U.K. Stocks Decline as Spanish Bond Sale Suggests Debt Crisis Is Spreading

U.K. stocks declined for a fourth day, their longest stretch of losses in six weeks, amid concern the euro-area’s sovereign-debt crisis is deepening and higher oil prices will hamper economic growth.

Carnival Plc, the world’s biggest cruise-ship operator, declined 4.3 percent as crude traded near the highest price in more than five months. Pace Plc (PIC) slumped 24 percent after cutting 2012 operating profit forecast. Vedanta Resources Plc (VED) tumbled 6.9 percent, leading commodity producers lower, as copper fell.

The benchmark FTSE 100 Index (UKX) slid 85.88, or 1.6 percent, to 5,423.14 at the close of trading in London, extending this year’s decline to 8.1 percent. Stocks fell yesterday as the Bank of England warned that the outlook for Britain’s economy has worsened and a report showed that unemployment increased the most since 2009. The gauge has fallen every day this week.

“In Europe, there’s an 80 to 90 percent probability that we’ll see a recession,” Marino Valensise, the London-based chief investment officer at Baring Asset Management Ltd., said in a Bloomberg television interview today with Francine Lacqua. “There’s massive deleveraging and massive austerity. We are underweight equities and continue to be quite cautious.” Barings has 29.5 billion pounds ($46 billion) of assets under management.

Spanish Auction

Stocks extended losses as borrowing costs rose at auctions of Spanish and French debt. The yield on Spain’s 10-year bond rose 28 basis points to 6.69 percent, a euro-era record, with similar-maturity French yields jumping to 2 percentage points more than benchmark German bunds, also a record since the common currency was introduced.

Fitch Ratings said late yesterday that while U.S. banks have “manageable direct exposures” to Greece, Ireland, Italy, Portugal and Spain, further turmoil in those markets poses them a “serious risk.”

Oil rose to a five-month high in New York yesterday as signs of shrinking stockpiles in the U.S. countered concern Europe’s debt crisis will damp fuel demand. Crude for December delivery slipped 2.2 percent to $100.31 a barrel at 11:44 a.m. in electronic trading on the New York Mercantile Exchange today.

Carnival declined 4.3 percent to 2,052 pence amid concern fuel costs will climb.

Pace dropped 24 percent to 45.55 pence, the lowest since January 2009. The world’s biggest maker of television set-top boxes said operating profit in 2012 may be $35 million to $50 million lower than it previously forecast.

Miners Retreat

Vedanta slid 6.9 percent to 1,014 pence. Rio Tinto Group lost 3.5 percent to 3,324 pence. BHP Billiton Ltd. (BHP) retreated 2.8 percent to 1,906.5 pence. Copper tumbled as much as 2.9 percent in London amid concern growth will be choked by the effects of Europe’s debt crisis, eroding demand for metals.

Mothercare Plc (MTC), the children’s clothing retailer, slid 18 percent to 127.3 pence, the lowest since May 2003. The company said it expects tough economic conditions in its home market to continue through the Christmas holiday season.

Amlin Plc gained 5 percent to 307.5 pence as analysts at Execution Noble said the outlook for 2012 for the second-biggest Lloyd’s of London insurer by market value is positive.

The company is “materially undervalued” given the company’s prospects, strategic positioning and management, Shore Capital Group Ltd. said in a note, reiterating its “buy” recommendation.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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

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