U.K. Stocks Drop as U.S. Jobs Data Signals Fed Tapering

U.K. stocks declined, paring their biggest weekly gain in six months, after better-than-estimated U.S. non-farm payrolls data stoked speculation the Federal Reserve will begin to reduce the size of its asset purchases.

BHP Billiton Ltd. (BHP) and Rio Tinto Group, the world’s biggest mining companies, fell at least 3 percent. Whitbread Plc (WTB) dropped 2.8 percent after UBS AG downgraded the owner of the Costa Coffee chain. British Land Co., the U.K.’s second-largest real estate investment trust, advanced 1.2 percent after saying it bought commercial property in London for 470 million pounds ($707 million).

The FTSE 100 Index (UKX) slid 46.15 points, or 0.7 percent, to 6,375.52 at the close of trading in London, paring its weekly advance to 2.6 percent, the most since Jan. 4. The gauge has still lost 6.8 percent since the Federal Reserve signaled that it may start to taper its stimulus program if the U.S. economy improves in line with its forecasts. The FTSE All-Share Index slipped 0.7 percent, while Ireland’s ISEQ Index tumbled 1.6 percent today.

“The short-term trend in payroll growth is back near 200,000 and right at the Fed’s perceived bogey,” Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, wrote in a note. “While we still think October is most likely when the Fed will announce tapering, this report means an increased risk of an earlier taper.”

U.S. Employment

Treasury yields rose to the highest level in almost two years after a U.S. Labor Department report showed that employers hired 195,000 workers in June, compared with the 165,000 median forecast of economists surveyed by Bloomberg. Payrolls in May also rose a revised 195,000, from an earlier reading of 175,000. The unemployment rate stayed at May’s level of 7.6 percent. Economists had projected 7.5 percent.

BHP Billiton retreated 3.6 percent to 1,666.5 pence and Rio Tinto dropped 4.4 percent to 2,636 pence. A gauge of mining shares in the FTSE 350 tumbled 4.6 percent, the most in two weeks. Fresnillo Plc declined 5.8 percent to 886.5 pence as the price of silver, the metal it produces, fell in London.

Whitbread slipped 2.8 percent to 3,106 pence after UBS lowered its recommendation on the shares to neutral from buy, saying the retailer’s new initiatives do not change the near-term earnings outlook.

A gauge of banking shares in the FTSE 350 Index reversed earlier gains, declining 0.5 percent. Standard Chartered Plc (STAN) fell 1.8 percent to 1,470 pence and Royal Bank of Scotland Group Plc lost 2.6 percent to 276.7 pence.

British Land increased 1.2 percent to 591.5 pence after saying it bought buildings and development sites near London’s Paddington Station from Aviva Plc and other investors. The company said it will own about 1 million square feet (93,000 square meters) of Paddington Central’s 1.6 million-square feet space once the development is completed.

Redrow Plc (RDW) rallied 3.2 percent to 245.6 pence as Deutsche Bank AG increased its 12-month share-price estimate and profit forecasts for 2013 and 2014. The U.K. builder yesterday jumped the most in five months after saying pretax profit for the year ended June will beat analysts’ estimates.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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

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