Bloomberg News

U.K. Stocks Fall, Extending 2012 Low Amid Greek Concern

May 17, 2012

U.K. stocks declined for a fourth day, extending the FTSE 100 Index (UKX)’s lowest level this year, amid continued uncertainty about Greece’s future in the euro area and the strength of Spain’s banks.

Royal Bank of Scotland Group Plc (RBS) and Barclays Plc lost more than 3 percent in London as Spain’s Bankia SA plunged as much as 29 percent in Madrid. Vedanta Resources (VED) Plc paced a selloff in mining companies. Retailers Kesa Electricals Plc (KESA) and French Connection Group Plc (FCCN) tumbled after reporting falling sales.

The benchmark FTSE 100 Index slid 1.2 percent to 5,338.38 at the close in London, completing its longest stretch of losses since November. The gauge has declined 11 percent from its 2012 high on March 16, entering a so-called technical correction. The FTSE All-Share Index also retreated 1.2 percent today, while Ireland’s ISEQ Index dropped 1.9 percent.

“While the situation in Greece represents a greater short- term risk for investors, the banking and economic crisis in Spain is just as significant,” said Ted Scott, a portfolio manager at F&C Asset Management Plc in London. “The Spanish government will probably be forced to pour more money into the banks.”

The FTSE 100 has tumbled 7 percent this month, helping to wipe more than $3 trillion from the value of global stock markets, amid mounting concern Greece will exit the euro. The country this week failed to form a new government at the May 6 elections, forcing policy makers to call another vote.

Bank Shares Slip

Lenders dropped in Europe today as the European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk. The central bank said yesterday it will push the responsibility for lending to some Greek financial institutions onto the country’s central bank until they have sufficiently boosted their capital.

In Spain, Bankia slumped as much as 29 percent after El Mundo reported that the lender’s depositors had withdrawn about 1 billion euros ($1.27 billion) since May 9, the day the government said it was taking over the lender.

Banks extended their selloff across Europe after Expansion, another Spanish newspaper, reported that Moody’s Investors Service would probably downgrade Spain’s banks today, citing people familiar with the situation.

RBS led U.K. banks lower, falling 3.7 percent to 21.06 pence. Barclays Plc (BARC) slid 3.8 percent to 181.9 pence and LLoyds Banking Group Plc (LLOY) retreated 3.6 percent to 27.65 pence. HSBC Holdings Plc (HSBA), which today doubled its target for generating extra revenue from greater cooperation between its four businesses to $2 billion, lost 2.5 percent to 520.9 pence.

Vedanta, Xstrata, Kazakhmys

Vedanta Resources declined 4 percent to 985 pence as the copper producer reported a 92 percent drop in full-year profit to $59.8 million on higher financing costs, largely because of the loan it arranged to acquire oil producer Cairn India Ltd.

Xstrata Plc slid 3 percent to 956.2 pence, Kazakhmys Plc (KAZ) fell 3 percent to 690.5 pence and Anglo American Plc (AAL) retreated 2.1 percent to 2,046 pence.

Kesa Electricals tumbled 14 percent to 46.76 pence after revenue at stores open at least a year fell 5.9 percent in the period from Jan. 9 to April 30. The average estimate of five analysts had called for a 5.3 percent decline.

The owner of the Darty electronics retailer predicted annual profit at the “mid-point” of investor expectations after sales worsened as it sold fewer televisions.

Rival Dixons Retail Plc (DXNS) lost 4.9 percent to 14.36 pence.

French Connection Tumbles

French Connection sank 24 percent to 30 pence after the clothing retailer said sales in the first three months of its financial year declined 9.5 percent and it was unlikely that full-year profit will meet market expectations.

Elsewhere, Aviva Plc (AV/) slid 4.7 percent to 267.7 pence after the U.K.’s second-biggest insurer by market value reported a 7 percent decline in first-quarter sales of life insurance and pensions to 6.52 billion pounds ($10.3 billion). That missed some analysts’ estimates.

Investec Plc (INVP) lost 3.4 percent to 317.5 pence after the owner of a bank and money manager in South Africa and the U.K. reported a 26 percent drop in earnings excluding one-off items to 31.8 pence apiece. That missed the 33 pence median estimate of four analysts surveyed by Bloomberg. The company cited rising costs and a slump in trading income amid Europe’s debt crisis.

ICAP Plc (IAP) paced advancing shares, climbing 1.6 percent to 342 pence after Numis Securities raised its recommendation for the world’s largest broker of transactions between banks to buy from hold. UBS AG also upgraded the shares to neutral.

TalkTalk Telecom Group Plc (TALK) surged 20 percent to 159 pence as the company raised its margin forecast after it transferred customers to its own network faster than it predicted.

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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