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U.K. Stocks Decline; Banks Decline as UBS Lowers Ratings

Oct. 2 (Bloomberg) -- U.K. stocks declined as banking shares slumped after UBS AG downgraded its recommendations for British lenders including Royal Bank of Scotland Plc and Lloyds Banking Group Plc.

RBS and Lloyds fell at least 2 percent. BG Group Plc advanced 1.6 percent after Goldman Sachs Group Inc. added the stock to its “conviction list”. Bumi Plc jumped 6.5 percent after its Indonesian unit said it will sell a subsidiary and make a rights offering to speed up debt repayment.

The FTSE 100 Index fell 11 points, or 0.2 percent, to 5,809.45 at the close in London, after gaining as much as 0.3 percent and declining as much as 0.7 percent. The gauge dropped 1.9 percent last week as Germany and France disagreed over a euro-area banking union and concern grew that the latest round of U.S. stimulus will fail to promote economic growth. The FTSE All-Share Index lost 0.1 percent today, while Ireland’s ISEQ Index jumped 0.9 percent.

“Traders have found it difficult to get a sense of direction for equity markets as contradictory comments continue to ensure that European waters remain as muddy as ever,” said Alastair McCaig, a market analyst at IG in London.

Spain’s registered unemployment rose 79,645 in September to 4.7 million, according to data from the Labor Ministry in Madrid. The median estimate of economists in a Bloomberg survey called for an increase of 57,000. The number of people registering for jobless benefits rose 38,179 in August.

Australia Rate

The Reserve Bank of Australia today lowered its target rate for overnight cash by a quarter percentage point to 3.25 percent. The majority of estimates by economists in a Bloomberg survey had called for no change.

RBS fell 3.3 percent to 257.5 pence and Lloyds declined 2.4 percent to 39.03 pence after UBS lowered its ratings on both banks to neutral from buy citing a difficult regulatory environment and concern the banks may have to raise more capital.

A gauge of banking shares in the FTSE 350 Index slid 1.4 percent. HSBC Holdings Plc slipped 1.2 percent to 580.5 pence, while Standard Chartered Plc declined 1.7 percent to 1,410.5 pence.

Petra Diamonds Ltd. dropped 2.8 percent to 116.7 pence after saying some miners halted work at its Kimberley underground operations. The company said today it’s in wage talks with the National Union of Mineworkers.

BG Group gained 1.6 percent to 1,300 pence after Goldman Sachs added the company to its “conviction list” and maintained a buy rating.

Bumi Rights

Bumi Plc rallied 6.5 percent to 159.5 pence after PT Bumi Resources said it may sell a subsidiary and conduct a rights offer as part of a plan to accelerate debt repayment.

Indonesia’s biggest exporter of thermal coal said it is considering a sale of PT Fajar Bumi Sakti. Bumi, founded by Nathaniel Rothschild, said Sept. 24 it began investigating “potential financial and other irregularities” into its Indonesian subsidiaries Bumi Resources and PT Berau Coal Energy. The shares have fallen 82 percent so far this year.

Fresnillo Plc gained 2.1 percent to 1,920 pence and Randgold Resources Ltd. climbed 1.4 percent to 7,770 pence.

Babcock International Group Plc advanced 2.4 percent to 945 pence after the company said it remains confident of meeting its own expectations for the current financial year. “Our businesses continue to experience buoyant market conditions, in both civil and military markets, as current and potential customers continue to seek increased efficiency and improved availability of assets,” it said in a statement.

St. Ives Plc, a U.K. printing company, gained 6.9 percent to 85.25 pence after announcing a dividend of 4 pence a share. The company was expected to pay 3.75 pence, according to Bloomberg Dividend Forecasts that factor in earnings and options prices.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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