U.K. Stocks Fall as Federal Reserve Damps Stimulus Hope
U.K. stocks fell, led by a selloff in mining companies, after minutes from the U.S. Federal Reserve’s latest policy meeting failed to signal more stimulus measures to spur economic growth.
Rio Tinto (RIO) Group and BHP Billiton Ltd. (BLT) both fell more than 3 percent as reports from Australia to Japan added to signs of slowing global growth. Ashmore Group Plc (ASHM) sank 6.7 percent after the fund manager reported a fall in assets. G4S (GFS) Plc slid 2.6 percent after the security company said it wouldn’t be able to supply enough guards for the London Olympics.
The FTSE 100 Index dropped 56.23 points, or 1 percent, to 5,608.25 at the close in London. The broader FTSE All-Share Index slipped 0.9 percent today. Ireland’s ISEQ Index slid 1.2 percent as Dublin-based broadcaster RTE reported the country’s economy contracted in the first quarter by 1.1 percent.
“Disappointment has set in as the world’s most powerful central bank still seems unwilling to provide another sugar rush of cheap money,” said Chris Beauchamp, a market analyst at IG Index. “The minutes of the most recent Fed meeting did not suggest that policy makers in the US were about to embark on more extensive easing measures.”
The FTSE 100 (UKX) has advanced 6.6 percent from its 2012 low on June 1 as central banks and policy makers took steps to support global growth. The volume of shares changing hands on the gauge was 25 percent lower today than the 30-day average, Bloomberg data show.
Minutes from the Federal Open Market Committee’s June meeting showed that two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.
Members also said strains in global markets stemming from Europe’s debt crisis had increased since their April meeting, and that “U.S. fiscal policy would be more contractionary than anticipated.”
Rio Tinto, the world’s third-largest mining company, declined 3.5 percent to 2,926 pence. BHP Billiton Ltd. (BHP) the biggest, slid 3.3 percent to 1,751 pence, while Anglo American Plc (AAL) dropped 2.2 percent to 2,010 pence.
Copper led base metals lower on the London Metal Exchange as South Korea unexpectedly cut interest rates and Australia’s jobless rate rose, adding to concern the global economic slowdown is deepening.
Ashmore Group declined 6.7 percent to 307.8 pence after the U.K. fund manager said assets under management fell 3.3 percent to $63.7 billion in the fourth quarter. Separately, Barclays Plc lowered its recommendation for the asset manager to equal weight, the equivalent of hold, from overweight.
G4S retreated 2.6 percent to 283 pence. The U.K. government said it will deploy troops to provide security at London Olympic venues after G4S said it wouldn’t have enough staff available.
Aegis Group Plc (AGS) surged 45 percent to 235.3 pence after Japan’s Dentsu Inc., an 111-year-old advertising company, agreed to buy the British firm for 3.16 billion pounds ($4.9 billion).
Aegis shareholders will get 240 pence in cash, or 48 percent more than the stock’s close in London yesterday, in an offer recommended by directors. Dentsu has bought a 15 percent stake and agreed to acquire a further 5 percent from companies controlled by Vincent Bollore, Aegis’s largest shareholder.
Premier Oil Plc (PMO) rallied 2.1 percent to 366.3 pence after the company agreed to buy a 60 percent stake in Rockhopper Exploration Plc (RKH)’s Falkland Island assets, including the territory’s first commercial discovery in the Sea Lion prospect. The company is planning production as early as 2017.
Rockhopper slumped 9.3 percent to 248.5 pence after earlier surging as much as 16 percent.
SuperGroup Plc (SGP), the maker of Superdry clothing, jumped 15 percent to 385 pence as earnings stabilized, helping to restore confidence after the company cut forecasts three times in a year.
Underlying pretax profit fell to 42.8 million pounds in the year ended April 29, from 47.3 million pounds a year earlier. That compared with the 43 million-pound average estimate of 10 analysts surveyed by Bloomberg. Revenue in the period rose 32 percent from a year earlier to 313.8 million pounds.
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