FTSE bruised by BP

By Sudip Kar-Gupta

LONDON (Reuters) - Britain's top share index fell sharply on Tuesday, knocked down by a drop in BP (BP.L) after the oil major reported its biggest ever annual loss.

The blue-chip FTSE 100 index (.FTSE) closed 2.3 percent lower at 5,922.01 points, with the FTSE down 5 percent since the start of 2016.

BP shares slumped 8.7 percent.

The company's results were worse even than when it counted the costs of the deadly Gulf of Mexico oil spill in 2010, raising questions over the sustainability of its dividend and some concerns over its debt position.

BP shares also suffered their biggest one-day percentage loss since mid-2010.

"BP is being punished for concerns about its leverage," said Roderic Owen-Thomas, derivatives trader at JNF Capital.

BP and world stock markets in general have been hit by concerns about a slowdown in China, the world's second-biggest economy and a major consumer of oil and metals.

The worries about China and persistent concerns about an oversupply in the market have hit oil prices, which lost ground again on Tuesday. [O/R]

Owen-Thomas said he would look to sell out from any brief moves higher on the FTSE 100, given the risks that the market would soon lose ground again.

In spite of the general market slump, supermarket group Sainsbury (SBRY.L) rose 2.4 percent after agreeing to buy Argos-owner Home Retail (HOME.L) for 1.3 billion pounds.

Home Retail shares were flat, but those shares remain up more than 50 percent since Home Retail first rejected an approach from Sainsbury in January.

The FTSE 100 hit a record high of 7,122.74 points in April 2015 but has steadily lost ground since then, and is currently some 17 percent below that record high.

(Additional reporting by Alistair Smout; Editing by John Stonestreet)