U.K. stocks dropped by the most in almost three weeks, led by a selloff in mining companies, as manufacturing reports in Europe and China added to concern that global economic growth is weakening.
Anglo American Plc and Vedanta Resources Plc both tumbled more 4.5 percent as base metals dropped in London. Banks declined after Moody’s Investors Service was said to have told lenders it may announce credit-rating downgrades. Invensys Plc plunged 14 percent after the company said it’s no longer in takeover talks with third parties.
The FTSE 100 Index fell 1 percent to 5,566.36 in London, trimming its gain over the last five days to 1.8 percent. The gauge has lost 6.7 percent from its 2012 high amid concern the euro area’s sovereign-debt crisis is derailing global growth. The broader FTSE All-Share Index slid 1 percent today, while Ireland’s ISEQ Index retreated 0.7 percent.
“Investors have moved to lock in their profits after some good equity gains earlier this week,” said Joshua Raymond, chief market strategist at City Index. “Chinese manufacturing data has showed yet another contraction in activity. This has correlated with weakening demand for mining stocks.”
Manufacturing in the euro-area contracted at the fastest pace in three years in June, while China’s factory output is seen shrinking for an eighth month, according to purchasing managers’ indexes from Markit Economics and HSBC Holdings Plc.
The U.S. Federal Reserve also cut its growth forecast for the world’s largest economy after the close of European trading yesterday. The central bank now predicts growth of 1.9 percent to 2.4 percent this year, lower than an April forecast of 2.4 percent to 2.9 percent.
A gauge of U.K. mining companies tumbled 3.5 percent with copper, the biggest decline in almost a month. Anglo American fell 5.2 percent to 2,101 pence, Vedanta slid 4.9 percent to 930 pence and Glencore International Plc fell 3.2 percent to 322.65 pence.
Barclays Plc fell 1.7 percent to 202.3 pence, Royal Bank of Scotland Group Plc slid 1.7 percent to 243.30 pence and HSBC Holdings Plc retreated 1.1 percent to 559.20 pence.
Moody’s has told banks it may today announce downgrades of the credit ratings of as many as 17 lenders and securities firms with global capital markets operations, according to two people with knowledge of the plans. The announcement may come after the close of trading in New York.
The company said in February it may lower the ratings of firms including UBS AG, Credit Suisse Group AG and Barclays as part of a review of how Europe’s sovereign debt crisis was hurting more than 100 lenders. Any downgrades could raise borrowing costs and force banks to increase collateral.
Invensys plunged 14 percent to 220 pence, paring some of yesterday’s 27 percent advance, after the British maker of rail signaling and industrial automation systems said it’s reviewing options following unsuccessful takeover talks with suitors including Emerson Electric Co.
Ashtead Group Plc rose 1.8 percent to 254.8 pence after the equipment-rental company said profits in the current year may exceed previous expectations. Ashtead is making gains in the U.S. where a weak construction market is prompting customers to switch to leasing from purchase of equipment.
The company today reported full-year net income of 88.5 million pounds ($138.9 million), up from 900,000 pounds a year earlier.
Dixons Retail Plc gained 7.4 percent to 17.19 pence after the U.K.’s largest consumer electronics retailer said it had had a “good start” to this fiscal year as earnings topped analysts’ estimates.
Underlying pretax profit fell 17 percent to 70.8 million pounds ($111 million) in the 12 months through April 28. That compares with the median estimate of 68 million pounds. The company in May forecast profit to be at the top end of estimates of 65 million pounds to 70 million pounds.