LONDON, Dec 18 ― UK shares fell sharply yesterday, as a profit warning from online fashion store ASOS reverberated across Europe and reinforced woes about slow sales during the busy holiday season, adding to a pre-Christmas gloom and worries over Brexit.

Opening losses on Wall Street accelerated the fall, leading to the UK blue-chip bourse closing 1.1 per cent lower and the domestically focused mid-cap index losing 1.4 per cent in the first day of the year's last full week of trading.

FTSE 100, which is down nearly 12 per cent this year, is on track for its worst yearly drop since the financial crisis, even as investors brace themselves for a Bank of England's meeting later this week.

“...the FTSE is being impacted by increasing global pessimism. And today, one way that’s being manifested is in the consumer sector after ASOS’s warnings point to concerns about Brexit and wider economic fears becoming more crystallised,” Ken Odeluga, analyst at City Index, told Reuters.

News that AIM-listed ASOS, which targets 20-somethings, cut its full-year targets after a weaker-than-expected November set the tone for the market on Monday, showing how online-only clothing retailers were not immune to a growing crisis in the UK retail sector.

ASOS plunged over 40 per cent, recording its worst one-day drop ever and losing roughly 1.3 billion pounds in market value.

It follows weak outlooks from other big UK high street names, including Dixons Carphone and Sports Direct. Last week Sports Direct owner Mike Ashley said trading in November was “unbelievably bad”.

Among big fallers on the main index were high street retailers Next and Marks & Spencer, which fell 4.6 per cent each and Kingfisher, which was down 4.2 per cent. Internet food store Ocado was down 4.4 per cent.

ASOS rival Boohoo fell as much as 18 per cent at the open, before recouping some losses after it reported record Black Friday sales and ending the day with a 13.7 per cent fall.

High street chains were the worst performers on the mid-cap index, with home furnishings retailer Dunelm Group plunging 10.3 per cent, JD Sports Fashion dropping 6.6 per cent and greeting cards retailer Card Factory losing 6.1 per cent.

British households' confidence in their finances hit a six-month low in December ― a critical month for retailers ― as their earnings from employment rose more slowly while living costs increased, a survey showed.

This points to a dismal end to the year in which household names like Toys R Us and House of Fraser buckled under pressure from online shopping giant Amazon.com, rising labour costs and unseasonably warm weather.

The sell-off also did not spare the small-caps, taking off 16.5 per cent from N Brown and 7.1 per cent off Debenhams shares.

Shares in Wood Plc, the engineering and oilfield services provider, fell 6 per cent to the bottom of the main bourse after mid-cap peer Hunting Plc said it expects project deferrals from producers due to the recent plunge in crude prices. Hunting also fell 5 per cent.

Oil prices have tanked over 30 per cent from their US$86.74 (RM361.82) a barrel peak in early October, even as analysts question whether the recent Opec output cut would do much to stabilise prices.

Also weighing on investor confidence was property data showing that asking prices suffered their biggest fall over a two-month period since 2012.

That pulled down the shares of housebuilders Persimmon , Barratt Developments, Taylor Wimpey, Berkeley, which dropped between 1.4 per cent and 4.1 per cent.

In single moves, a 3 per cent drop made Shire the top drag on FTSE 100 following a downgrade of Takeda by rating agency Moody's, citing that its takeover of Shire will cause the Japanese drugmaker's debt to increase almost six-fold.

Financial heavyweight Barclays dipped 3.6 per cent, while Prudential pared some of the initial fall to close the day with a 0.4 per cent loss.

Shares in multinational stocks Unilever and British American Tobacco fell 2.1 per cent and 1.2 per cent, respectively, as the dollar weakened ahead of the Federal Reserve's policy meeting tomorrow.

GVC shares were down 4.9 per cent, easing some of last week's gains, ahead of a parliamentary vote this week on maximum stakes on fixed-odds betting terminals.

Shares in energy provider SSE gave up 3.2 per cent after it scrapped a deal with Innogy SE for a tie-up that would have created UK's second biggest retail power provider as the companies failed to agree on revised terms.

Among a handful of blue-chip stocks in positive territory was the world's biggest miner, BHP, with a 2.7 per cent gain after it announced a US$1.02 per share special dividend, delivering on an earlier promise to hand back all of the proceeds from the sale of its US shale business.

Peers Rio Tinto, Antofagasta, Glencore and Anglo American all rose between 0.8 per cent and 2.4 per cent.

Shares in the world's oldest travel firm, Thomas Cook , dipped nearly 5 per cent after a Sunday Times report that people will be advised not to book holidays after next March, as per contingency plans being drawn up for a no-deal Brexit. German Peer TUI also fell 2.7 per cent.

The report also led to a 4.3 per cent fall in budget airline EasyJet. ― Reuters