Bloomberg News

U.K. Stocks Retreat as Metal Producers Fall on Growth Concerns

June 02, 2011

June 2 (Bloomberg) -- U.K. stocks dropped for a second day, led by a selloff in mining companies as base metals tumbled amid mounting concern that the global economic recovery is faltering.

Antofagasta Plc, Xstrata Plc and BHP Billiton Ltd. lost more than 2.5 percent as copper, nickel and aluminum retreated. Johnson Matthey Plc, maker of a third of all auto-catalysts, and Kingfisher Plc, Britain’s largest home-improvement retailer, retreated after posting earnings that trailed estimates.

The FTSE 100 lost 80.69, or 1.4 percent, to 5,847.92 at the 4:30 p.m. close in London, for the biggest two-day drop in four weeks. The gauge slid 1.3 percent last month amid renewed concern that Greece will default on its debts. The FTSE All- Share Index retreated 1.2 percent today, while Ireland’s ISEQ Index fell 0.3 percent.

“It’s the same old concerns that have sent jitters through investors,” said Anthony Grech, head of research at IG Index in London. “Worry about the stability of the economic recovery and just how much worse than expectations the U.S. employment numbers will be tomorrow.”

Tomorrow’s Labor Department report may show U.S. employers hired fewer workers in May, according to a Bloomberg survey of economists. The projected 170,000 gain in payrolls would follow a 244,000 increase in April. A separate release today showed factory orders in the world’s largest economy dropped in April by the most in almost a year.

Greek Default Risk

Stocks also declined today after Greece’s risk of default was raised to 50 percent by Moody’s Investors Service. The rating firm downgraded Greece to Caa1 from B1, putting the Mediterranean nation on par with Cuba. Moody’s move came after policy makers considered asking investors to reinvest in new Greek debt when existing bonds mature.

Antofagasta, owner of copper mines in Chile, slid 3.1 percent to 1,269 pence. Xstrata, the world’s fourth-largest copper producer, slipped 3.1 percent to 1,375 pence and BHP, the world’s biggest mining company, fell 2.7 percent to 2,327 pence.

Base metals retreated for a second day on the London Metal Exchange as the outlook for global growth dimmed. Reports yesterday showed manufacturing output in the U.S. in May was the weakest since September 2009, while industrial production cooled in India and the U.K.

Johnson Matthey

Johnson Matthey declined 3.3 percent to 2,013 pence after the company posted an 11 percent gain in full-year profit to 182.3 million pounds ($298 million), missing the 230.6 million- pound average estimate of analysts surveyed by Bloomberg. The company reported a 71.8 million-pound impairment charge that included costs for closing a Belgian plant.

Kingfisher lost 1 percent to 279.3 pence after the retailer reported earnings that missed some analysts’ estimates as profitability declined at its U.K. B&Q chain. Gross margin, or profit as a percentage of revenue, was “slightly down” in the U.K. and Ireland as less-profitable seasonal items and increased promotions drove sales growth.

Home Retail Group Plc fell 2.2 percent to 209 pence, while Wolseley Plc, which supplies heating and plumbing products, declined 3.1 percent to 1,959 pence.

Asos Plc, Britain’s second-largest online clothing retailer, sank 8.3 percent to 2,144 pence after a 41 percent increase in full-year profit wasn’t sufficient for analysts to raise their earnings estimates, leading some investors to question the stock’s valuation.

The shares currently trade on a multiple of 60 times analysts’ estimates of fiscal 2012 earnings. That compares with 11.2 times for the 20-member FTSE 350 General Retailers Index.

Noventa Ltd. plunged 61 percent to 66 pence after the tantalum miner warned of an “urgent fund-raising requirement.” Noventa said its current cash position of $17.6 million is “substantially” less than the business needs.

Serco Group Plc rallied 4.4 percent to 597.5 pence. Credit Suisse Group AG reiterated its “outperform” recommendation on the operator of London’s Docklands Light Railway and raised its price estimate for the shares by 7.4 percent to 720 pence.

--With assistance from Sarah Shannon and Adam Haigh in London. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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