U.K. stocks fell, extending this week’s decline for the FTSE 100 Index, on renewed concern that the global economic recovery is at risk.
Kazakhmys Plc and Xstrata Plc led losses among basic- resources companies. Vedanta Resources Plc tumbled 4.9 percent as people with knowledge of the matter said the company is in talks to buy a controlling stake in Cairn Energy Plc’s Indian oil-exploration unit.
The FTSE 100 dropped 22.87, or 0.4 percent, to 5,243.19 as of 12:10 p.m. in London, erasing an earlier gain of 0.8 percent. The gauge has lost 1.7 percent this week as the Federal Reserve said the U.S. economy’s recovery is likely to be “more modest” than forecast and the Bank of England cut its estimate for U.K. growth. The FTSE All-Share Index fell 0.4 percent today, while Ireland’s ISEQ Overall Index retreated 0.7 percent.
“The slowdown in growth that we anticipate has started to be priced into markets and will go on doing so until the end of the year,” said Vincent Treulet, chief investment strategist at BNP Paribas Investment Partners in Paris. “This is a market that remains adverse to risk, and especially to sovereign risk.”
The yield premium that investors demand to hold Greek 10- year bonds instead of benchmark German debt of similar maturity rose to 800 basis points today for the first time since June 28. Demand fell at sales of 2015 and 2025 Italian debt.
U.K. stocks had earlier climbed as Germany’s economy grew in the second quarter at the fastest pace since the country’s reunification two decades ago. German gross domestic product surged 2.2 percent from the first quarter, fueling euro-area growth of 1 percent, the fastest in four years. Economists had forecast GDP would rise 1.3 percent in Germany and 0.7 percent in the currency bloc.
Germany’s performance highlights the growth differential across the euro region in a quarter that saw the Greek fiscal crisis threaten to break the bloc apart. France’s economy expanded 0.6 percent in the period, Italy’s 0.4 percent and Spain’s 0.2 percent, while Greece experienced a 1.5 percent contraction.
Kazakhmys, Kazakhstan’s biggest copper producer, dropped 2 percent to 1,146 pence. Xstrata, the world’s biggest exporter of coal for power stations, fell 1.6 percent to 991.4 pence.
Vedanta, the mining company controlled by billionaire Anil Agarwal, plunged 4.9 percent to 2,075 pence, extending yesterday’s 7.5 percent slide. The company is in advanced talks to buy more than 50 percent in Cairn India Ltd., according to two people with knowledge of the matter. Cairn Energy rose 1 percent to 457.4 pence.
Aviva Plc gained 4.3 percent to 383.1 pence as two people with knowledge of the situation said RSA Insurance Group Plc made a 5 billion-pound ($7.8 billion) bid for Aviva’s general insurance business.
The bid was rejected by Aviva and there are no current negotiations between the two companies, said the people, declining to be identified because the matter is private. Officials at Aviva and RSA declined to comment. RSA, the U.K.’s biggest non-life insurer, slipped 0.7 percent to 127.6 pence. Legal & General Group Plc, the U.K.’s second-biggest life insurer by assets, climbed 2.6 percent to 90.15 pence.