U.K. stocks fell for a second day, with the FTSE 100 Index continuing its retreat from a six-month high, amid renewed concern about Europe’s debt crisis and as tensions between Japan and China escalated.
Aviva Plc led a selloff in financial companies as analysts downgraded the insurer’s shares. Royal Bank of Scotland Group Plc (RBS) and Lloyds Banking Group Plc (LLOY) dropped more than 2 percent. BP Plc (BP/), Europe’s second-biggest oil company, retreated 2.8 percent as crude dropped for a second day. United Utilities Group Plc climbed 2.8 percent amid takeover speculation.
The FTSE 100 fell 25.36 points, or 0.4 percent, to 5,868.16 at the close in London. The gauge pared an earlier drop of as much as 1 percent as Spanish Deputy Prime Minister Soraya Saenz de Santamaria said the country will consider seeking a bailout if the conditions imposed are acceptable. The broader FTSE All- Share Index dropped 0.5 percent today, while Ireland’s ISEQ Index slipped 0.4 percent.
“The main event for the coming weeks is Spain’s bailout,” said Chris Beauchamp, a market analyst at IG in London. “The Spanish government might be looking to haggle over the terms, and unlike Greece, Ireland and Portugal it has the clout to make the rest of the euro zone listen.”
The FTSE 100 (UKX) climbed to the highest level since March last week after the European Central Bank pledged an unlimited bond- buying program to help contain bond yields while and the Federal Reserve announced a third-round of quantitative easing to support economic growth.
Spain today sold 4.6 billion euros ($6 billion) of bills at its first auction since the ECB announcement. The nation sold 12-month bills at 2.835 percent, compared with 3.07 percent when they were last auctioned on Aug. 21, and 18-month securities at 3.072 percent, versus 3.335 percent.
Elsewhere, thousands of people in China protested outside the Japanese Embassy in Beijing over a territorial dispute in China and Japan’s worst diplomatic crisis since 2005 that threatens a trade relationship worth more than $340 billion.
Tensions over islands, known as Diaoyu in Chinese and Senkaku in Japanese, complicate policy makers’ efforts to fortify growth in Asia’s biggest economies as Europe’s debt crisis saps demand for exports.
Aviva (AV/) fell the most on the FTSE 100 today, sliding 4 percent to 344.9 pence. Bank of America Corp. downgraded the U.K.’s second-largest insurer to underperform, the equivalent of a sell rating, from neutral. Deutsche Bank AG lowered its recommendation to hold from buy, citing a 40 percent gain in the shares since June.
RBS led a gauge of bank shares lower, sliding 2.7 percent to 267.1 pence. The shares had surged 23 percent over the previous two weeks. Lloyds lost 2.5 percent to 38.86 pence and Barclays Plc (BARC) retreated 1.1 percent to 225.4 pence
BP led energy companies lower as oil fell. Crude futures declined as much as 1.3 percent to $95.39 a barrel in New York today, extending the biggest drop in two months. The contracts plunged more than $3 in less than a minute yesterday as October options were about to expire.
BP retreated 2.8 percent to 438.95 pence, the largest drop in two weeks. Tullow Oil Plc slid 2.3 percent to 1,411 pence and BG Group Plc (BG/) sank 2 percent to 1,265 pence. Royal Dutch Shell Group Plc, the biggest oil company in Europe, slipped 0.8 percent to 2,236 pence.
Volex Plc (VLX) plummeted 27 percent to 187.5 pence, for the worst performance on the FTSE All-Share Index and the largest drop since January 2008. The U.K. maker of power cords for computers and devices including Apple Inc.’s iPhone cut its earnings forecast, citing an unexpected drop in demand from its largest customer in the consumer sector.
So-called defensive companies, whose earnings are less tied to the economy, paced advancing shares on the FTSE 100. British American Tobacco Plc (BATS) and Imperial Tobacco Group Plc (IMT) climbed 2.8 percent to 3,243 pence and 1.9 percent to 2,362 pence, respectively. Reckitt Benckiser Group Plc (RB/), the maker of French’s mustard and Nurofen painkillers, gained 1.3 percent to 3,627 pence.
United Utilities (UU/) extending gains in the final hour of trading, closing up 2.8 percent at 707.5 pence amid speculation the company may be a takeover target. The number of shares changing hands was more than triple the three-month average, according to data compiled by Bloomberg.
“Bid rumors have supported the shares on decent volume this afternoon,” said Jawaid Afsar, a CFD trader at Securequity Ltd. in Sheffield, England. “But it appears to be more positioned ahead of the company’s numbers.”
United Utilities has a trading statement provisionally scheduled for Sept. 20, according to the company’s website.
Wilmington Group Plc (WIL) advanced 7.8 percent to 117 pence, the highest in almost 14 months. The publisher of directories and periodicals said full-year net income increased 13 percent to 4.88 million pounds ($7.9 million).
The volume of shares changing hands on the FTSE 100 was 17 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
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