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U.K. Stocks Fall for Second Day as Iraq Violence Spreads

U.K. stocks slipped for a second day, following the FTSE 100 (UKX) Index’s largest weekly drop in two months, as investors weighed increasing violence in Iraq after Sunni insurgents captured more territory.

BT Group Plc (BT/A) lost 2.4 percent after the Sunday Times reported that the company may need to increase its pension contributions. Persimmon Plc posted its biggest two-day slump since August, while Bovis Homes Group Plc slipped 1 percent as a report showed U.K. house prices rose this month at the slowest pace in 2014. A gauge of mining stocks rebounded from its lowest level since March. Tullow Oil Plc (TLW) and Premier Oil Plc led oil producers higher.

The FTSE 100 fell 23.21 points, or 0.3 percent, to 6,754.64 at the close of trading in London. The benchmark gauge retreated 1.2 percent last week as George Osborne promised that the Bank of England will get new powers to rein in mortgage lending, while BOE Governor Mark Carney said interest rates may rise sooner than markets expect. The measure is 1.8 percent below its 14-year high reached on May 14. The FTSE All-Share Index slipped 0.4 percent today, while Ireland’s ISEQ Index fell 0.8 percent.

“Iraq is one element of concern for the market,” said Tim Rees, who helps oversee about $370 billion at Insight Investment Management Ltd. in London. “There are implications to deal with wherever you go in U.K. stocks. You’ve got geopolitical uncertainty affecting the multinationals, while Carney’s comments last week clearly did something for the domestic play. With oil and sterling shooting up, I can understand that nerves are quite frayed.”

The pound briefly strengthened above $1.70 for the first time since August 2009. West Texas Intermediate traded near a nine-month high on concern that escalating violence in Iraq would disrupt oil supplies from OPEC’s second-largest producer.

Lower Volume

The number of shares changing hands today in FTSE 100-listed stocks was 10 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.

In Iraq, Sunni militants stormed and captured most of the northern Iraqi town of Tal Afar, west of Mosul. Iraq’s military attempted to stop the insurgents from advancing further south. The army said yesterday that troops killed more than 279 rebels with the Islamic State in Iraq and the Levant and destroyed 50 of the group’s vehicles.

BT lost 2.4 percent to 384.9 pence. A review of the phone and broadband company’s final-salary pension fund may show a shortfall of about 6 billion pounds ($10.2 billion), the Sunday Times reported, without saying how it got the information. BT’s pension deficit swelled to 4.1 billion pounds by the end of 2011.

Housebuilders Fall

Persimmon dropped 2 percent to 1,187 pence, its lowest price since December, while Bovis Homes Group retreated 1 percent to 743.5 pence. Asking prices for U.K. houses rose 0.1 percent in June from the prior month after increasing 3.6 percent in May, according to a Rightmove Plc report today.

A gauge of FTSE 350-listed mining stocks climbed 0.8 percent. Fresnillo Plc (FRES) rose 1.9 percent to 822 pence, its sixth day of gains, while Polymetal International Plc (POLY) advanced 1 percent to 543.5 pence. African Barrick Gold Plc (ABG) added 2.7 percent to 224.2 pence.

Tullow Oil climbed 1.8 percent to 856.5 pence, and Premier Oil rose 2.8 percent to 351.6 pence.

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

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Alan Soughley, Will Hadfield

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