U.K. stocks declined the most this month as lenders fell after the government sold a stake in Lloyds Banking Group Plc and Glencore Xstrata Plc led mining companies lower.
Lloyds tumbled the most since May 23 after UK Financial Investments Ltd. sold a 6 percent stake in the company on behalf of the government. Glencore slid 2.3 percent as UBS AG cut its rating for the commodity producer. Aviva Plc (AV/) and Aggreko Plc retreated after analysts advised selling the shares.
The FTSE 100 Index (UKX) dropped 52.69 points, or 0.8 percent, to 6,570.17 in London, as investors awaited the Federal Reserve’s two-day meeting starting today for its stance on reducing bond purchases. The broader FTSE All-Share Index also declined 0.8 percent today, while Ireland’s ISEQ Index added 0.1 percent.
“The market is really focused on what the Fed is going to tell us tomorrow -- how much they’ll taper, whether they’ll taper.” David Wartenweiler, chief investment officer at Habib Bank AG, said by telephone from Zurich. “A lot of it is priced in. If they don’t taper, that would be a surprise. I’m not sure it’d be positive for equities, because it would imply the Fed is concerned about the U.S. economy.”
The volume of shares changing hands in companies listed on the FTSE 100 was 80 percent higher than the average of the past 30 days, according to data compiled by Bloomberg.
The Federal Open Market Committee will probably decide to reduce its monthly bond purchases by $10 billion to $75 billion, according to the median estimate of 34 economists in a Bloomberg News survey earlier this month. That’s down from the forecast of a $20 billion reduction in a July survey. The FOMC will announce its decision after European market hours tomorrow.
In the U.K., the Bank of England will publish the minutes of its recent policy meeting at 9:30 a.m. in London tomorrow.
Lloyds lost 3.5 percent to 74.65 pence. UKFI, which overseas the government’s holding in the bank, sold 4.28 billion shares for 3.2 billion pounds ($5.1 billion). The shares were priced at 75 pence, a 3.1 percent discount to yesterday’s closing price and above the 73.6 pence the state originally paid after providing a 20 billion-pound bailout in 2008.
Royal Bank of Scotland Group Plc (RBS), which received a 45.5 billion-pound bailout, fell 1.1 percent to 362.5 pence.
Glencore slid 2.3 percent to 334.2 pence, contributing the most to the decline in a gauge of U.K. mining companies. UBS cut the company’s rating to neutral from buy, citing a high valuation amid a challenging outlook for copper and coal prices. The stock trades at 17.9 times its projected earnings, compared with 9 at the end of March.
Vedanta Resources Plc (VED) retreated 2.1 percent to 1,158 pence.
Evraz Plc (EVR) retreated 1.6 percent to 137.7 pence. Barclays Plc downgraded the mining-and-metals company to underweight from equal weight, saying investors are concerned about a lack of free cash flow, high levels of borrowing and exposure to the long-steel market in Russia. Citigroup Inc. also reduced its recommendation to neutral from buy.
Aviva lost 1.1 percent to 415.1 pence. Berenberg Bank cut the U.K.’s third-biggest insurer by market value to sell from hold. Mediobanca SpA started coverage of the company with an underperform rating, saying the company’s return on equity may slide, partly because of high levels of borrowing.
Aggreko lost 4.2 percent to 1,580 pence. Credit Suisse Group AG downgraded the largest provider of mobile power generators to underperform, the equivalent of sell, from neutral. Credit Suisse also cut Aggreko (AGK)’s earnings estimates by 6 percent for 2013, 19 percent for 2014 and 16 percent for 2015, citing challenging trading conditions in the company’s power-projects division.
Porvair Plc rallied 5.2 percent to 244 pence. The filtration and environmental-technology company said revenue in the nine months ended Aug. 31 increased 13 percent from the same period last year and it expects pretax profit for the full year to exceed its own forecast.
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