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U.K. Stocks Drop as BHP Billiton, Rio Tinto Retreat

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Aug. 19 (Bloomberg) -- U.K. stocks fell to their lowest level in more than a month as mining shares dropped and Treasury yields jumped on speculation the Federal Reserve will reduce its bond purchases next month.

Glencore Xstrata Plc dropped 2.1 percent after Reuters reported that the mining company created three months ago may write down as much as $7 billion of assets it inherited from Xstrata. BHP Billiton Ltd. and Rio Tinto Group each declined more than 1.5 percent as copper slid.

The FTSE 100 decreased 34.26 points, or 0.5 percent, to 6,465.73 at the close in London. The equity benchmark declined 1.3 percent last week, its biggest drop since June, as speculation mounted that the Fed will reduce the pace of bond buying as the U.S. economy improves. The broader FTSE All-Share Index slipped 0.4 percent today, while Ireland’s ISEQ Index climbed 0.4 percent.

“People want to take some money off the table, be a little more defensive,” Espen Furnes, who helps oversee $75 billion at Storebrand Asset Management in Oslo, said by telephone. “The reporting season is more or less done, so we’re in for a couple of months of a lot of macro news and, therefore, things will be more volatile.”

The volume of shares changing hands in FTSE-100 listed companies was 27 percent lower than the 100-day average, data compiled by Bloomberg show.

Fed Minutes

Yields on 10-year Treasuries jumped four basis points to 2.87 percent and yielded 39 basis points more than bonds in an index of debt from the Group of Seven nations, the most since May 2010.

Investors will scrutinize the minutes from the Federal Open Market Committee’s July 30-31 meeting for anything that may indicate when the U.S. central bank will reduce the pace of its $85 billion of monthly bond purchases. The minutes will probably set out the risks from inflation falling below the Fed’s 2 percent goal.

“The Fed tapering issue is well known and well flagged,” Furnes said. “Tapering news will bring further volatility, but it won’t break the market.”

Glencore Xstrata slid 2.1 percent to 301.95 pence. The mining company may announce the writedowns when it reports its first-half earnings tomorrow, according to Reuters, which cited analysts and a person in the industry it didn’t identify.

BHP Billiton lost 1.6 percent to 1,956 pence and Rio Tinto dropped 1.6 percent to 3,055 pence. A gauge of mining companies posted the biggest decline of the 19 industry groups in the Stoxx Europe 600 Index, losing 1.8 percent. Copper fell from its highest price since June 5.

Kentz Soars

Kentz Corp. surged 24 percent to 591 pence, the highest price since its initial public offering in 2008. The oilfield-services provider rejected a takeover offer of 565 pence to 580 pence a share from Amec Plc, according to a statement. The approach valued Kentz at as much as 680 million pounds ($1.1 billion). Three people familiar with the matter said that Kentz has received interest from several potential buyers. The company, which is based in Tipperary, Ireland, said it had rejected an offer from M&W Group GmbH.

Rightmove Plc climbed 4.4 percent to 2,364 pence. Westhouse Securities Ltd. upgraded the owner of the largest residential property website to add from neutral, meaning that investors should hold more of the shares than are represented in benchmark indexes. Analyst Roddy Davidson said that better-than-expected revenue per advertiser in the first half and the company’s positive outlook supported speculation the housing market is improving. The brokerage lifted its 12-month price target to 2,570 pence from 1,793 pence.

Moneysupermarket.com Group Plc gained 3.4 percent to 166 pence. Westhouse’s Davidson upgraded the price-comparison website to buy from neutral. He cited the company’s cash generation and the shares’ recent slide. Moneysupermarket has slumped 25 percent from its highest price this year on May 17.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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