Burberry sparks FTSE 100 sell-off amid consumer spending concerns

The FTSE 100 slumped on Monday after a profit warning from luxury fashion house Burberry sparked a rout across several different sectors.

The blue-chip index fell 70 points to end the day on 8,183, a 0.9% drop.

Investors were spooked after Burberry warned of a 21% drop in retail sales, causing concern that the lack of consumer demand could hit other companies too.

Burberry also replaced its chief executive, said full-year earnings will be lower than expected and suspended its dividend, sending shares down 18% by the close.

Chris Beauchamp, chief market analyst at online trading platform IG, said: “Burberry’s results today were dire, and the shares have reacted with a 16% drop to 14-year lows.

“But the read across has caught two very different sectors, retailers and mining. It’s not often the two are moved by the same story.

“The former have been hit by worries that Burberry’s problems are not an isolated case, and that UK consumer spending is on a downward trajectory.

“Meanwhile, the latter are down on China worries, amplified by the poor GDP (gross domestic product) figures that spell trouble for demand for raw materials and luxury fashion alike.”

France’s CAC 40 finished 1.2% down, while Germany’s Dax fell 0.8%.

Stateside, the S&P 500 was up 0.7% as markets were closing in London , while the Dow Jones was up 0.8%.

The pound was up 0.1% at 1.298 US dollars and was up 0.04% at 1.189 euros.

Elsewhere, a Bank of England rate-setter said interest rates should be cut in order to stop squeezing the living standards of British households.

Swati Dhingra, a member of the Bank’s nine-strong Monetary Policy Committee (MPC), said “now is the time” for a reduction in the bank rate.

UK interest rates – which are used to help set mortgage rates and other borrowing costs – are currently at a 16-year-high of 5.25% after they were increased in a bid to tackle soaring inflation.

The MPC , which votes to set the rate, has held interest rates at this level for the past seven meetings but some economists have predicted they will cut the rate at the next vote on August 1.

The price of a barrel of Brent crude oil was down 0.04% to 82.63 US dollars as markets were closing in London.

The biggest risers on the FTSE 100 were Ashtead, up 128p to 5350p, 3i Group, up 51p to 3067p, Barclays, up 3.3p to 225.75p, BAE Systems, up 11p to 1279p, and Intercontinental Hotels Group, up 68p to 8384p.

The biggest fallers were Burberry, down 142.6p to 744p, Antofagasta, down 80p to 2145p, Frasers, down 31.5p to 843.5p, Marks & Spencer, down 9.7p to 299.9p, and Smith & Nephew, down 29.5p to 1070.5p.