UK shares fall as financials, consumer staples weigh; Dunelm Group jumps

British shares slipped on Wednesday, dragged down by heavyweight financial and consumer staple stocks, while Dunelm Group jumped to the top of mid-cap index after posting upbeat annual results.

The blue-chip FTSE 100 index fell 0.9%, while the domestically focused mid-cap FTSE 250 index declined 0.5%.

Banking shares shed 1.2%, with big lenders Barclays (LON:BARC) and Lloyds Banking Group (LON:LLOY) slipping 1.4% and 1.3%, respectively, after Morgan Stanley (NYSE:MS) cut its price targets on the stocks.

Consumer staples, including Dove soap maker Unilever (LON:ULVR), spirits maker Diageo (LON:DGE) and tobacco company British American Tobacco (LON:BATS), dropped 0.9% each to weigh the most on the FTSE 100 index.

“Concerns about the spread of the Delta variant hampering economic recovery in parts of the world is weighing on European markets today,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV).

“A spending squeeze coming alongside tax rises announced by (Finance Minister) Rishi Sunak is also likely to put brakes on the recovery, with consumer confidence likely to take a hit, given that people will have less take home pay so the big re-opening boost to hospitality and retail we’ve seen could ebb away.”

On Oct. 27, Sunak will deliver a half-yearly budget statement and a three-year spending plan, for which most ministries have been told to set out cost savings, after announcing hefty tax rises to fund health and social care on Tuesday.

Halfords Group (LON:HFD) dropped 4.4% after the bikes and car parts retailer said disruption in the global supply chain was impacting its cycling business.

Bucking the trend, Dunelm Group gained 7.2% after the home furnishing retailer declared a special dividend and forecast fiscal 2022 profit to be modestly above analysts’ forecasts.

Smiths Group (LON:SMIN) rose 4.5% to the top of FTSE 100 index after the technology company agreed to sell its medical unit to U.S.-based ICU Medical Inc for $2.4 billion.