Bloomberg News

U.K. Stocks Slide as U.S. GDP Misses Forecast; Lloyds, BHP Fall

July 29, 2011

July 29 (Bloomberg) -- U.K. stocks fell after a report showed that the U.S. economy grew less than forecast in the second quarter and as Republicans failed to muster support within their party for a plan to raise the country’s debt limit.

Banking and mining stocks led the FTSE 100 Index lower with Lloyds Banking Group Plc and BHP Billiton Ltd. losing more than 2 percent. Anglo American Plc declined 3.3 percent as earnings trailed projections. Vodafone Group Plc surged 4 percent after announcing a special dividend.

The benchmark FTSE 100 Index declined 58.02, or 1 percent, to 5,815.19 at the 4:30 p.m. close in London, extending this month’s drop to 2.2 percent. The gauge has slumped 4.5 percent from this year’s high on Feb. 8 amid concern that Europe’s sovereign-debt crisis will derail the economic recovery. The FTSE 100 dropped 2 percent this week. The FTSE All-Share Index lost 0.9 percent today, while Ireland’s ISEQ Index slid 0.1 percent.

“Certainly the continued delay is upsetting the markets,” said Joshua Raymond, a market strategist at City Index in London. “How can we expect the Republicans to forge a compromise with the Democrats over what they’re going do if they can’t agree among themselves over what the plan is?”

House Republicans called off the vote on their plan last night as they failed to convince members of their own party to back it.

If an agreement isn’t reached to lift the debt ceiling over the weekend, “we’ll see a lot more volatile trade action on Monday morning,” Raymond said.

U.S. GDP Growth

The FTSE 100 extended its losses after the U.S. Commerce Department announced that the economy expanded at a 1.3 percent annual pace in the second quarter. Economists had predicted growth of 1.8 percent in a Bloomberg survey. The Commerce Department revised growth in gross domestic product for the first quarter down to 0.4 percent.

Lloyds, the U.K.’s biggest mortgage lender, slid 3.7 percent to 43.4 pence. BHP Billiton, the world’s biggest mining company, lost 2.3 percent to 2,273 pence.

Anglo American, part owner of the world’s biggest platinum and diamond producers, slipped 3.3 percent to 2,900 pence. The company said underlying earnings climbed to $3.1 billion, or $2.58 a share. That fell short of the $2.63 mean estimate of eight analysts surveyed by Bloomberg News yesterday and a consensus compiled by Anglo for $2.59 a share.

Vodafone, Pearson Rise

Vodafone jumped 4 percent to 172 pence, its biggest gain since May 2010. Europe’s third-largest phone company by sales said it will pay a 2 billion-pound ($3.3 billion) special dividend after Verizon Wireless, Vodafone’s U.S. venture, said it will pay its first dividend since 2005.

International Consolidated Airlines Group SA climbed 2 percent to 237.3 pence. The airline formed from the January merger of British Airways and Iberia posted second-quarter operating profit of 190 million euros ($273 million), beating the average analyst estimate of four analysts for 166 million euros.

BAE Systems Plc, Europe’s largest defense contractor and a maker of the Eurofighter warplane, lost 0.9 percent to 304 pence after it was downgraded to “neutral” from “outperform” at Exane BNP Paribas.

--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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