Tesco drives retailers lower in London

MADRID (MarketWatch) � Stocks in London fell Wednesday, with miners losing ground and Tesco PLC leading the retail sector lower after a downgrade as investors took their cue from a weaker tone for markets across Europe.

Shares of heavyweight Vodafone Group PLC UK:VOD � VOD �also fell following broker action, while Rexam PLC UK:REX �and Logica PLC UK:LOG gained after they reported financial results.

The FTSE 100 index UK:UKX �fell 11.65 points, or 0.2%, to close at 5,916.55, after a 0.3% decline the prior day.

Shares of heavily weighted Tesco UK:TSCO �fell 2.3% to 315.4 pence. Bank of America Merrill Lynch downgraded its rating to underperform from neutral and cut its price target to 325 pence from 350 pence.

While its shares aren�t expensive, �we think Tesco has format and brand/offer issues in the U.K. that will take time to fix; and international performance remains mixed,� said analysts at B. of A. Merrill Lynch.

In a separate note on U.K. grocers, the analysts noted consumption in the country is likely to remain constrained as well.

Click to Play Dow 13,000 in a struggling economy

A look at the recent strength of the stock market and a return to the 13,000 mark for the Dow industrials, crossed Tuesday morning. (Photo: AP.)

Also in the retail sector, shares of Marks & Spencer Group PLC UK:MKS �fell 1.6%.

Vodafone�lost 1.1% to 174 pence, under pressure after Credit Suisse cut its forecast on earnings before interest and taxation by 3% and revised lower its price target, to 170 pence from 175 pence previously.

Shares of International Consolidated Airlines Group SA UK:IAG �fell 2.8%. A continued strike at Germany�s biggest airport, in Frankfurt, was causing disruptions for many airlines, with shares of Germany�s Deutsche Lufthansa AG DE:LHA �off 2.6%.

Feeling Europe�s effects

Losses for European stock markets leaned on the FTSE 100. Preliminary data from the Markit purchasing managers index for the euro zone showed a surprise contraction in private-sector activity in February. Read more.

In the U.K., minutes of the Bank of England�s policy meeting earlier this month showed two participants sought a bigger February expansion in quantitative easing than the central bank decided on.

Miners fell after HSBC�s February purchasing managers index for China showed factory activity rose to a four-month high but stayed at levels that indicated a slight contraction. As China is a big user of natural resources, resource stocks are sensitive to growth indicators. Read more on China data

/quotes/zigman/154972 LOG 107.20, -0.10, -0.09%

Shares of Vedanta Resources PLC UK:VED �dropped 5%, retreating after sharp gains the prior day, as Kazakhmys PLC UK:KAZ �fell 1.3%.

Topping gainers among FTSE 100 components, Rexam jumped 7.4%. The packaging maker reported a 15% increase in underlying pretax profit for the full year and said it would separate its personal-care business into a stand-alone unit.

Away from the main index, shares of Logica � jumped more than 6% after the business and technology service reported results for 2011. The company said that last year was tougher than it expected but that it expects a return to profit for its Benelux business and as well as improvements for its Swedish and outsourcing units.

And shares of Cove Energy PLC UK:COV �jumped 25.6% after Royal Dutch Shell PLC RDS.A �UK:RDSA �offered to buy the company for 992.4 million pounds ($1.57 billion). Shell�s shares rose 0.2%.