Britain's FTSE edges lower as commodities stocks slip

By Kit Rees

LONDON, May 23 (Reuters) - Britain's top share index edged lower on Monday, with a drop in the prices of crude oil and industrial metals putting pressure on commodities-related stocks.

The UK energy index dropped 1.1 percent as the oil price fell for a fourth consecutive session after Iran insisted it would not freeze crude output, returning investor attention to a global glut. Shares in BP and Royal Dutch Shell were down about 1 percent.

The mining index also came under pressure, edging down 0.6 percent, after copper slipped towards a three-month low as expectations that the U.S. Federal Reserve will raise interest rates in June reinforced worries about weak demand growth in top consumer China. Anglo American and BHP Billiton were down more than 1 percent.

"The two sectors could face further selling pressure in the near term as sentiment towards commodities prices remains fragile," Securequity senior trader, Jawaid Afsar, said.

"There are numerous headwinds such as a stronger dollar and lingering concerns about the pace of economic growth in China, Europe and the United States," he said.

The blue-chip FTSE 100 index was down 0.3 percent at 6,138.41 pionts by 1222 GMT. Losses were mitigated by a 3.4-percent gain in Royal Mail shares after upgrades from brokers Cantor Fitzgerald and RBC Capital Markets.

"We expect parcels in the UK and Europe to drive the top-line and restructuring and productivity gains to support the bottom-line," Cantor Fitzgerald analysts said in a note.

"(Royal Mail) faces potentially tough wage and pension negotiations this year but the risks are probably overstated," they said.

Among mid-caps, sports retailer Sports Direct dropped 3.7 percent after Goldman Sachs downgraded the stock to "neutral" from "buy".

"The UK high street is changing - we're seeing quite an uptick in online shopping," Charles Hanover Investments advisory investment manager, Jonathan Roy, said.

"The retail space that (Sports Direct is) occupying is becoming a bit of a burden and that's a trend that we expect to see follow through for the rest of 2016 and beyond."

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Mike Dolan, Markets Editor EMEA. (Additional reporting by Atul Prakash; Editing by Louise Ireland)

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