UK stocks drop sharply for the second day straight on Tuesday as falling oil prices and another shocking profits warning from supermarket Tesco (TSCO) hammer market sentiment. Having lost around 1% of its value on Monday, London’s FTSE 100 index dives a further 1.1% at 6,601 in early deals. The index has not closed below this level since 7 November.

Global stock markets are also under pressure from further declines in oil prices, which fall to their lowest levels in over five years. Brent crude is trading as low as $65.29 a barrel on Tuesday while West Texas Intermediate falls to $62.25 a barrel, a level not seen since September 2009, according to data.

There's no doubting the day's biggest story as embattled grocery giant Tesco tumbles a staggering 11% to 166.75p after issuing yet another profits warning, its fourth in a year. In an unscheduled update, CEO Dave Lewis warns trading profits for the year to February 'will not exceed £1.4 billion' as a result of investment in price cutting and changes to commercial income activities following the fall-out from a £263 million profits overstatement, currently being pored over by the Serious Fraud Office.

That drags on the entire supermarket sector with grocery rivals Morrisons (MRW) and Sainsbury's (SBRY) also heading south as investors fret over the impact of the price war on sector margins, the former down more than 5% to 174.8p, the latter off 4.5% at 225.2p.

Meanwhile, foods-to-fashion titan Marks & Spencer (MKS) is marked down another 1.5% to 476.4p following the news its Castle Donington-based distribution centre has been unable to cope with a glut of orders during a frenzied Black Friday.

Online fashion store ASOS (ASC:AIM) cheapens 6.2% to £22.31 as its first quarter trading statement highlights a weak start to the year. For the quarter to 30 November, total retail sales grew a disappointing 8% to £246.3 million, though boss Nick Robertson says 'sales have since gathered momentum' with ASOS enjoying its 'biggest ever trading week over cyber weekend in November.'

An upgrade from Credit Suisse helps government outsourcer GFS (GFS) 2.7% higher to 281p. The Swiss investment bank raises the stock from ‘neutral’ to ‘outperform’, giving it a target price of 320p.

Polymers group Victrex (VCT) is a rare bright spark on Tuesday after beating forecasts with a 9% rise in annual profits and saying it will return £43 million to shareholders as part of a special dividend.

Managed services data centres business Iomart (IOM:AIM) surprisingly crashes nearly 19% to 184.5p despite robust growth in the first half. But for the first time in years the company misses revenue expectations, although this may be in part down the the aborted Host Europe takeover approach a few months ago.

Wearable technology company Fitbug (FITB:AIM) is down 25.9% to 7.88p after raising £3.5 million in a placing of 39 million shares to scale up the sales and marketing of its Orb fitness tracker and the Kiqplan digital health coaching platform. Fitbug also says chief executive Malcolm Fried is to step down at the end of the year.

Motion capture technology designer OMG (OMG:AIM) leaps 17% to 31p on acquisition-boosted full year results and a strategy reverse for its wearable camera app, Autographer, to a pure IP supply operation. But not everyone is convinced, with analysts at IT consultancy Megabuyte saying 'we remain unconvinced of the product's long-term potential.'

Budget hotels operator easyHotel (EZH:AIM) slips 3% to 96p as pre-tax profits slump from £1.4 million to £0.57 million as IPO costs bite. Revenues, however, increase 34% to £3.5 million for the 12 months ended 30 September. Management remains confident about expansion opportunities despite walking away from a deal recently that would have accelerated growth in Europe.

Andy Church, chief executive of specialist recruiter and outsourcer Servoca (SVCA) snaps up £20,000 worth of shares. Servoca posted strong full year results last week, doubling pre-tax profit. Church now owns 6.1 million shares in the business, a stake of slightly less than 5%.

Children's animation production business DQ Entertainment (DQE:AIM) gains 24% to 11.62p as it announces a $50 million convertible bond issue to private credit fund managed by Hong Kong based OCP Asia which will fund the development of more than 20 intellectual properties and co-productions over the next two years. The bonds have a coupon of 13%.

Anti-aging consumer products distributor Venture Life (VLG:AIM) gains 1.6% to 95.5p as it starts selling its Benecol food supplement in Malta.

Chinese lottery games operator DJI (DJI:AIM) adds 2% to 98.5p after winning a new sports lottery contract with Heilongjiang Province and beginning live trials of a virtual horse racing game. The Cheshire-based company says the new contract will allow it to transact directly with several hundred thousand new players who buy lottery every day.

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Issue Date: 09 Dec 2014