Britain’s main equity index fell sharply on Tuesday, weighed down by grocer Tesco after yet another profit warning.

Tesco fell 12 per cent as it warned on profit for the fourth time this year, slashing its full-year outlook by almost a third in the latest downgrade sparked by an accounting scandal and intense competition in its home market.

“A lot of investors had been cleared out by the other profit warnings but this is a bit of a disappointment,’’ Will Hedden, a trader at IG, said.

“It’s probably getting close to where it’s likely to find support but I wouldn't want to be the one calling a bottom.’’

Bernstein Research analyst Bruno Monteyne stuck to his “outperform’’ stance on the stock, arguing the profit warning was a “sensible decision’’ by the management.

“This is bringing forward the profit trough, bringing forward the pain of unstretching the accounts,’’ Monteyne said in a note.

“While many people will focus on the initial profit guidance, we consider this a sensible decision to start early with the necessary reset of accounts.’’

Fellow grocers Sainsbury and Morrison each fell around 5 per cent on concerns Tesco’s woes would lead to increased price competition in the supermarket sector.

They were among top fallers on the FTSE 100, which was down 1.2 per cent at 6,590.35 points by 0845 GMT, taking its loss since the start of the week to over 2 per cent.

The FTSE had risen around 11 per cent since hitting a 1-1/2 years low in mid October.

A further slump in mining and energy shares also weighed. The rout in base metals and crude hit oil services group such as Weir, down 4 per cent, and miners such as BHP Billiton, down 2.6 per cent.

Brent crude sinks

Benchmark Brent crude slipped to its lowest in five years on worries of a swelling supply glut as Gulf producers appeared ready to ride out plunging prices.

Meanwhile, Shanghai aluminium plumbed its lowest level since May on Tuesday as growing overcapacity and the shaky outlook for demand in China curbed buying. Three-month copper on the London Metal Exchange also slipped.

Among small caps, online fashion retailer ASOS fell 7 per cent as it posted a further slowdown in quarterly sales growth, with a robust performance in its home market offset by overseas weakness.

Related Topics