U.K. Stocks Fall, FTSE 100 Erases Gains as Vodafone Sinks

U.K. stocks fell, ending a five-day rally, as declines in Vodafone (VOD) Group Plc shares and basic- resources companies overshadowed an improved assessment of the world’s largest economy from the U.S. Federal Reserve.

Vodafone fell 2.4 percent, the most in two months, as Exane BNP Paribas SA downgraded the world’s biggest mobile-phone operator. Rio Tinto Group and BHP Billiton Ltd. (BHP) retreated with metals prices. The FTSE 100 Index unperformed most western- European markets today as stocks including HSBC Holdings Plc (HSBA), the largest index member by weighting, traded without the right to the latest dividend.

The FTSE 100 slid 10.48, or 0.2 percent, to 5,945.43 at the close in London, erasing earlier gains in the final hour of trading. The gauge has still rallied 6.7 percent this year as the European Central Bank disbursed 1 trillion euros ($1.3 trillion) of loans to the region’s banks. The FTSE All-Share Index fell 0.1 percent today, while Ireland’s ISEQ Index (ISEQ) rallied 0.4 percent.

“A weaker mining sector was able to drag the FTSE lower, as raw-material stocks also felt the impact of the almighty dollar,” said Will Hedden, a sales trader at IG Index in London. “Now that hopes of a more accommodative Fed are off the table for the time being, bulls will need to look elsewhere for real reasons to lift indices beyond their current levels.”

The dollar strengthened against the yen and the euro as the Fed raised its outlook for U.S. growth, reducing expectations the bank will begin a third round of bond purchases.

HSBC, Hammerson

HSBC, Hammerson Plc and Land Securities Group Plc were among companies on the FTSE 100 that traded without the right to their latest dividend today, taking 6.82 points off the gauge, according to data compiled by Bloomberg.

The number of shares changing hands on the FTSE 100 was 30 percent higher than the 30-day average, Bloomberg data show. The gauge had earlier rallied as much as 0.6 percent, to within 11 points of the 6,000 level.

The Federal Open Market Committee said late yesterday that strains in global financial markets have eased and the labor market is gathering strength. At the same time, it said that the unemployment rate is “elevated” and “significant downside risks” remain. Fed Chairman Ben S. Bernanke is sticking to his plan to the keep the benchmark interest rate close to zero through at least 2014.

In a separate statement, the Fed said 15 of America’s largest 19 banks could maintain adequate capital levels even in a recession scenario.

U.K. Economy

In the U.K., jobless claims rose more than economists forecast in February and the three-month unemployment rate remained at the highest in 16 years, underscoring the weakness in the labor market even as the economy shows some signs of recovery.

Unemployment-benefit claims climbed by 7,200 from January to 1.612 million, the Office for National Statistics said today. That’s the 12th straight increase. The median forecast of 28 economists in a Bloomberg survey was for a gain of 5,000. Unemployment measured by International Labour Organization methods held at 8.4 percent in the three months through January, the highest since 1995.

Vodafone fell 2.4 percent to 166.65 pence. Exane lowered its recommendation to underperform from neutral, meaning that the broker expects the stock to return less than the Euro Stoxx 50 during the next 12 months.

Mining Companies Drop

Rio Tinto declined 1.5 percent to 3,480 pence and BHP Billiton lost 2.3 percent to 2,000.5 pence. Copper, lead and tin prices retreated in London.

Smiths Group Plc (SMIN) slipped 1.1 percent to 1,089 pence after the maker of airport security scanners said first-half net income fell 52 percent to 83.8 million pounds. Numis Securities Ltd. said the results were in-line with estimates while economic uncertainty may put pressure on the company’s outlook.

Barclays Plc (BARC) rose 3.9 percent to 248.8 pence as most U.S. banks passed a Fed stress test. Royal Bank of Scotland Group Plc (RBS) advanced 3.1 percent to 26.56 pence

Legal & General Group Plc (LGEN) surged 7.2 percent to 134.3 pence, the biggest gain since October. The fourth-largest U.K. insurer by market value boosted its dividend by 35 percent as profit beat analysts’ estimates on growth in the U.S. and fees for investment-management products.

Resolution Ltd. (RSL), the financial-services buyout firm that has acquired three life insurers since it was founded in 2008 by Clive Cowdery, soared 5.2 percent to 283.2 pence. That was the biggest gain in five months.

Yule Catto & Co. jumped 9 percent to 228.9 pence after the chemicals company increased its target for efficiency gains as it integrates a recently acquired latex business.

Home Retail Group Plc (HOME) gained 4.6 percent to 115 pence as the JPMorgan Chase & Co. advised buying shares in the owner of the Argos chain as U.K. shoppers return to stores in a “more stable” economy.

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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