Investors continued to dump supermarket stocks today amid fears that Tesco's troubles will trigger deeper price cuts in the beleaguered sector.

Morrisons was the biggest faller in the FTSE 100 Index, while Tesco boss Dave Lewis's first day in the job was marked by a fall of 2%.

Overall, the FTSE 100 was 6.8 points lower at 6813.4 at the start of an important week for monetary policy-makers in the UK and Europe.

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The odds on a rates rise from the Bank of England lengthened after the closely-watched CIPS/Markit purchasing managers' index survey for the manufacturing sector showed the worst performance in 14 months.

The poor reading, which was blamed on the impact of geopolitical tensions affecting the eurozone, kept the pound in check at 1.66 versus the US dollar as economists said it was now increasingly unlikely that the Bank would want to jeopardise the UK's recovery by raising rates from their record low.

In corporate news, Tesco was again the main focus for investors after it said on Friday it would cut its dividend by 75% in the wake of more poor trading.

It was also reported at the weekend that one of its top-ten shareholders, the US investment fund Harris Associates, has sold two-thirds of its stake in recent months because the supermarket was becoming "too risky".

Tesco shares fell to an 11-year low on Friday and were down another 4.2p to 225.7p today. Bradford-based chain Morrisons was at the top of the fallers board - off 5.1p at 172.3p - while Sainsbury's was down 3.6p at 286.6p.

Elsewhere, HSBC shares were lower after respected fund manager Neil Woodford sold his holding in the bank due to concerns about "fine inflation" as regulators continue their crackdown on past wrongdoings in the industry.

HSBC shares were 6.15p lower at 645.9p, while Royal Bank of Scotland was off 4.6p to 358.2p. Barclays dipped half a penny to 223.9p after announcing a deal to sell the bulk of its operations in Spain to Caixa for £630 million.

This will represent a £500 million loss on the book value, although chief executive Antony Jenkins hailed the deal as progress in his strategy announced in May to offload non-core operations.

On the risers board, ITV was up by more than 2% - 5.15p to 216.35p - on speculation that Liberty Global boss John Malone is preparing the ground for a possible takeover swoop, having recently bought a 6.4% stake.