LONDON MARKETS: London Stocks Pull Back; Unilever, Tesco Down

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- London stocks fell on the first day of trading for 2014, though losses were muted compared with a bigger pullback across the rest of Europe.

Shares of Unilever PLC and Tesco PLC were among stocks that fell.

The FTSE 100 index dropped 31.18 points, or 0.5%, to 6,717.91. The index finished 2013 with a 14% annual gain, its best performance since 2009.

On Thursday, losses were extended as Wall Street pushed deeper into the red in early trade.

Decliners outpaced gainers, with volumes still thin as some traders remain away from their desks in a week shortened by the holiday. Among the heavyweights, shares of Associated British Foods PLC rose 1.8% and International Consolidated Airlines Group SA added 1.2%.

Brenda Kelly, chief market strategist at IG, said the recent rally seen by London markets and across Europe has been hit as investors have taken profits. Sentiment was also dented by a slowing in factory growth out of China, while in the U.K., the Markit/CIPS manufacturing purchasing managers index fell unexpectedly to 57.3 from 58.1 in November.

Among retailers, Next PLC added 1.5%. The retail sector got dented earlier in the week when Debenhams PLC warned that first-half pretax profit would take a hit from "highly promotional" activity in the sector over Christmas. Shares of Debenhams rose 1.4% after the company announced the resignation of Chief Financial Officer Simon Herrick.

Tesco PLC lost ground, falling 1.3%

Shares of Aberdeen Asset Management PLC fell 2% after reports Credit Suisse cut its view on shares to neutral from outperform.