U.K. stocks (UKX) sank the the most in three weeks, led by a selloff in mining companies, after the U.S. Federal Reserve refrained from announcing additional measures to bolster the world’s largest economy.
Antofagasta Plc and Fresnillo Plc (FRES) lost at least 4 percent as copper dropped to a two-month low and gold and silver tumbled. Barclays Plc led banks lower amid speculation a rating company may downgrade France’s credit rating. Logica Plc plunged the most in nine years after the computer-services provider reduced its sales-growth forecast.
The benchmark FTSE 100 Index dropped 123.35, or 2.3 percent, to 5,366.8 at the close in London. The gauge has retreated 9 percent this year amid concern the euro area’s debt crisis is spreading. The FTSE All-Share Index slipped 2.2 percent today, while Ireland’s ISEQ Index fell 1.5 percent.
Fed policy makers defied speculation from some investors that the central bank would signal plans for a third round of large-scale asset purchases, known as quantitative easing or QE3. The central bank said in a statement after the close of European trading yesterday that the U.S. is maintaining growth even as the global economy slows.
“It’s been a largely risk-off day again in Europe with investors refusing to take on extra risk as we edge closer to the holiday season,” said Joshua Raymond, chief market strategist at City Index in London. “The FTSE was pushed higher yesterday mostly on optimism that perhaps the Fed was willing to start QE3, but this optimism was firmly quashed.”
Separately, Bank of England Chief Economist Spencer Dale warned the U.K. economy may face at least one quarter of contraction before a “gentle recovery” in the second half of next year. The BOE started a four-month program of bond purchases in October in response to the weakening recovery.
Antofagasta Plc (ANTO) led a selloff in mining companies as copper dropped to its lowest price since October on the London Metal Exchange. The shares lost 4.9 percent to 1,120 pence, Rio Tinto Group fell 4.7 percent to 3,035.5 pence and BHP Billiton Ltd. (BHP) slid 3.5 percent to 1,835.5 pence.
Fresnillo, the world’s largest primary silver miner, dropped 9.7 percent to 1,494 pence, the biggest decline in three months. Randgold Resources Ltd. (RRS) retreated 6.1 percent to 6,360 pence.
Gold fell below $1,600 an ounce for the first time since October on speculation a stronger dollar will curb demand for the metal as an alternative asset. Silver and platinum tumbled at least 4 percent.
A gauge of bank shares fell amid speculation France’s credit rating may be downgraded. President Nicolas Sarkozy said that the loss of France’s top credit rating wouldn’t be an “insurmountable” economic difficulty, according to an interview published Dec. 12 in Le Monde newspaper.
“The market is bracing in for the possibility of a downgrade of France -- that’s the rumor we have had today,” said Jean Borjeix, strategist at Paris-based Platinium Gestion, which helps oversee about $170 million. “Banks are obviously in the first line because they own French bonds on their balance sheet. Clearly a downgrade would hit their valuations.”
Banks also fell as sovereign-bond risk approached a record and the euro fell below $1.30 for the first time since January. Italian borrowing costs increased at a debt auction and the amount that Spain’s banks borrowed from the European Central Bank climbed by the most in a year.
Barclays slid 4.7 percent to 170.3 pence, Royal Bank of Scotland Group Plc lost 4.4 percent to 19.50 pence and HSBC Holdings Plc fell 2.5 percent to 480 pence.
Logica (LOG) sank 16 percent to 62.1 pence after the company reduced its full-year revenue growth forecast to about 3 percent compared with a Nov. 2 estimate for an increase of more than 3 percent. The company also said it will accelerate restructuring measures that will eliminate more than 1,300 jobs with charges of 80 million pounds ($124 million) this year.
Elsewhere, Thomas Cook Group Plc (TCG) slipped 2 percent to 14.52 pence after Europe’s second-largest tour operator posted an annual net loss of 521 million pounds. The company plans to close about 200 U.K. shops and scale back its plane fleet.
SuperGroup Plc (SGP) gained 7.2 percent to 538.5 pence after the owner of the Superdry fashion chain said it has resolved capacity shortages at a warehouse that affected product availability and contributed to a 3.7 percent drop in first-half earnings.
Pace Plc (PIC) rallied 4.5 percent to 69.75 pence after the maker of television set-top boxes appointed Mike Pulli, currently president of its American business, as chief executive officer.
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