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June 27, 2017, 12:20 p.m. EDT

FTSE 100 ends lower as retailers lose ground

Banks ordered to boost capital buffers

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By Carla Mozee and Victor Reklaitis, MarketWatch


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Shopping on London’s Oxford Street.

U.K. stocks finished in the red Tuesday, as a profit warning from British department store Debenhams PLC dragged down shares of blue-chip retailers, but gains for commodity stocks limited losses for the London benchmark.

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -1.20%  fell 0.2% to close at 7,434.36, suffering its fifth loss in six sessions.

A cloud over consumers: Retail shares lost ground after Debenhams  said continued market volatility could leave its full-year profit at the lower end of expectations. But in the 15 weeks to June 17, like-for-like sales did rise 1.8%, it noted. Debenhams shares  were down 2.3% off the FTSE 100.

After the warning, shares of department store chain Marks & Spencer Group PLC /zigman2/quotes/206225481/delayed UK:MKS -1.88%  lost 2%, and apparel and home furnishings seller Next PLC /zigman2/quotes/200704121/delayed UK:NXT -0.95%  dropped 1.1% on the FTSE 100. DIY retailer Kingfisher PLC /zigman2/quotes/200571451/delayed UK:KGF -2.42% finished flat on the day.

“Recent figures from the Office for National Statistics show sales volumes in the retail industry are growing at their lowest level for 4 years, and Debenhams is feeling the pinch. Trends in its key sales metrics have gone into reverse in recent weeks,” said George Salmon, equity analyst at Hargreaves Lansdown, in a note.

Adding to the sector’s gloom was YouGov/CEBR’s survey showing a sharp drop in consumer sentiment to levels seen immediately after the U.K. voted last year to leave the European Union. A slump in optimism over property prices and a squeeze on Britons’ household finances were the key factors behind the downbeat consumer sentiment, according to the survey.

Shares of home builders also struggled. Persimmon PLC /zigman2/quotes/206444744/delayed UK:PSN -0.66% shed 0.1%, Barratt Developments PLC /zigman2/quotes/209812640/delayed UK:BDEV -0.77%  fell 0.2%, and Taylor Wimpey PLC  declined 0.6%.

Supermarket sweep: Meanwhile, the country’s four largest supermarket chains logged sales growth in the 12 weeks ended June 18, but lost market share to German retailers Aldi and Lidl as consumers sought lower prices, according to a Kantar Worldpanel report.

Shares of grocery chains were mixed. Wm. Morrison Supermarkets PLC  turned higher by 0.2%, J Sainsbury PLC /zigman2/quotes/206038250/delayed UK:SBRY -1.18%  slipped 0.4%, while Tesco PLC /zigman2/quotes/203761082/delayed UK:TSCO +0.50%  moved up 1.3%.

Resources: As the euro strengthened, the dollar /zigman2/quotes/210598269/delayed DXY -0.10%  was pulled lower, aiding prices for most dollar-denominated commodities such as copper .

That, in turn, further lifted shares of metals producers. The sector started the session higher after Chinese Premier Li Keqiang said the country has experienced significant job creation from his program to bolster the world’s second-largest economy.

China is a major buyer of industrial and precious metals.

In London, miners Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL -2.70%  and Rio Tinto PLC /zigman2/quotes/208934945/delayed UK:RIO -2.20%  climbed 3.2% and 3.3%, respectively, and copper producer Antofagasta PLC /zigman2/quotes/200173667/delayed UK:ANTO -0.96%  tacked on 3.1%.

Meanwhile, Royal Dutch Shell PLC /zigman2/quotes/204253697/delayed UK:RDSB -1.67%   /zigman2/quotes/207682964/composite RDS.B -1.90%  was up 1.1% and rival oil producer BP PLC   /zigman2/quotes/207305210/composite BP -2.07%  was higher by 0.6% as oil prices   traded higher for a fourth consecutive session. Crude tumbled into a bear market last week.

Banks: Bank shares took in stride the Bank of England’s order to lenders to boost their capital cushions, a move aimed to protect the U.K.’s financial system from risks including Brexit and increased borrowing by consumers. The buffer was reduced to zero last year in a bid to support the economy after the Brexit vote.

Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC -3.07%  was up 1.5%, Standard Chartered PLC /zigman2/quotes/200125072/delayed UK:STAN -0.12% moved up 1.8%, and Lloyds Banking Group PLC /zigman2/quotes/202285510/delayed UK:LLOY -2.32%   /zigman2/quotes/200709414/composite LYG -2.84%  gained 0.3%.

The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.3456%  bought $1.2790, up from $1.2721 late Tuesday in New York.

Meanwhile, the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.3094%  rallied after European Central Bank President Mario Draghi said at an ECB forum in Sintra that “a considerable degree” of stimulus is needed in the eurozone, a step back from the stimulus levels signaled in earlier speeches. The shared currency /zigman2/quotes/210561182/realtime/sampled EURGBP +0.5770%  gained more than 0.5% against the pound.

Fed Reserve Chairwoman Janet Yellen was scheduled to speak in London at 6 p.m. local time, or 1 p.m. Eastern U.S. time.

Read: Don’t expect Yellen to signal retreat from Fed’s interest-rate strategy

Stock movers: At the bottom of the FTSE 100, shares of auto- and aerospace parts supplier GKN PLC  fell 4.3% after German auto parts supplier Schaeffler AG /zigman2/quotes/207262541/delayed DE:SHA -2.92% cut its profit forecast for 2017.

WPP PLC shares /zigman2/quotes/202300097/delayed UK:WPP -1.24%   fell 0.8% after the advertising heavyweight said IT systems at several of its businesses were hit by a suspected cyberattack . Other companies reported suspected cyberattacks Tuesday, including French building materials company Saint Gobain /zigman2/quotes/201813666/delayed FR:SGO -3.34% .

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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee. Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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