Bloomberg News

U.K. Stocks Slide as Moody’s Downgrades Portugal; Barclays Sinks

July 06, 2011

July 6 (Bloomberg) -- U.K. stocks fell, ending an eight-day rally for the benchmark FTSE 100 Index, as Moody’s Investors Service cut Portugal’s credit rating to junk and China’s central bank said it will increase interest rates.

Barclays Plc and Royal Bank of Scotland Group Plc sank by more than 3 percent. Trinity Mirror Plc surged 17 percent as investors speculated that the publisher of Britain’s Daily Mirror newspaper may as much as double annual advertising revenue for its Sunday newspaper.

The FTSE 100 dropped 0.4 percent to 6,002.92 at the 4:30 p.m. close in London. The gauge had rallied 6.2 percent over the past eight days, posting its longest winning streak in almost two years, as Greek lawmakers approved a five-year austerity package, qualifying the country to receive further aid from the European Union and the International Monetary Fund. The FTSE All-Share Index lost 0.3 percent today, while Ireland’s ISEQ Index declined 1.1 percent.

“There’s concern from some people that China is pushing the brakes on economic growth a little too hard,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London. “We’ve by no means solved Europe’s debt problem and that is going to need to be revisited again soon.”

U.K. stocks extended their losses after China raised benchmark interest rates for the third time this year. Chinese inflation accelerated in May to the fastest pace since July 2008.

The one-year deposit rate will increase to 3.5 percent from 3.25 percent tomorrow, the People’s Bank of China said on its website today. The one-year lending rate will climb to 6.56 percent from 6.31 percent.

U.S. Non-Manufacturing

In the U.S., a report from the Institute for Supply Management showed that growth in service industries slowed more than expected in June. The measure dropped to 53.3 from 54.6 in May. That fell short of the median economist estimate for a reading of 53.7 in a Bloomberg News survey.

Moody’s Investors Service cut Portugal’s credit rating to junk, lowering the indebted country’s debt to Ba2 from Baa1 with a negative outlook.

Germany revived a proposal to lengthen Greek bond maturities. It had dropped the idea two weeks ago when rating firms said they may deem such a move as a default.

Barclays, RBS, Lloyds

Banks were the worst performing industry on the Stoxx Europe 600 Index today, sliding 1.7 percent. Barclays slumped 3.8 percent to 249.8 pence, its largest slide in two months. RBS sank 3.4 percent to 37.9 pence and Lloyds Banking Group Plc slipped 2.1 percent to 47.8 pence.

Trinity Mirror surged 17 percent to 49.3 pence, its biggest increase in almost a year, on speculation that companies will avoid associating their brands with Rupert Murdoch’s News of the World after the newspaper was accused of hacking into a murder victim’s voicemail. Lloyds and General Motors Co.’s Vauxhall auto brand have pulled advertising from the market-leading Sunday tabloid.

British Sky Broadcasting Group Plc, which Murdoch’s News Corp. plans to acquire, fell 2.1 percent to 827 pence for the broadcaster’s largest retreat in more a year.

BP fell 1 percent to 455 pence following a report that the Indian oil ministry has referred the company’s bid to acquire a 30 percent stake in oil and gas blocks operated by Reliance Industries Ltd. to a cabinet committee. The report, from the Press Trust of India newswire, said the referral may delay the deal.

Smith & Nephew Rallies

Smith & Nephew Plc, Europe’s largest maker of shoulder and knee implants, climbed 1.7 percent to 684 pence. Rival Kinetic Concepts Inc., a manufacturer of wound-care products, was said to have held talks to go private in a leveraged buyout, according to people familiar with the matter.

International Consolidated Airlines Group SA, the carrier formed from the merger of British Airways and Iberia, retreated 2.9 percent to 251.1 pence.

Booker Group Plc, the wholesale grocer, surged 11 percent to 77.9 pence.

Outsourcing company Serco Group Plc soared 3.9 percent to 565 pence, its largest gain in five weeks and the biggest advance on the FTSE 100 today.

--Editor: Will Hadfield

To contact the reporter on this story: Conor Sullivan in London at csullivan39@bloomberg.net

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


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