By Toni Vorobyova
LONDON (Reuters) - The FTSE 100 fell on Thursday, heading for its longest run of weekly drops since 2008 led by a sell-off in engineering and retail and rattled by growing concerns of an imminent scaling back of U.S. stimulus.
Sports Direct led the fallers, down 8.2 percent after disappointing investors with a slightly smaller than expected underlying pre-tax profit in the first half. The absence of any outlook upgrades also weighed on Britain's biggest sporting goods retailer.
The news hit Sports Direct shares which had been among the most expensive in the FTSE 100 - trading on 30 times current earnings, compared with the index average of around 16 times.
"You normally get ratings of that kind when you are expecting further upgrades," said Paul Kavanagh, partner at Killik & Co.
"Because you've got a pretty weak market anyway, there is scope for a reaction. It's not just Sports Direct - Supergroup, Ted Baker, all those highly-rated retail concepts have been hit by the feeling that valuations may have got a little bit stretched in the near term."
Shares in mid-cap Supergroup, which also issued an update on Thursday, and Ted Baker fell 2.9 and 2.2 percent respectively.
In the engineering sector, a profit warning from mid-cap Wood Group hit blue-chip peers like Amec and Petrofac.
"That whole sector is really suffering ... The big oil companies are starting to focus back on their return on equity and reducing capex in certain areas, so ... the people that are suffering are those that feed off those big companies," said Kavanagh at Killik.
"When Wood Group are guiding 15 percent lower, there is scope for further earnings disappointment in the sector."
Shares in Wood Group dropped 10.7 percent, the top faller in the mid-cap FTSE 250, while Amec and Petrofac were down 4.9 and 5.0 percent respectively.
The weakness in engineers and retailers meant the FTSE 100 lagged its European peers, with the British index down 63.36 points or 1.0 percent at 6,444.36 points by 1202 GMT while the euro zone EuroSTOXX 50 lost 0.5 percent.
Sentiment, however, was negative across the board, hit by growing expectations that the U.S. Federal Reserve may start to scale back its equity-friendly stimulus at this month's meeting.
"(The market) thinks they're going to taper next week; the mood seems to have changed on that quite dramatically," said Ian Williams, equity strategist at Peel Hunt.
The shift in sentiment has helped take the FTSE's drop for the week so far to 1.6 percent, putting it on track for a sixth consecutive weekly drop for the first time since summer 2008.
The British benchmark - whose companies make around a quarter of their revenues in the United States - has been worse hit than indexes with lower U.S. exposure, such as the German DAX or the French CAC.
The recent weakness of the FTSE has also been exacerbated by the pound, which hit a 2-year high against the dollar this week, eating into the revenues of British exporters.
"FTSE is continuing to struggle to maintain the 6,500 level and this will most likely remain the case as long as sterling stays this strong, which is a significant headwind for the export-led part of the economy," said Lex van Dam, hedge fund manager at Hampstead Capital.
(Additional Reporting by Tricia Wright; Editing by Ruth Pitchford)