UK stocks slip after Lufthansa warning

Airline stocks endured a turbulent session today after a profits warning from German carrier Lufthansa shook investors in the sector.

British Airways owner International Airlines Group (IAG) fell 3% while easyJet was down by 4% after the downgrade by their rival highlighted falling fares on European and American routes.

The wider London market was also under pressure after the World Bank cut its forecast for global economic growth to 2.8% from 3.2%, sending the FTSE 100 Index 34.7 points lower to 6838.9.

Germany’s Dax and France’s Cac 40 dropped too while New York’s Dow Jones Industrial Average was also in the red at the time of the close in London.

On currency markets, the pound rose against the US dollar and the euro after the unemployment rate fell to a five-year low of 6.6% as official figures showed jobs increased at the fastest rate since records began in 1971.

Sterling was at 1.68 US dollars and 1.24 euros.

Airline stocks were hit after Lufthansa’s operating profit forecast was lowered by as much as a third to €1bn for this year and by 24% to €2bn in 2015.

It warned that its European business was seeing increased excess capacity, leading to falling prices on these routes.

IAG, which owns Spain’s Iberia as well as BA, fell 12.6p to 400p while low-cost airline easyJet also lost altitude, off 63p at 1530p. Dublin-based operator Ryanair was down 2%.

In a grim session for the airline sector, Rolls-Royce topped the fallers board after Emirates scrapped plans to buy 70 Airbus A350 planes.

Shares fell more than 5%, or 59p, to 1017p after Rolls said this would reduce its order book by 3.5% or £2.6 billion, although it remains hopeful that the delivery slots will be taken by other airlines.

The loss of the Emirates order comes in a year when Rolls-Royce expects revenues and profits will fail to grow due to the impact of defence spending cuts among major customers.

On the risers’ board, supermarket chain Sainsbury’s climbed 1% despite reporting a 1.1% fall in like-for-like sales in the 12 weeks to June 7.

This was the second quarterly decline in a row but shares rose 3.2p to 333p on relief that the figure was in line with City expectations.

Shore Capital, which has a hold rating on Sainsbury’s, said the outcome was “relatively sound”, particularly when compared with its rivals.

Tesco edged 0.4p lower to 295p, while Morrisons was 1p higher at 195.5p.

Former takeover target AstraZeneca was ahead after announcing it would present a string of data on its drugs at a major US diabetes conference.

The UK pharmaceuticals group, which recently shrugged off the advances of Viagra maker Pfizer, rose 52p to 4400p.

The biggest FTSE 100 risers were Randgold Resources, up 75p to 4482p, Coca-Cola HBC up 17p to 1406p, AstraZeneca up 52p to 4400p and Sainsbury’s up 3.2p to 333p.

The biggest FTSE 100 fallers were Rolls-Royce down 59p to 1017p, Vodafone down 9.4p to 199.4p, easyJet down 63p to 1530p and International Airlines Group down 12.6p to 400p.