U.K. stocks declined to the lowest level in more than seven weeks as concern grew that central banks may scale back stimulus measures and as Greek politicians wrangled over the closure of the nation’s broadcaster.
Severn Trent Plc slid the most in more than 6 1/2 years as a consortium abandoned an offer for the water utility. Vodafone Group Plc fell 2.2 percent after confirming it approached Kabel Deutschland Holding AG about a takeover. British Sky Broadcasting Group Plc gained 1.4 percent after Banco Espirito Santo SA said it may get a new bid from News Corp.
The FTSE 100 Index dropped 40.63 points, or 0.6 percent, to 6,299.45 at the close in London, the lowest level since April 22. The equity benchmark has lost 7.9 percent since Federal Reserve Chairman Ben S. Bernanke said May 22 that the central bank may scale back stimulus if the U.S. economy improves sustainably. The broader FTSE All-Share Index fell 0.6 percent today, while Ireland’s ISEQ Index retreated 0.5 percent.
“Talks of quantitative-easing tapering and the ramifications of that carries on affecting the markets,” said Gerard Lane, a strategist at Shore Capital Group Ltd. in Liverpool, England. “My belief is that markets are at levels they shouldn’t be, given the economic momentum and company earnings. They are only there because of quantitative easing.”
Vodafone and Johnson Matthey Plc traded without the rights to their latest dividend today, shaving off 13.7 points from the FTSE 100.
Stocks extended declines as members of Greece’s Pasok and Democratic Left parties submitted a draft law for the parliament to revoke a government decision to shut down the nation’s public broadcaster ERT overnight. The two parties make up the coalition along with Prime Minister Antonis Samaras’s New Democracy.
Separately, MSCI Inc. lowered Greece’s status to an emerging market from a developed country. The country failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability, according to a statement late yesterday.
“The sudden closure of the country’s state broadcaster, ERT, to save taxpayer money, no less, and the relegation of Greek equities to the emerging market sector has seen the country back in the headlines and for all the wrong reasons,” wrote Brenda Kelly, a market strategist at IG in London.
Jobless claims in the U.K. fell 8,600 to 1.51 million in May from the previous month, leaving the rate at 4.5 percent, the Office for National Statistics said today in London. Economists had forecast a drop of 5,000.
Severn Trent slid 8.9 percent to 1,765 pence, its biggest drop since October 2006. A bidding group led by Canada’s Borealis Infrastructure Management Inc. declined to make an offer for the company by the 5 p.m. deadline yesterday.
The consortium said June 10 it would not make a further proposal in the absence of “meaningful engagement” from Severn Trent. LongRiver Partners, a part of the group, said it decided against increasing its pre-conditional offer as no such engagement occurred before the deadline expired.
Vodafone slipped 2.2 percent to 181 pence as the shares traded without the rights to a 6.9 pence dividend today. The world’s second-biggest wireless carrier said it has made a “preliminary approach” to Kabel Deutschland to discuss acquiring the German cable operator to expand in the broadband and TV markets.
BSkyB advanced 1.4 percent to 788.5 pence after Espirito Santo wrote in a note the British broadcaster may receive a new bid from News Corp. as the company owned by Rupert Murdoch won shareholders’ approval to spin off its publishing unit.
Heritage Oil Plc advanced 4.6 percent to 142.4 pence after saying it has successfully addressed “temporary factors” that led to lower-than-estimated production levels at the fields in its OML 30 oil mining lease in Nigeria.
BT Group Plc added 1.4 percent to 309.3 pence as Credit Suisse Group AG raised its share-price estimate to 350 pence from 300 pence. The brokerage maintained an outperform rating, saying that the U.K.’s biggest fixed-line company has the potential to cut costs.