October 1, 2014 / 2:32 PM / 3 years ago

New slump in supermarket stocks hits UK's FTSE

* FTSE 100 at lowest level since early August

* Sainsbury cuts sales forecast and puts dividend on review

* Regulators probe Tesco

By Sudip Kar-Gupta

LONDON, Oct 1 (Reuters) - Britain’s top equity index fell to its lowest level in nearly two months on Wednesday, as a new slump in the shares of supermarket retailers hit the market.

Sainsbury fell 6.6 percent after the supermarket operator cut its annual sales forecast and put its dividend under review. Rival Tesco weakened 3.8 percent after saying it was under investigation by regulators.

The investigation into Tesco comes after an accounting scandal that has wiped some 4 billion pounds ($6.5 billion) off its market capitalisation over the past week and a half.

“Dire news from the supermarket sector shows that investors should still be looking elsewhere. Any rally in supermarket shares will be an invitation for fresh selling,” said IG market analyst Chris Beauchamp.

The blue-chip FTSE 100 index was down by 1.1 percent, or 70.95 points, at 6,551.77 points going into the close of the trading day - its lowest level since early August.

“We would be concerned if the FTSE fell below 6,500 or 6,425 points, but we’re not ready to jump in with the bears just yet,” said Joe Neighbour, trading analyst at Central Markets.

The FTSE is down by around 2 percent since the start of 2014, underperforming a gain of around 4 percent on the broader pan-European FTSEurofirst 300 index. (1 US dollar = 0.6175 British pound) (Additional reporting by Francesco Canepa; Editing by Hugh Lawson)

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