By Ben Eisen and Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- London stocks fell on Wednesday, with J. Sainsbury PLC dragging the broader market south after issuing a cautious outlook, and shares of heavyweights Aberdeen Asset Management PLC and Tate & Lyle PLC also dropping.

The FTSE 100 index fell 0.5% to 6,721.78, after closing up 0.4% the day prior at 6,755.45, the highest closing value since Nov. 4, 2013.

On the main index, shares of J. Sainsbury fell 2.4% after the U.K.'s third-biggest supermarket chain on Wednesday reported a 0.2% rise in third-quarter like-for-like sales, but said the general economic backdrop remains uncertain and shoppers could spend cautiously in the months after Christmas. Shares of fellow grocer Tesco PLC slipped 1%,

Other decliners included Aberdeen Asset Management PLC , which fell 3.6%, and Tate & Lyle PLC , which sank 3.4%. Aggreko PLC dropped 2.9% and William Hill PLC was down 2.5%.

Cigarette makers were adding to the downside, with Imperial Tobacco Group PLC off 2.9% and British American Tobacco PLC slipping 1%.

On the upside, financial firms rose, with shares of Royal Bank of Scotland Group PLC up 2.1% and Lloyds Banking Group PLC (LYG) gaining 1.6%. RSA Insurance Group PLC , which provided a lift for the broader index earlier this week, gained another 3%.

Away from the main index, retailers were under pressure. Small-cap Mothercare PLC tumbled 31% after a profit warning. The international mother-and-baby goods retailer said worldwide network sales fell 4.4% in the 12 weeks to Jan. 4, with the U.K. hit particularly hard by promotional sales over the Christmas period. Mothercare's chief executive, Simon Calver, said the company remains cautious looking forward and full-year profits will likely be below the current range of market expectations.

On the data front, the Halifax House Price index showed a drop of 0.6% in December, the first decline in a year. The Bank of England's Monetary Policy Committee is due to announce a decision on interest rates on Thursday. Economists largely expect the bank will keep rates on hold, but there is speculation the unemployment threshold, used to gauge whether interest rates should rise, will be lowered as soon as the economy gathers strength.

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