U.K. Stocks Decline for Fourth Day as BP Drops; Prudential Shares Advance
U.K. stocks fell for a fourth day, sending the FTSE 100 Index towards its lowest closing level in more than six months, on concern that Europe’s debt problems will continue to roil the markets.
BP Plc extended losses from the past five weeks, falling 2.4 percent as it continues to attempt plugging an oil leak in the Gulf of Mexico which has so far cost $760 million to clean up. Lonmin Plc fell after saying it will need to boost toll refining to meet this year’s sales target. Prudential Plc rose 2.7 percent as it pushes ahead with its plan to take over American International Group Inc.’s AIA Group Ltd.
The FTSE 100 has dropped 14 percent from this year’s high on April 15 as concern rose that a sovereign-debt crisis in Europe is spreading. The declines came even as economic reports including U.K. factory production and U.S. retail sales beat estimates and European governments committed as much as 860 billion euros ($1.1 trillion) to support weak economies.
“Investors remained nervous in the opening trading session to the week, with euro zone debt concerns still weighing on sentiment,” said Giles Watts, head of equities at City Index in London. “There is an air of nervousness and apprehension in the markets.”
Europe’s credit crisis dragged the FTSE 100 last week to its lowest price relative to expected earnings in more than one year. The price-earnings ratio of London-based HSBC Holdings Plc, Europe’s biggest bank by market value, slipped below Greece’s EFG Eurobank Ergasias SA last week.
BP lost 2.4 percent to 494.80 pence, extending the decline since April 21 to 22 percent. The oil company said today it may try in the next few days to plug the oil leak by injecting heavy drilling fluids into an undersea well.
The so-called “top kill” operation involves “significant uncertainties” and isn’t guaranteed to succeed, the oil company said in a statement. It will be followed by cement to seal the well about 5,000 feet (1,524 meters) underwater.
Lonmin dropped 2.4 percent to 1,597 pence. The world’s third-largest platinum producer said it will take a further 25 to 30 days to bring the Number One furnace online following a leak, during which time Lonmin will increase toll refining to “over and above our current contractual commitments.” Toll refiners are paid an agreed fee to run a specified amount of raw material through a processing plant.
Prudential rose 2.7 percent to 531 pence. Management gave an “upbeat presentation” about the planned takeover of AIA, according to Oriel Securities.
The U.S. Treasury is resurrecting a backup plan to float AIA amid concern Prudential’s takeover of the Asian insurer may fall apart, the Sunday Times reported.
Chief Executive Officer Tidjane Thiam said he will take up his full 1.5 million-pound ($2.2 million) allocation in the company’s rights offer, the Sunday Telegraph reported, citing an interview.
Rio Tinto Group, the world’s third-largest mining company, gained 1.5 percent to 2,951.5 pence. Nickel, zinc and lead advanced on the London Metal Exchange.
Imperial Tobacco Group Plc, the maker of Davidoff cigarettes, added 1.9 percent to 1,795 pence. The shares were raised to “buy” from “neutral” at Nomura Holdings Inc. The shares have dropped 10 percent in 2010.
“Although we see many of the concerns over low- to medium- term underlying profit growth, competition in the U.S., margins in the U.K., plain packaging and leaf cost inflation as justified, we believe these are more than reflected in the current stock price,” the Japanese bank wrote in a report.
Cranswick Plc advanced 3.7 percent to 824.5 pence. The foodmaker said full-year net income rose 72 percent in the year ended March 31 to 32.6 million pounds.
Bellzone Mining Plc surged 59 percent to 55 pence. The iron-ore company that listed in London last month rose to its highest after reaching a binding accord with China International Fund Ltd. over project financing.