U.K. Stocks Decline on U.S. Economy, Bank of England Statement

U.K. stocks (UKX) declined for a seventh day after the U.S. economy expanded slower than forecast in the third quarter and the Bank of England said concern has risen that the country’s financial system will receive another shock.

Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc led losses among lenders. Thomas Cook Group Plc (TCG) sank 75 percent after delaying the full-year report and saying it is in talks with banks.

The benchmark FTSE 100 Index lost 15.78, or 0.3 percent, to 5,206.82 at the close in London. The gauge has slumped 6.1 percent over the last seven days, as surging borrowing costs in Italy and Spain spurred concern the crisis is spreading and renewed calls for bond purchases by the European Central Bank. The FTSE All-Share Index dropped 0.1 percent and Ireland’s ISEQ Index retreated 0.2 percent.

“The market was worried about the U.S. debt and what that adds to the debt trouble in Europe,” said Magnus Dagel, an equity strategist at Nordea Bank AB in Stockholm. “There’s nothing materially new to the market. It’s the same old story as the ECB is buying Italian and Spanish debt now.”

U.K. shares swung between gains and losses after a report showed the U.S. economy expanded less than previously estimated in the third quarter. Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed.

U.S. Credit Rating

Standard & Poor’s and Moody’s Investors Service maintained their U.S. credit ratings, even as Congress’s special debt- reduction committee failed to agree on budget savings, setting the stage for $1.2 trillion in automatic spending cuts.

S&P affirmed it will keep its U.S. rating at AA+. Moody’s kept its AAA rating with a negative outlook. Fitch Ratings noted in a statement that it said in August that a supercommittee failure would probably result in a “negative rating action,” likely a revision of its outlook to negative, and that it will conclude a review by the end of this month.

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 a haven for global investors.

Spain’s three-month borrowing costs more than doubled at auction today, sending two-year yields toward the highest level since 2003, while Belgium’s 10-year bond yields rose to more than 5 percent, adding to concern the euro crisis is spreading.

RBS declined 5.8 percent to 18.42 pence and Lloyds fell 4.4 percent to 22.39 pence.

The Bank of England said concern among market participants of another shock to the financial system jumped in the second half of the year as Europe grappled with its debt crisis.

Big Yellow Group Plc (BYG), the U.K.’s largest operator of self- storage warehouses, rose 9.8 percent to 239.4 pence as occupancy rates grew in the first half. The company announced an interim dividend of 4.5 pence. Shares declined 8.1 percent yesterday.

Thomas Cook slipped 75 percent to 10.2 pence, its biggest drop since at least 2007. Europe’s second-largest tour operator said it’s in talks with banks on financing a month after agreeing to relaxed loan conditions. The company will delay its full-year results until after the talks and expects headline operating profit for the year ended Sept. 30 to be “broadly in line” with previous guidance.

International Consolidated Airlines Group Plc, the holding company of the Iberia-British Airways merger, dropped 5.2 percent to 132 pence. Competitor Deutsche Lufthansa AG said it will withdraw at least one-fifth of its cargo capacity in the first half of next year to counter an anticipated slowdown in demand.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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

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