U.K. stocks declined for a third day on concern the global economy is worsening, with mining stocks falling on investor concerns about Chinese demand.
Antofagasta Plc (ANTO) and Fresnillo Plc (FRES) led miners lower after Goldman Sachs Group Inc. said it sees a slowdown in demand for industrial metals in China. Smith & Nephew Plc (SN/) lost 1.7 percent after Societe Generale SA recommended investors sell the stock. Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS) gained at least 2 percent.
The FTSE 100 (UKX) Index dropped 33.34 points, or 0.6 percent, to 5,776.71 at the close in London, the biggest decline this month. The gauge has still climbed 9.8 percent from this year’s low on June 1 as the European Central Bank agreed on an unlimited bond- buying plan and U.S. unemployment fell to the lowest rate in more than three years. The FTSE All-Share Index also fell 0.6 percent, while Ireland’s ISEQ Index lost 0.7 percent today.
“The FTSE has slipped lower once again as unease about global growth prospects takes hold,” said Chris Beauchamp, a market analyst at IG in London. “Expectations for earnings season are for a general slowdown in revenues, a reflection of the stagnation seen around the world.”
The International Monetary Fund yesterday cut its global growth forecasts and warned of even slower expansion if European officials don’t address threats to their economies.
Alcoa Inc., the largest U.S. aluminum producer, kicked off the U.S. earnings season yesterday by cutting its forecast for global consumption of the metal by 1 percentage point on slowing Chinese demand.
A gauge of mining shares in the FTSE 350 Index dropped 0.8 percent. Max Layton, a London-based analyst at Goldman Sachs, wrote in a report the high demand for copper and aluminum in China, the biggest metals user, is set to “crash” by 2014.
Antofagasta slid 1.8 percent to 1,291 pence, Fresnillo lost 2.4 percent to 1,926 pence and Vedanta Resources Plc (VED) slipped 2.8 percent to 1,060 pence. Randgold Resources Ltd. (RRS) declined 1.9 percent to 7,600 pence.
Smith & Nephew, Europe’s largest maker of artificial hips and knees, retreated 1.7 percent to 655 pence after SocGen initiated coverage of the stock with a sell rating. The shares were trading without the right to the latest dividend today.
Separately, U.S. medical devices company Biomet Inc. said today it saw some “deceleration in growth” for its orthopedic hip and knee devices.
Imagination Technologies Group Plc (IMG), a maker of chip technology for phones and tablet computers, plunged 9.4 percent to 455.5 pence after Credit Suisse AG began coverage of the shares with a sell rating.
BAE Systems Plc (BA/) lost 1.4 percent to 320.9 pence after the company abandoned a planned merger with European Aeronautic, Defence & Space Co. The two companies said in a statement they terminated the deal, hours before a deadline to formalize the agreement or ask for more time, because they could not get government backing.
The U.K.’s Financial Services Authority relaxed a requirement for lenders to meet an end-2013 deadline to achieve a core capital ratio of 10 percent of their assets, the Financial Times reported, without saying where it got the information.
The FSA said on its website Sept. 27 it will allow banks to deduct any increase in their minimum capital requirements from buffers, with the effect that “no bank will be required to hold the additional” reserves needed previously.
Lloyds advanced 4 percent to 38.48 pence. U.S. investment firms Lone Star Funds and Kennedy-Wilson Holdings Inc. are among remaining bidders for parts of about 2 billion euros ($2.58 billion) of mainly Irish real estate loans Lloyds is selling, two people familiar with the matter said.
RBS gained 2.1 percent to 262.7 pence. Axa Investment Managers SA and Norway’s sovereign-wealth fund today agreed to buy two of the lenders’ properties in Frankfurt and Berlin for 784 million euros, the biggest German commercial real estate transaction this year.
The takeover is “possible but not likely,” Peter Lenardos, an analyst at RBC Capital Markets in London, wrote in an e-mailed note. “We do not see the logic of acquiring a company whose funds are underperforming key benchmarks and are experiencing net outflows,” he wrote.
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