U.K. stocks fell, led by a drop in basic material stocks and utilities, as a global selloff in equities continued on concern that Europe is struggling to deal with its sovereign debt crisis.
Rio Tinto Group, the world’s third-biggest miner, retreated 5.8 percent after the shares were downgraded by BofA Merrill Lynch Global Research. National Grid Plc, the owner of utilities in the U.S. and U.K. lost 7 percent after saying it planned to issue new shares. SABMiller, the world’s second-biggest brewer by volume, slumped 6 percent after reporting profit that missed estimates.
The benchmark FTSE 100 Index fell 84.95, or 1.7 percent, to 5,073.13, extending yesterday’s 2.8 percent slide as all but 6 of 102 shares retreated. The FTSE 100 has retreated 13 percent from this year’s high on April 15 amid concern Europe’s debt crisis may derail the global economic recovery. The FTSE All- Share Index lost 1.8 percent and Ireland’s ISEQ Index fell 3.3 percent today.
“Investors are unwinding their positions today even though there isn’t a lot of news or macro drivers in the market,” said Neil Phillips, a fund manager at BlueBay Asset Management in London, which oversees about $32 billion. “Risk managers are tapping people on the back and telling them to cut at this point. Fear doesn’t ride out of town on a tortoise.”
French Finance Minister Christine Lagarde today told RTL radio that the 16 countries that share the euro need greater coordination of economic policies to avoid a financial crisis. France doesn’t plan to follow Germany in banning the use of contracts to speculate on European sovereign debt.
Italy’s Il Sole 24 Ore newspaper, citing European Central Bank policy maker Jose Manuel Gonzalez-Paramo, said Germany didn’t tell the ECB before its surprise ban.
Stocks in Europe fell yesterday, and U.S. equities declined for a second day, after Germany’s unilateral ban on some bets against government bonds and financial institutions triggered a flight from equities. U.S. shares pared some losses after as the euro extended its rebound from a four-year low against the dollar and the Federal Reserve said it was in no hurry to sell mortgage assets.
Mining shares fell after BofA Merrill Lynch said things “look tough” for miners in the near term because of China’s moves to slow its housing industry, which is expected to reduce metals demand.
Rio Tinto fell 5.8 percent to 2,812 pence, its lowest point since November. The world’s third-biggest miner was downgraded to “neutral” from “buy” and was removed from BofA’s “Europe 1” list.
Kazakhmys Plc dropped 4.3 percent to 1,089 pence, extending yesterday’s 6.7 percent slide. Kazakhstan’s biggest copper miner was downgraded to “underperform” from “buy” at BofA.
National Grid dropped 7 percent to 576.5 pence, the biggest drop since December 2008. The owner of utilities in the U.S. and U.K. said it will raise 3.2 billion pounds through a rights offer to fund capital investment.
Scottish & Southern Energy Plc, the U.K.’s second-biggest electricity producer was downgraded to “neutral” at Exane BNP Paribas. The shares slipped 3.1 percent to 1,040 pence, extending yesterday’s 2.5 percent drop.
SABMiller fell 6 percent to 1,912 pence, the biggest fall since October 2008. The company said full-year operating profit fell 1.7 percent to $3.09 billion, excluding one-time charges. That missed the $3.41 billion average estimate of 12 analysts.
British Airways Plc, Europe’s third-biggest air carrier, slipped 3.2 percent to 186.5 pence. Flight attendants should be allowed to strike, the court of appeal in London said, setting aside a ruling issued three days ago blocking the walkout.
BP gained 1 percent to 528.8 pence. The company is moving equipment in place for an attempt as early as Sunday to plug the 18,000-foot (5,486-meter) deep well with a tactic known as top kill, Doug Suttles, chief operating officer of exploration and production for the company, said on a conference call with reporters yesterday.