Bloomberg News

U.K. Stocks Extend Selloff on U.S. Jobs Report; Lenders Tumble

September 02, 2011

Sept. 2 (Bloomberg) -- U.K. stocks tumbled the most in two weeks, led by a selloff in banks and commodity producers, after a worse-than-forecast U.S. jobs report added to concern that the country’s economic recovery may be at risk.

Barclays Plc led a selloff in banks, tumbling more than 8 percent as European sovereign default risk climbed to a record. Kazakhmys Plc and BP Plc led commodity companies lower as metal and oil prices dropped. AstraZeneca Plc slid 3.7 percent after reporting study results for its best-selling drug.

The benchmark FTSE 100 Index dropped 126.62, or 2.3 percent, to 5,292.03 at the 4:30 p.m. close. in London, its biggest decline since Aug. 18. The FTSE All-Share Index sank 2.2 percent, while Ireland’s ISEQ Index slid 2.7 percent.

The employment data “badly missed market expectations in August to show complete stagnation,” said Joshua Raymond, chief market strategist at City Index in London. “With no jobs created, it adds yet more pressure on the Federal Reserve to re- ignite the U.S. economic recovery.”

The gauge has still climbed 3.2 percent this week after last month’s 7.2 percent selloff dragged equities to their cheapest valuation as a multiple of estimated earnings since March 2009. Fed minutes earlier this week showed some policy makers wanted to add to stimulus measures to drive the economy.

Today’s report showed U.S. employment unexpectedly stagnated in August as employers became less confident in the strength of the recovery.

Payrolls were unchanged last month after an 85,000 gain in July that was less than initially estimated. That missed the median economist forecast of 68,000 in a Bloomberg News survey. Hourly earnings and hours worked both declined.

U.S. Hourly Earnings

“Equally troubling could be the fact that average working hours fell which could indicate that companies are trying to scale back employment costs,” Raymond said. “We will need to see more evidence of a stagnation and potential contraction in the U.S. jobs market for the case for a double-dip recession to strengthen.”

Barclays slumped 8.4 percent to 165.2 pence, halting a three-day rally. Lloyds Banking Group Plc slid 7.1 percent to 33.12 pence and Royal Bank of Scotland Group Plc dropped 5.4 percent to 24.84 pence.

Banks fell as the Markit iTraxx SovX Western Europe Index of credit-default swaps insuring the debt of 15 governments surpassed an all-time high, rising to 311 earlier today, after the U.S. jobs report added to signs that the global economic recovery is weakening.

Kazakhmys led mining companies lower, sinking 3.4 percent to 1,040 pence as base metals extended declines. Xstrata Plc lost 3.2 percent to 1,018.5 pence and Rio Tinto Group retreated 2.5 percent to 3,674 pence.

BP, Shell Slide

BP fell 3.6 percent to 374.4 pence and Royal Dutch Shell Plc declined 1.9 percent to 2,036.5 pence as crude oil tumbled in New York. Separately, the oil companies began evacuating workers from platforms and rigs in the Gulf of Mexico as a storm intensified in the largest U.S. crude-producing region.

AstraZeneca retreated 3.7 percent to 2,809.5 pence after the drugmaker reported that its Crestor treatment for cholesterol didn’t reach statistical significance in lowering arterial plaque as a percentage volume, the study’s main measure of effectiveness.

London Stock Exchange Group Plc slipped 2.3 percent to 911 pence, falling for the first time in nine trading days. The U.K. bourse is holding talks with LCH.Clearnet Group Ltd. to buy the world’s biggest clearinghouse for swaps.

Randgold Resources Ltd. paced advancing shares on the FTSE 100, rallying 4.3 percent to 6,670 pence as gold prices extended gains in New York after the U.S. jobs report boosted demand for the precious metal as a haven.

--Editor: Will Hadfield

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

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


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