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U.K. Stocks Tumble Most in 21 Months on Fed Comments

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June 20 (Bloomberg) -- U.K. stocks sank the most in 21 months after Federal Reserve Chairman Ben S. Bernanke said the central bank may consider ending bond purchases next year.

HSBC Holdings Plc and Man Group Plc led a selloff in banks and financial companies. Randgold Resources Ltd. and Rio Tinto Group each tumbled at least 4.5 percent after data showed Chinese manufacturing shrank further this month. ARM Holdings Plc fell for a second day, falling 4.4 percent.

The FTSE 100 Index lost 189.31 points, or 3 percent, to 6,159.51 at the close in London, its lowest level since Jan. 18 and the biggest retreat since September 22, 2011. The gauge has slumped 10 percent since a high on May 22, when Bernanke first said the Fed could scale back stimulus if the economy improves. The FTSE 100 fell as low as 6,144.98 in intra-day trading.

“The chairman for the first time outlined a somewhat specific, albeit completely data-dependent, time line for the gradual wind-down,” Harm Bandholz, chief U.S economist at UniCredit SpA, wrote in a note to clients. “The FOMC statement and press conference are in line with the view that the tapering of asset purchases could start in September.”

The broader FTSE All-Share Index slid 2.7 percent today, while Ireland’s ISEQ Index slipped 1.3 percent. A measure of FTSE 100 volatility implied by options trading soared 17 percent, for the highest level since July 2012.

Fed Policy

European stocks tracked a selloff in U.S. equities after Bernanke said in Washington yesterday that the Fed will probably taper its stimulus measures later in 2013 and halt bond purchases around mid-2014 as long as the economy performs in line with Fed projections. He was speaking after a two-day meeting of the Federal Open Market Committee.

HSBC, Europe’s largest bank, lost 3.5 percent to 664.5 pence, Man Group Plc, the world’s biggest publicly traded hedge-fund manager, tumbled 10 percent to 78.65 pence and Prudential Plc, the U.K.’s largest insurer, slid 2.8 percent to 1,038 pence.

A gauge of London-listed mining companies dropped 4.7 percent, for the lowest level since July 2009. China’s manufacturing shrank in June, for a second successive month. A preliminary reading of 48.3 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compared with the 49.1 median estimate in a Bloomberg News survey. The final reading of 49.2 in May was the first below 50 since October, indicating contraction.

Gold Producers

Randgold dropped 7.5 percent to 4,296 pence, its lowest price since February 2010, as Gold plunged to the lowest in more than 2 1/2 years in London. Fresnillo Plc fell 8.1 percent to 960.5 pence and Anglo American Plc retreated 3.5 percent to 1,359 pence.

Antofagasta slid 5f3m.2 percent to 824.5 pence as copper tumbled to a seven-week low. Rio Tinto Group declined 4.5 percent to 2,674.5 pence and Glencore Xstrata Plc lost 4.8 percent to 292.7 pence.

ARM, whose chip designs power Apple Inc.’s products, lost 4.4 percent to 799 pence as the shares fell below their 200-day moving average for the first time in nine months. ARM slid 1.2 percent yesterday after U.S.-based Nvidia Corp. announced plans to license technology to other processor makers.

“We believe the announcement marks the entrance of a viable competitor in the graphics space to ARM Holdings,” Anil Doradla, an analyst at William Blair & Co., wrote in a report to clients. “Nvidia’s licensing model could prove to be a credible competitor to ARM’s graphics-segment momentum.”

Ashtead Earnings

Ashtead Group Plc rose 5 percent to 658.5 pence, rallying for a fifth day, as the company reported full-year pretax profit that beat analyst estimates and said earnings in the current accounting year will be better than forecast. The company also raised its dividend.

In Ireland, Elan Corp. gained 4.2 percent to 10.53 euros, its highest price in almost 11 months. Reuters reported late yesterday that Forest Laboratories Inc. is among a “handful of companies” that may bid for the Irish drugmaker. Reuters cited two people familiar with the matter. Both Forest and Elan declined to comment, Reuters said.

Ryanair Holdings Plc advanced 1.2 percent to 7.06 euros after Europe’s biggest discount airline said it will return 1 billion euros ($1.3 billion) to shareholders over the next two years. The company plans to repurchase at least 400 million euros of stock in the current fiscal year through March 2014, with as much as 600 million euros to be paid out in the following 12 months via a further buyback or a special dividend.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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

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