* FTSE 100 down 1.1 percent
* AB Foods drops after earnings update
* Financials also sold off
(Recasts, adds detail and updates prices at close)
By Kit Rees
LONDON, Sept 12 UK shares closed at their lowest
level in more than one month, led lower by a slump in AB Foods
, as stocks and bonds were sold off across the world on
nervousness about central bank policies.
Equities dropped as bond yields rose in the U.S. and Asia on
the back of speculation on a possible September U.S. rate hike
and questions about whether central banks had reached the limit
of their stimulus measures.
The FTSE 100 index was down 1.1 percent at 6,776.95 points
at its close, extending its losses from Friday. The fall was in
line with a broader decline on European markets, though the FTSE
recovered some of its losses made earlier in the session.
"The reason to own FTSE 100 stocks, the main one over the
last couple of months, is not as valid as it was when
(bond)yields were lower," said James Helliwell, head of markets
at the Lex van Dam Trading Academy.
"The dividend yield of the FTSE is just not as attractive
compared to other equity markets, if yields are rising across
The biggest faller was AB Foods, which dropped 10.6
percent and posted its biggest loss since June 27 after
reporting its results.
The company raised its earnings outlook for the second time
in two months, but worries concerning its Primark clothing
retail business weighed.
"While the sugar outlook looks supportive for 16/17, the
rather more crucial Primark performance appears light on sales,
margin and space guidance. Given the recent recovery back to
peak multiples ... the shares look vulnerable to profit-taking
in the near term," analysts at Jefferies said in a note.
Sector peer Marks & Spencer also dropped 5.5
British banking stocks were also among the top fallers, with
Lloyds, Royal Bank of Scotland and Barclays
all down between 2.6 percent to 3.9 percent, with
analysts citing a lack of confidence in central banks as
weighing on the sector.
Among the handful of gainers, pharma company AstraZeneca
rose 0.8 percent on the back of a supportive note from
Jefferies, who upgraded their rating on the stock to a "buy" on
the back of hopes for a lung cancer drug.
(Reporting by Kit Rees; Editing by Dominic Evans/Keith Weir)