U.K. stocks fell for a second day as Associated British Foods Plc headed for its biggest decline since May and investors weighed escalating tension between the U.S. and Russia over the future of Ukraine.
AB Foods dropped 3.9 percent as German peer Suedzucker AG predicted annual operating profit will slump 70 percent. Sports Direct International Plc declined 9.2 percent as founder Mike Ashley sold a stake. Stock Spirits Group Plc tumbled 9.9 percent after Oaktree Capital Management LLC sold its entire 37 percent holding in the central European distiller.
The FTSE 100 Index retreated 32.15 points, or 0.5 percent, to 6,590.69 at the close of trading in London. U.K. equities have lost 4 percent since reaching their highest level in 14 years on Feb. 24, taking their decline this year to 2.4 percent. The broader FTSE All-Share Index fell 0.7 percent today, while Ireland’s ISEQ Index slipped 1.3 percent.
“Investors are casting around for excuses to sell and Ukraine is an obvious one,” said Derek Mitchell, who helps oversee about $122 billion at Royal London Asset Management. “Geopolitical risk is back to the forefront of people’s minds after the market seemed to forget about it. There’s also a lot of de-risking going on in the U.K. market and people are selling not only stocks that have done well, but also companies that are sensitive to interest-rate hikes as the U.K. data has been stronger than we expected.”
The U.S. accused Russia of instigating the storming of government offices in eastern Ukraine, amid growing concern that President Vladimir Putin plans to make Ukraine a loose federation allied with Moscow. White House press secretary Jay Carney said that there is evidence some of the pro-Russian separatists who seized buildings in the Ukrainian cities of Luhansk and Donetsk were paid and brought in from outside.
Data today showed U.K. factory production increased 1 percent in February from the previous month, beating the median economist estimate in a Bloomberg survey of a 0.3 percent gain. Industrial output, which includes utilities and mines, rose 0.9 percent, compared with forecasts for a 0.3 percent advance.
The FTSE 100 trades at 13.3 times its members’ projected earnings, more than its five-year average of 11.6 times, data compiled by Bloomberg showed. That’s still lower than the multiple of 14.1 times earnings at the end of last year, which was the highest valuation since 2009.
AB Foods lost 3.9 percent to 2,645 pence. Mannheim, Germany-based Suedzucker predicted operating profit for the 2014-15 financial year will drop to about 200 million euros ($276 million) from 658 million euros because the European sugar market has deteriorated. AB Foods relied on its sugar unit for about 37 percent of adjusted operating profit for 2013, according to a Nov. 5 statement.
Sports Direct declined 9.2 percent to 811 pence. The sports retailer said in a statement that Ashley sold 24 million shares at 850 pence each.
Stock Spirits slid 9.9 percent to 277 pence after funds managed by Oaktree, which had planned to sell 50 million shares, sold all its 73.7 million shares at 275 pence apiece, according to a statement today.
Hikma Pharmaceuticals Plc dropped 9.1 percent to 1,512 pence, the largest decline since March 2009. UBS AG cut its rating on the drugmaker to neutral from buy, with analyst Guillaume van Renterghem saying the stock is fairly valued. Hikma rallied 39 percent this year through to yesterday, taking its valuation to 24.1 times its projected earnings. That compares to its 19.8 average multiple of the past five years.
Resolution Ltd. lost 3.8 percent to 277 pence, for its lowest close since June 25. Bank of America Corp. cut the insurer to underperform, similar to a sell rating, from neutral, saying it will be the most affected by U.K. regulatory changes in the industry. The stock has lost 28 percent since March 6, which was its highest price since May 2009.
Polymetal International Plc climbed 1.5 percent to 634 pence, while Fresnillo Plc increased 1.6 percent to 905 pence as silver and gold rose.