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Sainsbury's drags FTSE 100 lower, Taylor Wimpey warning knocks housebuilders

FILE PHOTO: A broker looks at financial information on computer screens on the IG Index trading floor in London, Britain February 6, 2018. REUTERS/Simon Dawson

By Shashwat Awasthi

(Reuters) - British shares closed in the red on Thursday as Taylor Wimpey's warning on margins triggered a sell-off among housebuilders while investors soured on Sainsbury's after the company scrapped its proposed takeover of Walmart's Asda.

The FTSE 100 and the FTSE 250 lost 0.6 percent each.

Sainsbury's tumbled 4.7 percent to a near three-year low after the supermarket chain scrapped its proposed 7.3 billion pound takeover of Walmart-owned Asda after the deal was blocked by Britain's competition regulator.

"The failure of securing a merger with Asda leaves the group in a bit of a vacuum, with leadership and strategic uncertainties the byproduct of the CMA's rebuttal," Jefferies analysts said.

"Next week's numbers are likely to act as a wakeup call to refocus (on underlying business) and decide how to react to the continued erosion of their business to the likes of Aldi and Lidl," said CMC Markets analyst Michael Hewson.

Shares of rivals Tesco, Morrisons and Ocado were down between 1.2 percent and 1.7 percent.

Taylor Wimpey shed 5.4 percent on its worst day in more than five months after it warned full-year margins would be slightly lower than last year as it cost more to build homes.

Fellow blue-chip housebuilders slipped after the update from Britain's third-largest homebuilder. Persimmon fell 2.6 percent, Barratt gave up 2.4 percent and Berkeley lost 1.6 percent.

Housebuilders on the mid-cap index were also left reeling. Bovis Homes, Redrow, Bellway and Crest Nicholson skidded between 2.9 percent and 3.4 percent.

Barclays' first-quarter profits fell 10 percent as tough market conditions led to lower earnings at its under-pressure investment bank, sending shares down 3.6 percent on their worst day since November.

Stocks trading ex-dividend also dragged the main bourse lower. Legal and General gave up 5.2 percent, while miners Antofagasta and Glencore shed 2.9 percent and 3.8 percent, respectively, despite higher base metal prices.

Acacia Mining shed 8 percent and hit a six-month low on the FTSE 250 after its quarterly underlying core earnings slumped amid production issues at its North Mara gold mine in Tanzania.

Corporate headlines shifted the focus slightly away from Brexit, but uncertainty remained. Prime Minister Theresa May's deputy said the government wants to get parliamentary approval for her thrice-defeated Brexit deal before July, while the Conservative Party looks likely to demand a "clear roadmap" for May's departure if a deal is not approved. [nL5N22757V] [nL5N22676F]

Among small stocks, flooring retailer Carpetright soared 83 percent on its best day ever as a significant improvement in quarterly UK like-for-like sales led investors to believe that its restructuring efforts were beginning to pay off.


(Reporting by Shashwat Awasthi in Bengaluru; Editing by Toby Chopra)