UK stocks fall as monetary tightening spurs selloff


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    * FTSE 100 down 0.7 pct
    * Consumer staples lead losses as bond proxies suffer
    * Restructuring, job cuts send Rolls Royce up 3 pct
    * Pearson hit by Barclays downgrade
    * Aveva jumps 12 pct after results

    By Helen Reid
    LONDON, June 14 (Reuters) - Britain's major stock index
tumbled on Thursday as equities across Europe sold off, with
investors positioning for a European Central Bank policy shift
following a hawkish outlook from the U.S. Federal Reserve.
    The FTSE 100  .FTSE  was down 0.7 percent by 0840 GMT, in
line with European peers, after Fed policymakers said they
expected two additional hikes this year, more than the market
had priced in.*:nTLADHEE2K
    Markets were focused on an ECB meeting at which the euro
zone's central bank could announce the timetable for the end of
its huge bond-buying programme.
    Consumer goods stocks including Unilever  ULVR.L  and
British American Tobacco  BATS.L  led losses as investors
reacted to signs of higher interest rates by shedding the
high-dividend yielding "bond proxies".
    Retail sales data for May smashed forecasts as the royal
wedding and sunnier weather drove Britons to spend more freely.
That boosted sterling, adding extra pressure on the
internationally-exposed FTSE 100.*:nUKLQCED6E
    "The Fed makes it more likely that the ECB will announce a
timetable for tapering, probably no later than December this
year. I think people see that not tightening in Europe is not an
option," said Colin McLean, CEO at SVM Asset Management. 
    Among notable single-stock movers, Rolls Royce  RR.L  shares
gained 2.8 percent after the engine maker announced it would cut
4,600 jobs in a restructuring effort that investors welcomed.*:nL8N1TG0QV
    The biggest boost to the index was pharmaceutical company
GlaxoSmithKline  GSK.L  which gained 1.1 percent after its
two-drug treatment for HIV met its main goal in late stage
studies, after regulators warned of possible birth defects from
one of the two drugs.*:nL8N1TG0V4
    "At face value this is good news as competition in the HIV
space has heated up, threatening GSK's highest-margin business,"
said UBS analysts, adding that they needed to see more details
on the trial. 
    Mining stocks weighed after copper prices slipped to a
one-week as weaker Chinese data, including industrial output,
pointed to lower-than-expected activity last month.*:nL4N1TG1FF
    Rio Tinto  RIO.L , Glencore  GLEN.L , Antofagasta  ANTO.L 
and BHP Billiton  BLT.L  were among the biggest fallers, down
1.3 to 1.4 percent. 
    Stocks going ex-dividend - including Persimmon, Severn
Trent, Intermediate Capital and WPP - took 4.5 points off the
    The FTSE 100 outperformed European markets in May, and Bank
of America Merrill Lynch's June fund manager survey showed
investors' underweight in UK stocks fell to its smallest in more
than a year.
    But the defensive weighting of the FTSE 100 could make it
more vulnerable to monetary tightening.
    "If we see weakness in bonds as yields rise that's going to
affect more the bond proxies. We've tended to avoid some of
those higher-yielding stocks more exposed to the tightening
cycle," said SVM's McLean. 

    Among mid-caps, Aveva  AVV.L  shares rose 10 percent to a
record high after the engineering software company reported
better full-year results and targeted cost savings of 25 million
    "The first update on financials for the combined pro forma
business reads well," said Investec analysts.


FTSE 100 earnings expectations
 (Reporting by Helen Reid; editing by John Stonestreet)
 ((; +44 20 7542 0402;))
For related prices, Reuters users may click on - * 
 UK stock report      .L     
 FTSE index:          0#.FTS6  
 techMARK 100 index:  .FTT1X          FTSE futures:      0#FFI:  
 Gilt futures:        0#FLG:          Smallcap index:     .FTSC  
 FTSE 250 index:      .FTMC           FTSE 350 index:     .FTLC  
 Market digest:       .AD.L           Top 10 by vol:      .AV.L  
 Top price gainers:   .NG.L           Top % gainers:      .PG.L  
 Top price losers:    .NL.L           Top % losers:       .PL.L  
 * For related news, click on - *
 UK hot stocks:      [HOT and GB]     Wall Street:           .N 
 Gilts report:        GB/             Euro bond report  GVD/EUR 
 Pan European stock report:  .EU 
 Tokyo stocks:        .T              HK stocks:            .HK 
 Sterling report:     GBP/            Dollar report:       USD/ 
 * For company prices, click on - *
 Company directory:   UKEQ           By sector:           FTAX  
 * For pan-European market data, click on - *
 European Equities speed guide................  EUR/EQUITY  
 FTSE Eurotop 300 index...........................  .FTEU3  
 DJ STOXX index...................................  .STOXX  
 Top 10 STOXX sectors........................  .PGL.STOXXS  
 Top 10 EUROSTOXX sectors...................  .PGL.STOXXES  
 Top 10 Eurotop 300 sectors..................  .PGL.FTEU3S  
 Top 25 European pct gainers....................  .PG.PEUR  
 Top 25 European pct losers.....................  .PL.PEUR ))

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