FTSE falters on Fed comments, oil dip

© Reuters. Traders work at their desks whilst screens show market data at CMC Markets in London

(Reuters) - UK shares fell to their lowest in more than two years on Thursday, joining a wider market selloff, after the U.S. Federal Reserve bank dampened hopes for a milder policy outlook and oil resumed its slide.

The FTSE 100 (FTSE) was down 0.4 percent with the mid-cap index (FTMC) 0.6 percent lower by 1115 GMT, after earlier hitting their lowest levels since 2016.

Oil and related stocks were the biggest drags on the main index, with heavyweights Shell (L:RDSa) and BP (L:BP) losing 2 percent each.

Utilities, often seen as a safe haven, helped the main index recoup some losses. National Grid (L:NG) was up 2.1 percent after a rating upgrade by CFRA, with peers Severn Trent (L:SVT) and United Utilities (L:UU) also rising.

The UK indexes are on track for their worst year since the 2008 financial crisis, and the Fed's tone deepened concerns already augmented by Brexit worries.

Despite calls by U.S. President Donald Trump for the Fed to stop raising interest rates, the central bank on Wednesday stuck by a plan to keep repealing support from an economy it views as strong, sending Wall Street spiraling down.

The Fed news and falling greenback also knocked mining stocks, with Antofagasta (L:ANTO), BHP Group (L:BHPB), Rio Tinto (L:RIO) and Anglo American (L:AAL) all down between 2.7 percent and 3.8 percent.

"The outlook has changed, for ten years we have been talking about buying the dip. The mentality is different now, it is sell the rally," said CMC Markets analyst Michael Hewson.

"My fear is that the Fed is ignoring the clouds of concern around the global economy and happily putting on sun cream when there is a shower just around the corner."

After starting the week with a profit warning from online fashion store ASOS (L:ASOS) that shook retail stocks, the shopping sector saw some good news as British retail sales topped expectations in November thanks to Black Friday promotions.

In mid-caps, construction firm Kier Group (L:KIE) recovered from double-digit losses earlier in the session to be 2 percent lower after saying that less than half of its shares were bought by shareholders in a fundraising. Its market value has already shrunk 64 percent this year.

Investors have dumped shares in the construction sector amid worries about mounting debts after Carillion's (L:CLLN) collapse and the impact of Brexit on real estate.

"After Carillion , everyone wants to kill these types of names," said a trader.

Defying the sentiment, sandwich maker Greencore Group (L:GNC) was the top mid-cap gainer with a 7.6 percent rise after announcing plans to buy back 509 million pounds of shares at a double-digit premium.

AIM-listed electricity and gas supplier Yu Group (L:YU) slumped 22 percent after it admitted to serious historical failures in an accounting review and said its profit would be hit as a result.