U.K. Stocks Retreat Amid Renewed Euro-Area Debt Concern

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U.K. stocks tumbled, for the FTSE 100 Index’s biggest two-day selloff since May, as banks slumped amid renewed concern the euro area has yet to contain its sovereign-debt crisis.

Barclays Plc and Royal Bank of Scotland Group Plc both slid more than 3 percent as Spanish bond yields surged to a euro-era record amid a report that more regions in Spain may ask for aid. Xstrata Plc fell 3.3 percent as copper declined.

The FTSE 100 lost 117.9, or 2.1 percent, to 5,533.87 at the close in London as all 101 companies in the gauge fell. The broader FTSE All-Share Index also retreated 2.1 percent today, while Ireland’s ISEQ Index sank 2.2 percent.

“The euro crisis has intensified in Madrid,” said Joshua Raymond, chief market strategist at City Index in London, in an e-mail. “The moves in Spanish bond yields over the last 48 hours of trading have been a big concern in the markets and a key catalyst for a bearish turn in equities.”

The FTSE 100 dropped last week fell from an 11-week high after Spain said its recession will extend into next year and the region of Valencia said it would tap an emergency-loan fund.

Spain’s 10-year bond yield climbed 23 basis points to 7.50 percent today, the most since the single currency began in 1999, after El Pais reported that six Spanish regions may ask for aid from the central government.

Spain’s Regions

Murcia will request a bailout from Spain’s liquidity fund, El Pais reported today, citing unidentified government officials in the region. The local government faces 433 million euros ($525 million) in debt redemptions in the second half, the newspaper said.

Yields on securities with similar maturities in Italy, France and Greece also climbed following a report in Der Spiegel that the International Monetary Fund will stop paying rescue aid to Greece. The magazine cited unidentified European Union officials.

Greece’s creditors meet this week amid doubts that the country will meet its bailout commitments. Germany’s Vice Chancellor, Philipp Roesler, said that “if Greece doesn’t fulfill those conditions, then there can be no more payments.”

The troika of international creditors -- the European Commission, the European Central Bank and the IMF -- will arrive in Athens tomorrow.

Short Selling

U.K. banks and insurers dropped as Italy and Spain reinstated short-selling bans on stocks. Spain’s CNMV market regulator banned the creation of negative bets using all equity securities through shares, derivatives and over-the-counter instruments for three months while Italy’s Consob prohibited the practice on 29 banking and insurance shares for one week.

“Short-selling bans on banking and insurance stocks are a sure sign that all is not well, though I fear that these restrictions will only offer the most temporary of respites,” said Chris Beauchamp, a market analyst at IG Index in London.

Barclays tumbled 4.2 percent to 152.55 pence, while RBS dropped 3.3 percent to 197.9 pence and HSBC Holdings Plc, Europe’s largest lender, declined 3.5 percent to 514.6 pence.

Among insurers, Aviva Plc slumped 6.6 percent to 275.2 pence, Prudential Plc slid 3.6 percent to 732.5 pence and Legal & General Group Plc slipped 2.6 percent to 125.3 pence.

Mining companies also retreated with commodity prices after Song Guoqing, a member of the monetary-policy committee of the People’s Bank of China, said the world’s second-largest economy may slow for a seventh quarter to 7.4 percent in the three months to September.

Xstrata, Antofagasta

Xstrata dropped 3.3 percent to 812.8 pence and Antofagasta Plc declined 3.5 percent to 1,027 pence. BHP Billiton Ltd., the world’s largest mining company, slid 2.8 percent to 1,765 pence.

Eurasian Natural Resources Corp. declined 4 percent to 366 pence following a report in the Sunday Times that ENRC is close to an agreement to buy out Dan Gertler, the owner of a 49.5 percent stake in a copper mine in Democratic Republic of Congo. The newspaper did not say where it got the information.

African Barrick Gold Plc slumped 16 percent to 317 pence after the largest producer of the metal in Tanzania reported a 57 percent drop in second-quarter profit to $29.9 million as gold output declined and the company’s costs rose. Attributable gold output fell 11 percent to 153,099 ounces.

Tullow Oil Plc, the London-based explorer with the most licenses in Africa, slid 4 percent to 1,373 pence after rival Marathon Oil Corp. paid $35 million to Africa Oil Corp. for interests in two Kenyan exploration projects.

Africa Oil said that the two companies have also “agreed to jointly pursue exploration activities on an additional exploration area in Ethiopia.”

Aberdeen Asset Management Plc lost 2.6 percent to 244.8 pence. The company today reported a 1.1 percent decline in assets under management for the quarter to 182.7 billion pounds ($283 billion).

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