U.K. stocks fell the most since March 2009 amid renewed concern that global growth is slowing.
HSBC Holdings Plc (HSBA) tumbled 6 percent and Barclays Plc (BARC) plunged 11 percent as the Wall Street Journal reported that U.S. regulators will increase their scrutiny of Europe’s largest lenders on concern that a debt crisis in the region may lead to a funding squeeze. Rio Tinto Group sank 6.5 percent as metals prices declined on concern that global demand is waning.
The FTSE 100 Index (UKX) slid 4.5 percent to 5,092.23 at the 4:30 p.m. close in London. The gauge has lost 14 percent from the end of June, wiping more than $300 billion from the value of U.K. shares amid concern that Europe’s credit crisis and slowing U.S. economic growth may derail the global recovery. The FTSE All- Share Index also declined 4.5 percent today, while Ireland’s ISEQ Index retreated 4.4 percent.
“Recession risk is the key call,” said Bill O’Neill, the London-based chief investment officer for Europe, the Middle East and Africa at Bank of America Corp.’s Merrill Lynch Wealth Management, which manages $1.5 trillion. “To some degree, there has been disappointment in terms of corporate activity, certainly in terms of jobs growth. We will see a weakening of growth close to stagnation in Europe in the second half of this year, but I don’t see a lurch into recession.”
U.K. Stock Valuations
The slump has pushed down the price-to-earnings ratio on the FTSE 100 to 9.1 times the estimated earnings of its constituent companies, below the average multiple of 11.5 over the last five years, according to data compiled by Bloomberg.
The Federal Reserve Bank of Philadelphia’s general economic index fell more than forecast to minus 30.7 in August, the lowest since March 2009, from 3.2 in July, a report showed today. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Morgan Stanley cut its forecast for global growth this year, citing an “insufficient” policy response to Europe’s sovereign-debt crisis, weaker confidence and the prospect of fiscal tightening. The bank predicted growth of 3.9 percent, down from a previous forecast of 4.2 percent, according to an e- mailed report dated today.
Federal Reserve Chairman Ben S. Bernanke’s pledge last week to keep interest rates near zero until mid-2013 was “inappropriate policy at an inappropriate time,” Charles Plosser, president of the Fed Bank of Philadelphia, said yesterday in a Bloomberg Radio interview.
Dallas Fed President Richard Fisher said the central bank shouldn’t make policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement.
U.K. Retail Sales
In the U.K., retail sales rose less in July than economists had forecast as demand at clothes and household-goods stores dropped. Sales including fuel climbed 0.2 percent from June, when they increased a revised 0.8 percent, the Office for National Statistics said today in London. The median forecast of 19 economists in a Bloomberg News survey called for a 0.3 percent increase in July. On the year, sales were unchanged.
HSBC sank 6 percent to 509.6 pence and Barclays plunged 11 percent to 154 pence, leading declines today on the FTSE 100, as the Wall Street Journal reported that U.S. regulators will increase their scrutiny of Europe’s largest lenders on concern that Europe’s debt crisis may lead to a funding squeeze.
Rio Tinto declined 6.5 percent to 3,494.5 pence as metal prices slumped amid concern that global economic growth is slowing. Xstrata Plc (XTA) and BHP Billiton Ltd. (BHP), partners in the world’s biggest open-pit coal mine for exports, fell 10 percent to 972 pence and 6.5 percent to 1,890 pence, respectively.
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