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U.K. Stocks Drop for Second Day on Spanish Manufacturing

Dec. 2 (Bloomberg) -- U.K. stocks fell for a second day, with the FTSE 100 Index closing at its lowest level in six weeks, after a purchasing managers’ index showed that Spanish manufacturing unexpectedly declined last month.

Aberdeen Asset Management Plc, which agreed to buy Scottish Widows Investment Partnership in November, dropped 1.9 percent after Credit Suisse Group AG downgraded its recommendation on the stock. Fresnillo Plc and Randgold Resources Ltd. slid more than 4 percent as precious metals retreated. Lloyds Banking Group Plc rose 1.5 percent.

The FTSE 100 lost 55.24 points, or 0.8 percent, to 6,595.33 at the close in London. The equity benchmark slid 1.2 percent in November. It has still rallied 12 percent this year as central banks around the world pledged to keep interest rates low for a prolonged period to support the economic recovery. The FTSE All-Share Index also fell 0.8 percent today, while Ireland’s ISEQ Index slipped less than 0.1 percent.

“We’re seeing a cautious start into the week with key economic news looming,” said Reto Huenerwadel, a senior economist at UBS AG in Zurich. “Sentiment is a bit weak today. In Europe, the PMI numbers came in quite good, except for Spain, which is a disappointment.”

Manufacturing Activity

A release from London-based Markit Economics showed that U.K. manufacturing expanded more than expected. The gauge rose to 58.4 in November from a revised 56.5 in October. The median forecast of economists had called for a reading of 56.1, according to a Bloomberg News survey. The PMI for factory output in Spain dropped to 48.6 last month. Economists had forecast it would climb to 51.1. A figure greater than 50 means that activity increased.

In the U.S., a measure of manufacturing unexpectedly rose last month. The Institute for Supply Management’s index climbed to 57.3 in November. Economists had forecast it would drop to 55.1, according to the median forecast in a Bloomberg survey.

Aberdeen Asset Management slipped 1.9 percent to 483.2 pence. Credit Suisse lowered the stock to neutral, which is similar to a hold recommendation, from outperform. The brokerage said that investors have already accounted for the potential increase in earnings per share from Aberdeen’s 560 million-pound ($917 million) acquisition of SWIP on Nov. 18.

Fresnillo and Randgold Resources, which both mine precious metals, fell 8.8 percent to 760 pence and 4.4 percent to 4,157 pence, respectively. Gold dropped 2.1 percent to $1,227.60 per ounce, while silver decreased 2.5 percent to $19.50 an ounce.

Tesco, Lloyds

Tesco Plc lost 2 percent to 340.9 pence after HSBC Holdings Plc cut the U.K.’s largest retailer to underweight from neutral, meaning investors should sell the shares. The brokerage said Tesco cannot sustain its 5.2 percent operating margin in the U.K. and should abandon the metric as one of its financial targets. J Sainsbury Plc slid 2.6 percent to 396.8 pence.

Lloyds rose 1.5 percent to 78.6 pence. Sky News yesterday reported that Chancellor George Osborne will reaffirm his intention to reduce the state’s holding in the company. The government cannot offload any further Lloyds shares until Dec. 19 under the terms of an agreement struck when it sold a 6 percent stake in the bank in September, Sky News said.

Talvivaara Mining Co. jumped 26 percent to 5.8 pence. The shares have more than doubled over the last four days, their largest such rally since the company listed in London in May 2007. A district court in Espoo, Finland, where the nickel miner is based, said on Nov. 29 that it had authorized the restructuring of the business. Talvivaara filed for a corporate reorganization on Nov. 15 to raise funds and avoid bankruptcy.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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