By Tricia Wright
LONDON (Reuters) - The FTSE 100 slipped on Wednesday, pressured by stocks trading without the attraction of their latest dividend, but Sainsbury's managed some gains after its trading update showed some signs of improvement.
J Sainsbury (L:SBRY) was the top FTSE 100 riser, bouncing back after recent weakness, after it said sales at stores open over a year fell 1.1 percent, excluding fuel, in the 12 weeks to June 7, its fiscal first quarter.
That compared to analysts' forecasts for a drop of 0.5-1.5 percent and a fall of 3.1 percent in the fourth quarter of the grocer's 2013-14 year. Shares in Sainsbury's advanced 2.4 percent, trimming their losses this month to 2.1 percent.
"Q1 trading is thankfully much better than Q4's, and whilst negative LFL is never good news, there are signs that Sainsbury’s is re-establishing its lead over its quoted peers. The shares have the most appeal in the superstores sector," Oriel Securities said.
The FTSE 100 L:FTSE was down 12.65 points, or 0.2 percent, at 6,860.90 points by 0728 GMT.
Stocks trading without the attraction of their latest dividend, namely Johnson Matthey (L:JMAT) and Vodafone (L:VOD), accounted for the majority of the FTSE 100's falls, knocking 8.24 points off the UK benchmark on Wednesday.
PROFIT-TAKING
Traders were losing faith in the idea that the index, which is just 1.3 percent off its record level set in December 1999, will reach new highs in the near term.
"We think the FTSE 100 feels quite toppy up here – we are bullish in the medium term but at the moment, with summer approaching and volumes continuing to be light, we feel as if there could be some profit-taking around these levels," said Mark Ward, Sanlam Securities' head of trading.
Alpari analyst Craig Erlam said a break beneath Tuesday's low of 6,835 would provide the first indication that the index was headed back towards its 6,800 range lows.
Frothy valuations are preventing investors from putting more money to work in equities. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.7 times, against its 10-year average of 11.7 times, Thomson Reuters Datastream shows.
Some analysts reckon the index will fail to make much headway until the interim reporting season gets underway, around mid-July, allowing earnings to catch up.
"I think given the steady grind higher recently we're bumping at the top of the valuation range. I just think we're still at the point where we're waiting for the earnings to support that," said Peel Hunt equity strategist Ian Williams.
(Fixes spelling of name in paragraph 8)
(Reporting by Tricia Wright; Editing by Gareth Jones)