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UPDATE 2-FTSE 100 falls behind Europe as earnings disappoint
Published at 16/01/2020 at 17:12

* FTSE 100 down 0.4%, FTSE 250 up slightly

* U.S.-China trade deal signed but doubts linger

* Pearson, Whitbread drag on blue chips

* ABF outshines main index

* Wood Group surges on midcaps

(Adds company news items, updates to closing prices)

By Shashwat Awasthi and Muvija M

Jan 16 (Reuters) - Underwhelming trading updates from Pearson and Whitbread broke a three-day winning run for London's main index on Thursday, while investors exercised caution amid a lack of clarity on some elements of the U.S.-China trade deal.

The FTSE 100 drifted in and out of the red but ended 0.4% lower, underperforming the STOXX 600 which added 0.2%. All but one sector ended the day in negative territory.

The FTSE 250 , however, eked out a 0.04% gain, helped by a strengthening of the pound as well as an 8% leap in Wood Group after the oilfield services provider forecast higher 2019 core earnings.

Education company Pearson sank 9% to the bottom of the FTSE 100 and hit its lowest level since October 2008 after saying earnings would be lower due to sharp declines in sales at its U.S. higher education business.

Premier Inn-owner Whitbread followed with a 5.1% fall after it reported lower UK like-for-like sales and warned that clarity on Brexit following a decisive British election outcome had yet to deliver a bounce in business bookings.

From global headlines, markets digested news that China will boost purchases of U.S. goods and services in exchange for the rolling back of some tariffs under a preliminary trade accord, and were left a bit edgy as the deal does not fully eliminate the tariffs.

"Given that it has taken nearly two years to pick off the low hanging fruit of a Phase 1 deal, it does stand to reason that (any) Phase 2 is likely to take much longer," CMC Markets analyst Michael Hewson said.

"In any case, the tail risk for markets in the short term isn't in the form of further de-escalation, but in the form of the deal falling down and tariffs getting increased again."

The finer print of the deal states that if the United States is prompted to slap new tariffs which are then disputed by China, the only recourse available would be to quit the agreement rather than lodge an appeal or retaliate.

Companies exposed to international trade relations including oil majors and miners closed in the red on Thursday.

Associated British Foods outperformed the FTSE 100, rising 4.1% as solid revenue growth at its Primark fashion chain over Christmas helped it stand by its annual earnings forecast.

A notable faller on the midcap bourse was Dechra Pharmaceuticals after the veterinary medicines maker pointed to a softer first-half partly due to supply issues.

N Brown plunged 25.2%, its worst day in nearly two decades, after the plus-sized fashion retailer issued a profit warning, citing aggressive discounting by rivals.

(Reporting by Shashwat Awasthi and Muvija M in Bengaluru; Editing by Anil D'Silva, Shailesh Kuber and Mark Heinrich)

((Shashwat.Awasthi@thomsonreuters.com; within UK: +1 646 223 3403; outside UK: +91 80 61822606, +91 80 37962606;))

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