(Corrects FTSE 100 closing level in para 3)

* FTSE 100 ends 0.5 pct lower after setting 2-wk low

* Retailer Sports Direct falls more than 9 pct

* FTSE falls below key moving average levels

By Atul Prakash

LONDON, April 8 (Reuters) – Britain’s blue chip share index hit a two-week low on Tuesday, with Sports Direct (Frankfurt: A0MK5S – news) leading losses after a share sale by founder Mike Ashley and technicals pointing to a bearish market outlook in the near term.

Sports Direct, Britain’s biggest sporting goods retailer, slumped 9.2 percent after Ashley sold 25 million shares, while financial stocks were also hard hit on concerns about earnings and valuations.

The blue-chip FTSE 100 index ended 0.5 percent weaker at 6,590.69 points after touching its lowest since late March at 6,549.75. It added to a 1.1 percent loss on Monday.

The near-term technical outlook became bearish after the index fell below its 50-day and 100-day moving averages on Monday and slipped below its 200-day moving average on Tuesday.

“With the daily momentum indicator turning down, we continue to expect further bottoming and a re-test of the last low at 6,492 or even a final washout towards 6,400,” Michael Riesner, head of equities technical analysis at UBS (Xetra: UB0BL6 – news) , said.

“With good buying support expected above 6,400, a pullback into deeper April would offer a tactical opportunity to buy.”

The market was pressured by a sell-off in insurance and banking shares. Investors took a cautious stand in the near term ahead of the earnings season and on concerns about valuations, lingering geopolitical concerns and growth prospects.

According to StarMine Smart Estimates, UK financial companies are expected to report a near 13 percent drop in earnings in the first quarter from the same period a year ago.

Financials were the worst hit, with Lloyds down 2 percent, Barclays (LSE: BARC.L – news) down 1.3 percent, Resolution falling 3.8 percent and Prudential (HKSE: 2378.HK – news) dropping 1.5 percent.

Insurers also slipped in a knee-jerk reaction to news that Britain’s insurance industry had urged its regulator to hold a fully independent inquiry into how news of a review into the sector was released. The news added to uncertainty about regulatory scrutiny of the sector.

Shares in the sector tumbled on March 28 after the Financial Conduct Authority told a newspaper it was reviewing part of the industry, raising fears that profitability would be hit.

“The insurance sector as a whole has come under scrutiny over the course of recent weeks because of regulatory concerns. Investors are already a bit worried and this kind of news adds to uncertainty and concerns,” said Peter Dixon, economist at Commerzbank (Xetra: CBK100 – news) .

Among other sharp movers, food and fashion conglomerate Associated British Foods (LSE: ABF.L – news) fell 3.9 percent, with traders attributing ABF’s fall to a profit warning on Tuesday by German sugar producer Suedzucker (Other OTC: SUEZF – news) .

According to Thomson Reuters StarMine data, Associated British Foods is on a price to earnings per share (P/E) ratio of 25.9 for the next 12 months – giving it a higher rating than similar P/E ratios of 12.7 for rival Tate & Lyle (LSE: TATE.L – news) and 18.3 for France’s Danone (Paris: FR0000120644 – news) .

“We believe ABF is simply overvalued,” said JNF Capital investment manager Ed Smyth. (Additional reporting by Sudip Kar-Gupta; Editing by Susan Fenton)