By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks headed for their biggest
monthly loss since June on Friday, tracking a wider selloff in
Europe, where lower-than-expected euro-zone inflation data spurred
fears of deflation.
The FTSE 100 index slid 1.3% to 6,452.39, setting it on track
for a 3.2% weekly fall and a 4.4% monthly decline.
Among top losers, shares of Diageo PLC (DEO) lost 2.6% after
Goldman Sachs removed the drinks maker from its pan-European
conviction buy list and cut its rating to neutral . The move comes
after the owner of brands such as Guinness beer and Smirnoff vodka
on Thursday flagged volatile demand in emerging markets, with sales
in the Asia-Pacific region dropping 10%.
"We expect the softer performance in [the first half the year]
to continue into 2H and see potential for continued EM challenges
in [full-year 2015]," the Goldman Sachs analysts said in a
note.
"Furthermore, there are no meaningful signs of a [developed
markets] recovery for Diageo, and with competitive intensity
picking up in U.S. vodka, we see a risk that DM growth deteriorates
from here," they added.
BAE Systems PLC (BAESY) skidded 2.2% after Barclays downgraded
the aerospace and defense firm to underweight from equal
weight.
More broadly in London, the benchmark index extended losses
after data showed euro-zone inflation fell to 0.7% in January from
0.8% in December, missing economists' expectations. The data
reignited fears the region is heading for a period of falling
consumer prices, known as deflation, which could derail the
economic recovery.
As a sector, banks added the most pressure. Shares of Barclays
PLC (BCS) lost 2.2%, Royal Bank of Scotland Group PLC (RBS) dropped
2% and heavyweight HSBC Holdings PLC (HSBC) gave up 1.4%.
On a more upbeat note in London, shares of BT Group PLC (BT)
added 2.4%, after the telecoms company raised its full-year
outlook, as it reported better-than-expected revenue for the third
quarter.
Tobacco firms were also on the rise after upbeat comments from
Goldman Sachs. The analysts said both British American Tobacco PLC
(BTI), up 0.8%, and Imperial Tobacco Group PLC , rising 2.1%,
currently trade on significant price-earnings discounts. The bank
upgraded Imperial Tobacco to buy from neutral and added it to the
conviction buy list, while reiterating a buy rating on BAT.
More must-reads from MarketWatch:
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