U.K. Stocks Drop Following Euro-Zone Manufacturing Report

U.K. stocks fell, following three weeks of gains, as a report showed the euro area’s manufacturing industries grew at a slower-than-expected pace this month and investors assessed the result of Germany’s federal election.

National Grid Plc (NG/) slipped 1.5 percent after UBS AG lowered its rating on the energy-network operator. Randgold Resources Ltd. (RRS) and Polymetal International Plc both lost more than 1 percent as precious-metal producers declined.

The FTSE 100 Index (UKX) dropped 39.06 points, or 0.6 percent, to 6,557.37 at the close in London. The equity benchmark has still risen 2.3 percent so far this month as Chinese economic reports beat forecasts and the Federal Reserve unexpectedly refrained from reducing its monthly asset purchases. The FTSE All-Share Index lost 0.6 percent today, while Ireland’s ISEQ Index dropped 0.3 percent.

“The market’s digesting a number of factors: the German election, last week’s Fed decision and various data,” Keith Bowman, an equity analyst at Hargreaves Lansdown Plc in London, said by telephone. “The Chinese data was reasonably positive.”

The FTSE 100 has risen 5.5 percent so far this quarter, extending its rally since the beginning of the year to 11 percent. That was its best performance for the first nine months of the year since 2009.

In the euro area, a measure of manufacturing slipped to 51.1 in September from 51.4 in August. That fell short of the median economist forecast for a reading of 51.7. A gauge of growth in services industries climbed to 52.1 from 50.7. That exceeded the median estimate of 51. Readings above 50 mean that activity increased.

Germany’s Election

In Germany, Angela Merkel’s Christian Democratic Union and its Bavarian allies fell five seats short of a majority in federal elections yesterday. Merkel needs to find a new coalition partner after the Free Democrats gained just 4.8 percent, less than the 5 percent threshold needed to win seats in the lower house of parliament.

In China, the world’s second-largest economy, a manufacturing index rose to a six-month high in September. The first reading of 51.2 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics exceeded the 50.9 median estimate of 14 economists surveyed by Bloomberg News.

National Grid slipped 1.5 percent to 747 pence, its biggest drop since June. UBS cut its rating to neutral from buy, saying that the current share price already reflects expected growth in the value of its assets. The brokerage also lowered its 12-month price forecast to 740 pence from 800 pence.

Randgold and Polymetal, which both mine precious metals, lost 1.2 percent to 4,621 pence and 1.6 percent to 658 pence, respectively. The price of gold dropped as much as 3 percent on Sept. 20, extending its decline after the close of European equity markets.

Croda International Plc (CRDA) gained 1.8 percent to 2,727 pence. Credit Suisse Group AG raised the world’s second-largest maker of chemicals for cosmetics to outperform from neutral, meaning that investors should buy the shares. The brokerage said the company has moved into a period of growing sales.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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