By Kit Rees
(Reuters) - FTSE 100 index fell on Thursday, extending its early losses as sterling strengthened after the Bank of England sounded less concerned than expected about the domestic impact of the turmoil in global markets.
The central bank's policymakers voted 8-1 to keep interest rates at a record low and judged it too early to decide whether the market upheaval sparked by China will affect Britain much, and some said there was a risk that inflation would rise quicker than forecast.
The minutes sent sterling to a two-week high, hitting British listed stocks with international exposure and exporters.
Worries over China's growth persisted after Chinese manufacturers cut prices at the fastest rate in six years, according to its August producer price index figures, stoking deflation fears and the expectation of further stimulus measures.
The data hit the mining sector, with BHP Billiton (L:BLT) falling 6.6 percent and Glencore (L:GLEN) down 6.5 percent. Both stocks also suffered as they went ex-dividend.
The FTSE 100 was down 1.2 percent at 6,152.23 points at 1146 GMT, set to snap a three-day rally.
Morrisons (L:MRW), Britain's fourth-biggest supermarket group, fell 4.2 percent, giving up its previous day's gains, after it reported a 35 percent slump in first-half profit, its lowest level in nine years.
The UK grocer, which is engaged in a price war with rivals to stem the loss of shoppers to discounters Aldi and Lidl, said its turnaround plan will take time.
On Wednesday it announced plans to sell its convenience stores to focus on improving its core larger stores.
"Until we see the first signs of a retail proposition, that has consumer appeal and that has been well costed, we do not anticipate margin improvements at the true underlying level," analysts at Bernstein said in a note.
Fellow retailers Tesco (L:TSCO) and Sainsbury (L:SBRY) were also lower, falling 2.7 percent and 2.1 percent respectively.
Barratt Developments (L:BDEV), the UK's largest housebuilder by volume, rose 2.4 percent after reporting a 45 percent surge in profits, as a result of the acute mismatch between housing demand and supply, as well as the government's help to buy scheme.
UK surveyors doubled their forecast on Thursday for house price gains this year after reporting the most widespread price increases since a mini-boom in early 2014.
Positive corporate results also gave a boost to Dixons Carphone (L:DC). The European electrical goods and mobile phone retailer was up 1.8 percent after posting a consensus-beating 8 percent rise in first quarter underlying sales, led by a strong showing in its home market Britain.
Equipment rental company Ashtead Group (L:AHT) rose 2.6 percent after posting an increase in revenues of more than a quarter, shrugging off the woes afflicting many of its peers.
Satellite communications company Inmarsat (L:ISA) was up 1.5 percent after announcing its participation with Rolls-Royce (LONDON:RR) on an autonomous ship project.