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U.K. Stocks Decline as Euro-Area Industrial Output Falls

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March 13 (Bloomberg) -- U.K. stocks fell from a five-year high as euro-area industrial output declined more than forecast and borrowing costs rose in the first auction of Italian bonds since last week’s credit-rating downgrade.

G4S Plc, the world’s largest security company, sank the most in four months after posting profit that missed analysts’ estimates. Balfour Beatty Plc retreated after HSBC Holdings Plc downgraded the shares. Prudential Plc jumped to the highest price in 13 years after raising its dividend.

The FTSE 100 Index dropped 29.12 points, or 0.5 percent, to 6,481.5 at the close of trading in London after climbing to the highest level since December 2007 yesterday. Six companies in the benchmark gauge traded without the right to the latest dividend today, wiping about 10.8 points off the measure. The broader FTSE All-Share Index also lost 0.5 percent today, while Ireland’s ISEQ Index fell 0.2 percent.

“A little bit of worry is creeping into this market,” Lex van Dam, a London-based fund manager at Hampstead Capital LLP, wrote in an e-mail. “The Italian auction today was not great and there is still no government, which does not help confidence.”

Italy sold 3.32 billion euros ($4.32 billion) of a 2015 note at 2.48 percent, up from the 2.3 percent paid Feb. 13, and 2 billion euros of 2028 bonds at 4.9 percent, compared with 4.805 percent on Jan. 15. Investors bid for 1.28 times the amount of three-year debt offered, down from 1.37 last month.

Fitch Ratings lowered Italy’s credit score by one level to BBB+ on March 8, saying that inconclusive parliamentary elections in February threatened the government’s ability to respond to a deepening recession and the European debt crisis.

European Economy

Euro-area industrial production dropped 0.4 percent in January, after increasing a revised 0.9 percent in December, a report showed today. The median forecast in a Bloomberg News survey of 32 economists had called for a 0.1 percent decline in the first month of 2013.

The FTSE 100 pared an earlier slide of as much as 1.1 percent as U.S. retail sales rose in February by the most in five months. The 1.1 percent advance in revenue was more than forecast and followed a revised 0.2 percent gain in January, Commerce Department figures showed. The median projection in a Bloomberg survey called for a 0.5 percent increase.

The volume of shares changing hands in companies on the FTSE 100 was 3.3 percent less than the average of the past 30 days, data compiled by Bloomberg showed.

G4S slid 2.5 percent to 299.9 pence, the biggest loss since Nov. 8. The company reported 2012 profit of 48 million pounds ($72 million), missing analysts’ estimates of 178 million pounds in a Bloomberg survey. Full-year sales stood at 7.5 billion pounds, trailing projections for 8.02 billion pounds.

Balfour Beatty

Balfour Beatty, the U.K.’s largest construction company fell 0.9 percent to 269.7 pence, after earlier tumbling as much as 5.9 percent. The stock was downgraded to neutral from overweight at HSBC, which said the outlook for the construction business is tougher than anticipated.

Petropavlovsk Plc, a miner of gold in Russia, dropped 4.4 percent to 238.5 pence. Kazakhmys Plc, Kazakhstan’s biggest copper producer, lost 3.4 percent to 533.5 pence.

Prudential rallied 9.3 percent to 1,125 pence, the highest price since January 2000. The U.K.’s biggest insurer by market value raised its dividend 16 percent as 2012 operating profit beat estimates.

The full-year payout increased to 29.19 pence a share in 2012, compared with 25.19 pence a share a year earlier, the London-based firm said. That beat the 26.5 pence a share median estimate of 11 analysts surveyed by Bloomberg.

Thomas Cook Plc surged 16 percent to 100.75 pence, the highest since July 2011. The 171-year-old U.K. tour operator said it will raise as much as 150 million pounds from disposals and is increasing cost cuts to achieve profitability targets.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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