Shares in J Sainsbury were under pressure this morning after analysts at Deutsche Bank downgraded the stock to "sell" from "hold", noting that the supermarket price war was likely to worsen this year.

The broker, which also cut its target price on the stock from 335p to 310p, said it believed the business would be increasingly “competitively hampered” by a lack of ability to aggressively cut costs without affecting its customer proposition. It also gave warning that the group had limited flexibility because of weakening underlying sales growth and the cost of accelerating growth of new space.

The stock, down 10.75p to 336.75p, was also hit as Lehman Brothers told its clients to avoid the company as consumers struggle with rising food price inflation. It added that it believes Sainsbury remains at a significant 8 per cent premium over its peers on own-label products and that it lacks the scale to outperform its rivals.

Supermarket majors have struggled to maintain sales growth as cash-strapped consumers trade down to cheaper rivals, such as Lidl and Aldi.

Overall, the FTSE 100 fell 64.3 points to 5297.8 as banks and miners lost ground on continuing fears over the global economy. Traders reflected that nothing but a surprise increase in US non-farm payrolls data, due this afternoon, was likely to turn the market around.

Ferrexpo was the biggest faller, continuing its heavy slide this week, down 20p to 187p, and Eurasian Natural Resources fell 62.5p to 809.5p as metal prices weakened.

Barclays, down 13.75p to 315.5p, and Royal Bank of Scotland, down 7.75p to 220p, as traders feared that the sector was not yet out of the woods as global economic conditions deteriorate.

RSA Insurance led the index, up 4.9p to 163.2p, on continuing bid talk. According to the latest speculation, Allianz, which agreed this week to sell its Dresdner business to Commerzbank, may make a bid. Nearly 23 million shares were traded before lunch on the talk, which put a price of 225p per share on the UK’s largest commercial insurer.

Johnson, Matthey, which makes catalysts for cars, fell 90p to £14.85 after Merrill Lynch downgraded the stock from "buy" to "neutral", citing a worsening situation in the car and truck markets.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive