U.K. stocks fell, paring a monthly gain for the benchmark FTSE 100 Index, with mining companies dropping the most.
BHP Billiton Plc, Rio Tinto Group and Anglo American Plc led a decline in European mining companies as they each dropped more than 3.5 percent. Fenner Plc slid the most since September 2009 after saying pretax profit may miss analysts’ estimates because of worsening trade conditions in U.S. coal. Salamander Energy Plc jumped 7.6 percent after a report said Cia. Espanola de Petroleos SA may make an offer for the oil-and-gas explorer.
The FTSE 100 lost 26.78 points, or 0.4 percent, to 6,844.51 at the close in London, paring its gain this month to 1 percent. The equity benchmark gauge has risen 6.1 percent from this year’s low on Feb. 4 and is 0.5 percent away from the high it reached on May 14. The broader FTSE All-Share Index and Ireland’s ISEQ Index each slid 0.3 percent today.
“Stocks are not cheap anymore, but they’re not end-of-the-cycle expensive either,” said Espen Furnes, who helps oversee about $85 billion at Storebrand Asset Management in Oslo. “We have several years of earnings growth ahead of us. Having said that, it’s not uncommon to see a correction in the stock market after such a run, so one has to be prepared for that.”
The FTSE 100 trades at 14.1 times estimated earnings, compared with a December 2009 high of 15.1 and a five-year average multiple of 11.7, data compiled by Bloomberg show.
In the U.S., a report showed business activity in the Chicago area unexpectedly increased in May. The Institute for Supply Management-Chicago Inc.’s business barometer rose to 65.5 from 63 a month earlier. The median of economists’ estimates compiled by Bloomberg News had called for a drop to 61. Readings above 50 signal expansion.
Another report showed the Thomson Reuters/University of Michigan’s consumer confidence index fell to 81.9 this month from April’s 84.1. Economists had predicted a reading of 82.5 and a preliminary estimate had called for 81.8.
BHP Billiton, the world’s biggest mining company, fell 3.7 percent to 1,868 pence, and Rio Tinto, the second largest, slid 4.1 percent to 3,057 pence. Anglo American, the biggest platinum producer, dropped 5.7 percent to 1,457.5 pence. Fresnillo Plc, a producer of gold and silver, lost 3.5 percent to 806 pence.
The FTSE 350 Mining Index retreated 3.5 percent, the most since March. A gauge of mining companies was the worst performer among 19 industry groups in the Stoxx Europe 600 Index today, losing 3 percent.
Fenner tumbled 10 percent to 350 pence after the maker of conveyor belts said pretax profit for the year ending Aug. 31 may be 10 percent to 15 percent lower than the consensus analyst estimate of 77.6 million pounds ($130 million). The company said sentiment and trading conditions in the U.S. coal industry probably won’t improve any time soon. It also said one of its units failed to win a tender to supply conveyor belts to an Australian iron-ore miner.
Salamander Energy rallied 7.6 percent to 148.3 pence after Expansion reported that Cespa is considering making an offer of 700 million euros ($953 million) for the British company. The Spanish newspaper cited unidentified bankers with knowledge of the matter.
Smith & Nephew Plc climbed 1.7 percent to 1,046 pence for a fourth day of gains as UBS AG added the stock to a list of companies to watch for mergers-and-acquisitions activity.
The maker of artificial knees and hips has surged 10 percent this week, the most since October 2008. The Financial Times reported on May 28 that Stryker Corp. may make a bid for the company. Stryker said the same day it did not plan to make an offer, while reserving its right to do so in accordance with U.K. takeover rules.