Britain stocks edge lower as US proposed tariffs on EU goods

London's main share index lost ground on Tuesday as Rolls Royce weakened after the U.S. proposed a list of EU goods for retaliatory tariffs, while investors awaited updates on a postponement of Britain's exit from the EU.

The FTSE 100 was down 0.2 per cent with losses across the board and the FTSE 250 was down 0.1 per cent at 0725 GMT. Rolls Royce gave up 1.1 per cent after the U.S. Trade Representative Robert Lighthizer announced a proposal to impose tariffs on a list of European Union products as retaliation for EU aircraft building subsidies.

The proposed list, which ranges from large commercial aircraft and parts to dairy products and wine, is retaliation against over $11 billion worth of damage to U.S. industry from EU subsidies to Airbus, Lighthizer said. Meanwhile sterling rose on hopes that Britain would avoid a disorderly no-deal Brexit, with Prime Minister Theresa May due to meet German Chancellor Angela Merkel and French President Emmanuel Macron.

Parliament passed a law on Monday that gave lawmakers the power to scrutinise and even make legally binding changes to May's request to extend the Article 50 negotiating period again. Companies that have a greater international presence and earn a big share of their profits in the U.S. dollar took a hit as the pound firmed.

AstraZeneca, GlaxoSmithKline and British American Tobacco fell in early deals. In midcaps, bus and rail company Go-Ahead Group and environmental infrastructure firm Pennon Group both slipped 2 per cent after rating cuts.

"There is a definite sense of caution which is keeping traders subdued as they shift their focus towards a busy second half to the week," said London Capital Group analyst Jasper Lawler. 

(With inputs from agencies.)