U.K. stocks dropped for a sixth day, the longest streak of declines since early August, amid signs U.S. lawmakers will fail to agree on budget cuts, raising the prospect America will face another credit-rating downgrade.
Antofagasta Plc (ANTO) and Rio Tinto Group slid at least 5.9 percent as metal prices fell in London. Lloyds Banking Group Plc (LLOY) and Barclays Plc (BARC) declined more than 5 percent as dollar funding costs and government bond yields climbed.
The benchmark FTSE 100 Index retreated 140.34, or 2.6 percent, to 5,222.6 at the close in London, extending this year’s losses to 11 percent. The gauge slid every day last week, as surging borrowing costs for Italy and Spain spurred concern the debt crisis in Europe is spreading.
“If bickering and incompetent politicians in Europe aren’t bad enough, we also have the specter this week of the so-called U.S. supercommittee, an oxymoron if ever there was one, failing to come to an agreement on spending cuts on the U.S. budget deficit, after the debt ceiling debacle a few months ago,” said Michael Hewson, a markets analyst at CMC Markets, in London.
In the U.S., the deficit-cutting congressional supercommittee will probably announce that it has failed to reach an agreement on federal budget savings, according to a Democratic aide in an e-mail.
The Democratic aide, who requested anonymity because he isn’t authorized to discuss internal matters publicly, said that it was highly unlikely that the talks could be salvaged. Today is the deadline for the Congressional Budget Office to receive a plan that it can analyze before the committee’s Nov. 23 target for reaching an agreement. Standard & Poor’s downgraded the U.S. on Aug. 5 to AA+ from AAA.
“This failure to agree will likely reinforce the vacuum at the top of U.S. politics and mean more stalemate for another 12 months, the last thing the U.S. economy needs as recent economic data starts to show some improvement,” Hewson said. “It could also herald the prospect of a further downgrade of U.S. sovereign debt from either Moody’s or Fitch who still have the U.S. on a triple ‘‘A’’ rating.”
Stocks slumped in August after S&P’s decision to strip the U.S. government of its AAA credit rating roiled global markets and made Treasuries the haven for global investors.
Antofagasta slid 6.2 percent to 1,009 pence and Rio Tinto dropped 5.9 percent to 3,083 pence, as copper, lead, nickel, tin and zinc retreated on the London Metal Exchange.
Lloyds dropped 7.1 percent to 23.42 pence and Barclays slumped 5.4 percent to 157.5 pence as the three-month cross- currency basis swap, the rate banks pay to convert euro payments into dollars, widened for a sixth day and bond yields climbed in Spain, Italy, France and Belgium.
Mecom Group Plc (MEC) rallied 16 percent to 169.5 pence after saying it is in talks “with various parties” to sell its Edda Media division.
Phoenix Group Holdings (PGH) Plc surged 6.7 percent to 525 pence. The U.K.’s biggest manager of closed life insurance funds said it’s considering a bid from CVC Capital Partners after takeover talks with Resolution Ltd. ended.
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