U.K. stocks fell to their lowest in a month, led by a selloff in mining companies, as a U.S. manufacturing report added to concern the recovery in the world’s largest economy is slowing.
Rio Tinto Group retreated 2.6 percent as iron ore traded near a three-year low. Xstrata Plc, the target of a $33 billion takeover bid by Glencore International Plc, declined 3.1 percent. Land Securities Group Ltd. and British Land Co. both slipped at least 2 percent.
The FTSE 100 Index slid 86.4 points, or 1.5 percent, to 5,672.01 at the close in London, its lowest level since Aug 2. The gauge has still gained 7.8 percent from this year’s low on June 1 boosted by speculation central banks will add stimulus to drive growth. The FTSE All-Share Index lost 1.4 percent today, while Ireland’s ISEQ Index fell 0.5 percent.
Today’s “data has forced traders to focus back on the real economy and the signs are still not encouraging,” said David Jones, chief market strategist at IG Index in London. “The moves today could well be the sign of the market returning to its more volatile and slightly nervous pre-summer state.”
Manufacturing in the U.S. has contracted for three months, the longest slide since the recession ended. The Institute for Supply Management’s factory index fell to 49.6 in August, the lowest since July 2009, from 49.8 in July. Economists in a Bloomberg survey had forecast a reading of 50, the dividing line between expansion and contraction.
Investors are waiting for European Central Bank President Mario Draghi to speak on Sept. 6. The leaders of the single currency’s biggest economies hold further meetings before then as they brace for the ECB’s plan to defend the euro from bond-market turmoil.
Rio Tinto, the world’s third-largest mining company, dropped 2.6 percent to 2,722 pence, while BHP Billiton Ltd., the biggest, lost 1.5 percent to 1,827 pence. Iron ore slipped on concern that slowing growth in China, the world’s largest buyer, will curb demand for the steel-making ingredient.
Xstrata fell 3.1 percent to 917.5 pence, sliding for a second day. Shareholders will reject the company’s merger with Glencore on Sept. 7, according to analysts. Qatar Holdings LLC, which owns about 12 percent of Xstrata, last week said that it will vote against the offer.
Glencore slipped 0.8 percent to 385.1 pence.
Land Securities lost 2 percent to 777.5 pence after analysts from UBS AG, JPMorgan Chase & Co. and Exane BNP Paribas all downgraded the U.K.’s largest real estate investment trust to neutral.
“The real estate sector is looking less attractive after a strong performance,” Nick Webb, an analyst at Exane in London wrote in a report to clients. “The scope for further performance through re-rating alone seems limited.”
UBS also lowered its recommendation for British Land to neutral. The U.K.’s second-biggest real estate investment trust fell 2.7 percent to 527 pence after announcing it will sell as much as 400 million pounds ($635 million) of convertible bonds.
The securities, due in 2017, can be exchanged for stock when the shares rise 27.5 percent to 32.5 percent from their current price.
Vodafone Group Plc declined 2.6 percent to 178.45 pence after Sanford C. Bernstein & Co. downgraded the mobile-phone company to market perform from outperform and cut its share price estimate by 21 percent to 170 pence. Analysts cited regulatory changes in the telecommunications industry and heightened operational risks.
Next Plc lost 2 percent to 3,571 pence after Exane downgraded the U.K.’s second-largest clothing retailer to underperform, the equivalent of a sell recommendation, from neutral. The brokerage said strong trading for the rest of the year was now priced into the shares.
Ashtead Group Plc surged 12 percent to 315.9 pence, its highest price since at least 1989, after the construction-equipment rental company said full-year earnings will be “materially better” than it had forecast. Ashtead reported a 76 percent jump in underlying pretax profit in the three months ended July 31 to 61.4 million pounds.