 600 million pounds and a dividend cut.

However, Ocado added 3 percent as M&S said it would pay 750 million pounds to own half of the online grocer's UK retail business.

The blue-chip index, which earns a major chunk of its earnings in dollars, was also dragged down by a stronger pound and tensions between India and Pakistan.

Sterling rallied in the previous sessions on growing hopes of a Brexit delay as Prime Minister Theresa May offered lawmakers the chance to vote for a no-deal or delay Britain's European Union divorce.

Wealth manager St. James's Place slid nearly 4 percent after it said THE pace of fund flows so far in 2019 was slower than at the same time last year.

Midcaps saw some big fallers too, with Metro Bank tanking 27 percent a day after it disclosed that regulators were looking to investigate the circumstances around an accounting error at the lender.

Metro Bank also announced plans for a 350 million pound shareholder cash call on Tuesday.

Fashion retailer Ted Baker slid 9 percent after it said 2018-19 earnings would miss forecasts due to volatile exchange rates, higher costs and a writedown on inventory.

European and Asian stocks were also lower as investors stayed away from riskier markets after Pakistan said it had shot down two Indian jets in its territory.

"The long list of market-disrupting disagreements and showdowns was too much for investors, who clearly decided that things were a tad too spicy for their liking," Spreadex analyst Connor Campbell said.

Outshining the main index was Taylor Wimpey, Britain's third-largest homebuilder, which added 3.5 percent after it said demand for its homes remained strong at the start of the year.

Rio Tinto also rose 1 percent after it announced a special dividend and reported better-than-expected earnings for the year.

(Reporting by Muvija M in Bengaluru; Editing by Andrew Heavens, Andrew Cawthorne/Mark Heinrich)