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U.K. Stocks Retreat as Greece Plans Election in June

May 16 (Bloomberg) -- U.K. stocks retreated for a third day as Greece set a date for another election amid speculation the country will leave the euro currency.

British American Tobacco Plc slipped 1.7 percent. Barclays Plc rose 1.6 percent as UBS AG recommended that its clients buy the stock.

The benchmark FTSE 100 benchmark index lost 0.6 percent to 5,405.25 at the close in London, after earlier climbing as much as 0.2 percent and dropping as much as 1.5 percent. The gauge has fallen 9.4 percent from its 2012 high on March 16. The FTSE All-Share Index also slid 0.6 percent today, while Ireland’s ISEQ Index increased 0.1 percent.

“People are still very unsure about the ramifications of what’s going on in Greece, so in the absence of anything else investors keep selling on that,” said Edmund Shing, an equity strategist at Barclays Capital in London. “Stocks can’t go down forever. Sooner or later it’ll change and one catalyst will be the French parliament election and the next Greek one.”

The FTSE 100 fell yesterday as Greece called a new general election after President Karolos Papoulias failed to cajole the country’s political parties into forming a new government.

The European Central Bank will conduct a comprehensive review of its policy tools and has no immediate plans to increase stimulus even as market tensions mount, two euro-area officials said.

U.K. stocks earlier pared losses as European Commission President Jose Barroso said that the other 16 members of the euro area will not allow Greece to ignore the spending cuts that it agreed to implement to get further financial aid.

June 17 Election

Greece’s caretaker government, agreed on in Athens today, will prepare for new elections probably on June 17, Democratic Left leader Fotis Kouvelis said.

Panagiotis Pikrammenos, head of Greece’s Council of State, its highest administrative court, will run the caretaker administration, Independent Greeks leader Panos Kammenos said after talks with other party leaders in Athens. Kouvelis told reporters the transitional government won’t pass any laws.

Public opinion polls suggest the Syriza party, which opposes the austerity measures pledged by Greece as part of an international bailout, may come first in the new ballot. The country will run out of cash by early July if the euro area withholds its next aid payment.

Merkel-Hollande Meeting

German Chancellor Angela Merkel and new French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters committed to the austerity demanded to stay in the euro.

U.K. unemployment unexpectedly declined in April as companies created jobs, providing further evidence that the labor market is stabilizing.

Jobless-benefit claims fell by 13,700 from March, their biggest drop since July 2010, to 1.59 million, the Office for National Statistics said. The median forecast of 24 economists in a Bloomberg News survey had called for a gain of 5,000. Unemployment as measured by International Labour Organization methods dropped to 8.2 percent in the three months through March from 8.3 percent in the three months through February.

The Bank of England said today that U.K. growth will probably remain subdued in the near term, held back by the government’s fiscal squeeze, the pace of the global economy and tight credit. The euro area’s sovereign-debt crisis constitutes the biggest threat to Britain’s economy.

Barclays increased 1.6 percent to 189.05 pence as UBS recommended its clients increase their holdings in the British bank, citing its valuation.

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