FTSE edges down, set for worst week in over five months

© Reuters. A red London bus passes the Stock Exchange in London

By Helen Reid

LONDON (Reuters) - British shares inched lower on Friday, set for their worst weekly losses since early November after Tuesday's surprise call for an national election caused equities to fall.

The FTSE 100 (FTSE) was down 0.1 percent on the day, weighed by consumer goods stocks while miners gained.

Prime Minister Theresa May called the early vote for June 8, sending sterling higher and erasing year-to-date gains for the FTSE.

"The FTSE has obviously had a terrible week - although corporate earnings have been somewhat of a mixed bag, the snap election, while providing medium term stability for Brexit negotiations, has created some short term market uncertainty," said Mark Ward, head of execution trading at Sanlam Securities.

Mid-caps (FTMC) and small-caps (FTSC) maintained their outperformance on the day. They have gained 7.3 and 6 percent respectively this year.

"People have been reaching for the UK domestic stocks, but there's reasons to be quite cautious there still," said Eric Moore, head of Miton's UK Income fund.

"The UK consumer is still under the cosh. Consumption has held up quite well but it's supported by things that are unsustainable in the long run," he added.

Retail sales figures out Friday showed the biggest quarterly fall in seven years for the first quarter, as rising prices started to squeeze consumers.

Miners led large-cap gains, with Glencore (LON:GLEN), Anglo American (LON:AAL), Antofagasta (LON:ANTO) and Rio Tinto (LON:RIO) up 1.7 to 2.4 percent. Defence firm Babcock gained 3.1 percent.

Consumer staples stocks were top weights, with Reckitt Benckiser (L:RB) the top loser, down 1.5 percent after its first-quarter sales disappointed due to weak markets in Europe and North America.

"while the market was prepared for a weak quarter, Reckitt Benckiser is the only EU Food/HPC company so far to miss on undemanding like-for-like expectations," said UBS analysts.

Peer Unilever (L:ULVR) also fell 1 percent.

A thumbs-up from Barclays (LON:BARC) boosted Marks & Spencer (L:MKS) shares up 1.3 percent, taking the retailer back to its pre-Brexit vote levels for the first time.

Barclays opened coverage of the stock with an "overweight" rating, saying a shift towards food, and management's plan to overhaul its clothing and home segment, would drive growth.

"M&S cannot avoid industry headwinds but its older and wealthier customer base may be helpful," Barclays analysts said.

"We expect Food to account for 64 percent of UK sales in 2020, rising steadily from 52 percent in 2010."

Merger moves continued to move stocks, and mid-cap WS Atkins (L:ATKW) rose 5.1 percent to an all-time high after Canadian engineering firm SNC-Lavalin Group (TO:SNC) firmed up its $2.67 billion (£2.09 billion) offer to buy the firm.

Phone and broadband provider TalkTalk (L:TALK) gained 4.3 percent after HSBC upgraded the stock to "buy" from "hold", saying the government's Wholesale Local Access review was good news for TalkTalk which could benefit from lower input prices.