U.K. Stocks Slide as FTSE 100 Index Trims Monthly Gain

U.K. stocks declined, with the FTSE 100 (UKX) Index posting two consecutive weekly losses for the first time since November, even as the equity benchmark completed the longest streak of monthly gains since its inception.

Imagination Technologies Group Plc (IMG) dropped 4.5 percent as Bank of America Corp.’s Merrill Lynch unit recommended that investors sell the shares. London-listed mining companies pared their first monthly advance since January as Rio Tinto Group and Glencore Xstrata Plc both fell at least 2.5 percent.

The FTSE 100 lost 73.9 points, or 1.1 percent, to 6,583.09 at the close in London. The gauge dropped 1.1 percent this week. It has still climbed 2.4 percent in May, for a 12th month of gains and the longest winning streak since the gauge was formed in 1984. The broader FTSE All-Share Index declined 1 percent today, even as it rose for a 12th month for the first time since the benchmark measure began in 1962. Ireland’s ISEQ Index slipped 0.5 percent.

“The market is perhaps going to be more volatile from here,” Xavier Lagrandie, who helps manage about $40 billion at Lombard Odier Investment Managers, said in a telephone interview from Geneva. “Still, this is a short-term pull-back, and I’d see a correction of 5 to even 10 percent as an opportunity to put more money to work again.”

Treasury Yields

The yield on benchmark 10-year U.S. Treasuries (USGG10YR) has increased 48 basis points in May, its biggest monthly advance since December 2010, amid speculation that the Federal Reserve will taper its debt-buying program as economic data improves.

“It’s understandable that at some point interest rates go up a bit, but rates are still extremely low,” Lagrandie said. “We’ve seen an economic recovery in the U.S., which supports global growth, though Europe continues to lag behind.”

U.S. consumer sentiment climbed in May to the highest level since July 2007. The Thomson Reuters/University of Michigan index of consumer confidence rose to 84.5 from 76.4 in April, according to a final reading today. Economists had predicted a gain to 83.7.

Business activity in the U.S. increased this month to the highest level in 14 months. The MNI Chicago Report’s business barometer rose to 58.7 in May, from 49 in April. Economists surveyed by Bloomberg had forecast an increase to 50. A reading above 50 signals expansion.

Economic Growth

The U.K. economy will grow faster than previously forecast over the next three years, the British Chambers of Commerce said today. Gross domestic product will rise 0.9 percent this year, 1.9 percent next year and 2.4 percent in 2015, compared with previous forecasts of 0.6 percent, 1.7 percent and 2.2 percent, the London-based lobby group said.

A U.K. consumer-sentiment index published by GfK NOP Ltd. climbed 5 points to minus 22 this month. That matched the reading in November, which was the strongest in 18 months.

The number of shares changing hands in FTSE 100-listed companies was 49 percent greater than the average of the past 30 days, data compiled by Bloomberg showed.

Imagination Technologies dropped 4.5 percent to 351.4 pence. Merrill Lynch lowered its rating on the designer of chips for mobile devices to underperform, the equivalent of a sell recommendation, from neutral. The brokerage said that lower prices for smartphones and tablet computers sold in emerging markets will reduce the royalties that the company collects from every sale.

A gauge of London-listed mining companies slipped 2.1 percent, paring its advance in May to 1.7 percent. Rio Tinto, the world’s second-largest raw-materials producer, slipped 2.6 percent to 2,857 pence, while Glencore decreased 3.1 percent to 323.1 pence. Vedanta Resources Plc (VED) slid 3.4 percent to 1,262 pence.

Lonmin Plc (LMI) jumped 2.8 percent to 295 pence, extending its biggest weekly rally in almost four months. Morgan Stanley upgraded the shares to overweight from equal weight, meaning that investors should buy more of the shares. The brokerage described their valuation as attractive.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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