U.K. stocks posted the biggest two-day drop since July as European Central Bank President Mario Draghi said he sees risks to the euro area’s economic recovery and U.S. jobless-benefit claims unexpectedly increased.
Diageo Plc dropped 1.9 percent after a report that its acquisition of United Spirits Ltd. may be delayed. WH Smith Plc slid the most in two months after Goldman Sachs Group Inc. downgraded the retailer. European Natural Resources Corp. jumped 4.7 percent, rebounding from a four-year low, as Halyk Bank Kazakhstan raised its recommendation on the mining company.
The FTSE 100 Index fell 76.16 points, or 1.2 percent, to 6,344.12 at the close in London, after sliding 1.1 percent yesterday. The equity benchmark has still rallied 7.6 percent this year as U.S. lawmakers agreed on a compromise budget and data fueled optimism that the world’s biggest economy is recovering. The broader FTSE All-Share Index and Ireland’s ISEQ Index also retreated 1.2 percent today.
“U.K. equities have had a strong start to the year, but the economic outlook is pretty murky,” said Ivor Pether, a fund manager who helps oversee about $15 billion at Royal London Asset Management in London. “Europe is in recession and Asia is having a growth pause. Overall, there’s downward pressure on company earnings.”
The euro area may see a gradual economic recovery in the second half of the year, subject to downside risks, Draghi said. The ECB cannot replace lack of government action or a lack of capital in the banking system, he said.
“Tight credit conditions will continue to weigh on economic activity,” Draghi said at a press conference in Frankfurt, after the ECB left its key interest rate unchanged at 0.75 percent. “Risks include the possibility of weaker-than-expected domestic demand and slow or insufficient implementation of structural reforms in the euro area.”
In the U.S., jobless claims rose by 28,000 to 385,000 in the week ended March 30, Labor Department figures showed. That’s the highest since Nov. 24 and compares with a median forecast of a drop to 353,000 among economists surveyed by Bloomberg.
The Bank of England kept its benchmark interest rate unchanged at 0.5 percent and its asset-purchase target at 375 billion pounds ($568 billion), matching economists’ forecasts in Bloomberg surveys.
The volume of FTSE 100 shares changing hands was 13 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
Diageo fell 1.9 percent to 2,046 pence after India’s Mint newspaper said the London-based liquor company may take as long as three months to complete a $2 billion deal to buy a majority stake in United Spirits. The newspaper citied unidentified people familiar with the matter.
WH Smith retreated 3.6 percent to 736.5 pence, the most since Feb. 2, as Goldman Sachs downgraded the shares to sell from neutral, citing a high exposure to low-growth product categories including books, news and stationery.
Heritage Oil Plc declined 7.1 percent to 165 pence after the New Vision newspaper reported that the oil and gas exploration company lost a tax dispute case to Uganda at an arbitration hearing in London. Heritage rejected the report, saying comments attributed to the Ugandan government are a misleading representation of a detailed legal decision.
ENRC, Kazakhstan’s biggest copper producer, surged 4.7 percent to 235.2 pence, after sliding 36 percent over the previous 12 days. Halyk raised its recommendation on the shares to hold from sell, saying the share price is close to its 12-month estimate of 257 pence.
Vedanta Resources Plc rallied 6.1 percent to 1,070 pence, the biggest gain since September, as Bank of America Corp. upgraded the mining company to buy from neutral.
Domino’s Pizza Group Plc rallied 6.3 percent to 607 pence, the biggest increase in 15 months, after saying same-store sales rose 6.6 percent in the first quarter.
Wincanton Plc jumped 20 percent to 54 pence, the largest advance since at least May 2001. The transporter of J Sainsbury Plc groceries and Miller Beer said its contract logistics and defense businesses have performed well.