UK's FTSE 100 falls; BAT, Frasers flag challenging outlook

"The update from Frasers shows there is still resilience in the fashion retail sector, but the company is unlikely to be immune to the recessionary headwinds whipping up," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. UK markets are bracing for a long uncertain winter amid rising borrowing costs and double-digit inflation that have sparked worker unrest in the recent past.

UK's FTSE 100 was dragged lower by consumer staples and retailers on Thursday after forecasts from British American Tobacco and Frasers fuelled concerns over economic outlook.

The blue-chip FTSE 100 dipped 0.1% while the FTSE 250 was down 0.2%, as of 0949 GMT. The FTSE 350 Food, Beverage and Tobacco index fell 1.4%, weighed down by a nearly 3% drop in shares of BAT after the tobacco firm said it expects net finance costs to top 1.6 bln pounds ($1.95 bln) in 2022.

Frasers Group was the biggest drag on retailers index, which shed 0.9%, after the sportswear and clothing firm warned of a challenging and uncertain outlook despite posting an upbeat half-yearly profit. Frasers stock lost 7.1% on Thursday. "The update from Frasers shows there is still resilience in the fashion retail sector, but the company is unlikely to be immune to the recessionary headwinds whipping up," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

UK markets are bracing for a long uncertain winter amid rising borrowing costs and double-digit inflation that have sparked worker unrest in the recent past. The Bank of England is set for a hike of 50 basis points next week as it is focuses on getting wayward inflation down to 2%.

"We're seeing an overall risk-off sentiment on the FTSE 100 because of worries about the twin evils of recession and high inflation, causing the BoE to keep ramping up interest rates, even though the economy is heading into downturns," Streeter added. Bucking the tepid mood, DS Smith rose 0.7% after the cardboard maker forecast annual performance to be ahead of its prior outlook on higher box prices and resilient demand from consumer goods companies.

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