U.K. stocks fell as Spain raised its budget deficit target above the limit committed to the European Union, and investors worried that rising oil prices will derail a global economic recovery.
GKN Plc, a British component-maker for Airbus SAS, declined 1.8 percent after the company was said to be the frontrunner in a bid to buy Volvo AB’s aircraft engine unit. Rentokil Initial Plc fell 5.5 percent after posting full-year pretax profit that missed analyst estimates. Barclays Plc rose 2.2 percent after saying it borrowed money from the European Central Bank to support its units in Spain and Portugal.
The FTSE 100 fell 20.12, or 0.3 percent, to 5,911.13 at the close in London. The measure declined for the first week in three, losing 0.4 percent. The FTSE All-Share Index dropped 0.3 percent today, while Ireland’s ISEQ Index rose 0.9 percent.
“There were a lot of European leaders’ comments but nothing’s really changed, nothing’s been solved,” said John Sidoli, an associate desk analyst at Knight Equity Markets LP in London. Spain’s target increase “was expected, but it’s still a negative because this is what we had with Greece. Another increase means Spain could end up going the way of Greece.”
Spanish Prime Minister Mariano Rajoy raised the country’s budget deficit target for 2012 to 5.8 percent of gross domestic product, defying a previous 4.4 percent level previously agreed with European Union leaders.
Crude oil has advanced 7.5 percent to $106.26 per barrel so far this year. The contract for April delivery rose to as high as $110.55 in intraday trading yesterday. A gradual 50 percent increase may weaken U.S. economic growth and trigger a recession, Citigroup Inc. analysts said in a report yesterday.
If oil prices continue to rise, a fragile economic recovery in the developed world could quickly be derailed and inflation could return to emerging markets,” HSBC Chief Economist Stephen King said in a note today.
Euro-area leaders committed to a pro-growth agenda and signed a deficit-control treaty at the second day of a summit in Brussels today. They agreed late yesterday to speed up payment towards a permanent bailout fund to bolster the region’s defenses against the debt crisis.
A gauge of U.K. construction output strengthened to 54.3 in February, according to a survey of purchasing managers compiled by Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply. The median forecast of economists in a Bloomberg News survey called for a reading of 51.3.
GKN fell 1.8 percent to 218.4 pence as the company was said to lead a bid to buy Volvo AB’s aircraft-engine unit after MTU Aero Engines Holding AG dropped out of the sale process, according to people familiar with the matter.
Rentokil Initial plunged 5.5 percent to 76 pence after the world’s biggest pest-control company reported full-year pretax profit of 184.4 million pounds ($293.7 million), missing the median analyst estimate of 189.7 million pounds according to data compiled by Bloomberg.
Kazakhmys Plc declined 5.8 percent to 1,000 pence after it was downgraded to “hold” from “buy” at Societe Generale SA.
Barclays increased 2.2 percent to 256.75 pence after Britain’s third-largest lender by assets said it took 8.2 billion euros ($10.8 billion) of three-year loans from the ECB on Feb. 29. The central bank allocated 529.5 billion euros to 800 of the region’s financial institutions in the second round of its long-term refinancing operation.
IMI Plc advanced 2.2 percent to 991 pence after the U.K. engineering company increased its full-year dividend by 15 percent to 30 pence a share and reported 2011 sales in line with analyst estimates.
International Power Plc gained 4.4 percent to 365.5 pence after the Times newspaper reported that GDF Suez SA may bid for the 30 percent stake in the company that it doesn’t already own.