By Rebekah Curtis
LONDON, Jan 11 (Reuters) - Britain's top shares tumbled on
Friday, as investors lost their appetite for food stocks after a
Unilever downgrade and talk of a Cadbury profit warning, and
investors digested the Bank of England's decision to hold
interest rates steady.
At 1153 GMT, the FTSE 100 <> was down 65.1 points, or
1.1 percent at 6,157.6. The pan-European FTSEurofirst 300 index
<> also shed about 1 percent.
Unilever Plc <ULVR.L>, the FTSE's biggest percentage loser,
dropped 5.4 percent after Morgan Stanley downgraded its rating
on the consumer goods giant late on Thursday to "underweight"
from "equal weight", saying improvements delivered by management
in the past three years are now fully reflected in the price.
Cadbury Schweppes <CBRY.L> fell 3.9 percent on market talk
the confectionery group would issue a profit warning, traders
said.
Also in the sector, Associated British Foods <ABF.L> fell
1.9 percent.
"The food producers are under big pressure today," said
Jeremy Batstone-Carr, head of private client research at Charles
Stanley. "We're washing about without any great sense of
direction."
U.S. stock futures fell, pointing to a fall on Wall Street
later as reports of worse-than-expected subprime-related losses
at Merrill Lynch <MER.N> suggested the credit crisis is far from
over.
In the previous session, the UK stock market reeled after
the Bank of England held borrowing costs steady at 5.5 percent.
But analysts expect the Monetary Policy Committee (MPC) will
follow up December's quarter percentage point cut with another
next month.
"Next month, being a quarterly reforecast month will see UK
base rates being cut. We take the view that it is probably
better to have travelled hopefully than to arrive,"
Batstone-Carr said. "We didn't get a rate cut this month but we
will get a rate cut next month."
Diageo <DGE.L> shed 4 percent. JPMorgan said consensus
estimates for the European beverages sector may be too high
despite their defensive quality and it sees "scope for some
multiple contraction should equity markets recover in 2008".
The broker said in a note that U.S. spirits data is showing
a slowdown with price/mix momentum falling and that will impact
the revenue growth for companies including Diageo <DGE.L>.
M&A LIFTS BA
Emirates airline [] is not planning to buy a stake
in rival British Airways <BAY.L>, a spokeswoman said on Friday,
denying rumours that pushed BA shares up 4.2 percent.
Among banking shares, a sector note from Morgan Stanley saw
several price raises and cuts. []
Barclays <BARC.L> shares gained 0.4 percent, Royal Bank of
Scotland <RBS.L> added 0.7 percent and Alliance & Leicester
<ALLL.L> added 0.8 percent. But Standard Chartered <STAN.L> fell
0.7 percent and Lloyds <LLOY.L> dropped 2.3 percent.
BT Group <BT.L> added 1.9 percent after ING raised its
rating to "buy" from "hold".
British buy-to-let mortgage lender Paragon <PARA.L>
announced a deeply discounted, fully underwritten rights issue
to raise 287 million pounds ($560 million).
The firm said shareholders would get the right to buy 25 new
shares for each one they own following a share consolidation of
one new share for every 10 existing shares. Paragon shares
slumped about 40 percent.
Embattled bank Northern Rock <NRK.L> said it was to sell its
portfolio of Lifetime home equity release mortgages to U.S. bank
JP Morgan Chase & Co <JPM.N>. The stock gained 5.6 percent.
Rolls-Royce Group <RR.L> fell 2.8 percent after the British
aero-engine maker said it plans to cut 2,300 managerial,
professional and clerical jobs to help offset rising costs and
the effect of the weak dollar.
(Additional reporting by Michael Taylor; editing by Sue Thomas)
