U.K. Stocks Decline on BOE Unemployment Prediction
U.K. stocks fell the most in more than six weeks as Bank of England Governor Mark Carney said the U.K.’s unemployment rate will probably remain above 7 percent for the next three years.
Randgold Resources Ltd. (RRS) slid 1.4 percent after second-quarter profit slumped 61 percent. BHP Billiton Ltd. (BHP) and Rio Tinto Group contributed the most to a decline by U.K. commodity producers. Old Mutual Plc (OML) advanced 2.9 percent after Africa’s biggest insurer said profit rose 14 percent in the first half.
The FTSE 100 Index (UKX) slipped 93 points, or 1.4 percent, to 6,511.21 at the close in London. The equity benchmark has still rallied 8 percent from a low on June 24 as the Federal Reserve said it remains flexible on the pace of bond buying. The broader FTSE All-Share Index lost 1.3 percent today, while Ireland’s ISEQ Index fell 0.5 percent today.
“The BOE remarks were a bit disappointing,” Stewart Richardson, who helps oversee about $100 million as chief investment officer at RMG Wealth Management LLP said by phone. “To think that we can’t get unemployment down by more than 1 percent, with the stimulus and the low interest rates and the improving economic data for the U.K., is a bit downbeat coming from the BOE.”
The Bank of England said it will hold interest rates at a record low until the unemployment rate falls to 7 percent from its current level of 7.8 percent. The threshold will not automatically trigger higher interest rates. New Governor Mark Carney forecast that the jobless rate will remain above the 7 percent level until at least the third quarter of 2016.
The BOE also said that it will not reduce the 375 billion pounds ($582 billion) stock of bonds purchased using its reserves until unemployment reaches the threshold level. The central bank said it may reduce stimulus at any time if the Monetary Policy Committee forecasts inflation of 2.5 percent or more in the next 18 to 24 months. High inflation expectations in the medium term and threats to financial stability may also cause the bank to raise interest rates and reduce bond holdings.
Randgold slid 1.4 percent to 4,366 pence after reporting second-quarter profit of $46.3 million, compared with $117.5 million a year earlier. Chief Executive Officer Mark Bristow said the producer of gold in Africa has yet to decide whether it needs to use a bank facility to complete its Kibali mine in the Democratic Republic of the Congo.
A gauge of mining companies in the FTSE 350 slipped 1.5 percent. BHP Billiton dropped 1.6 percent to 1,844.5 pence and Rio Tinto lost 1.5 percent to 2,953.5 pence.
TUI Travel Plc (TT/) retreated 5.2 percent to 380.8 pence as Europe’s largest tour operator said summer bookings declined 22 percent in France and 5 percent in Germany.
Old Mutual advanced 2.9 percent to 198.1 pence after reporting first-half earnings of 555 million pounds, compared with 487 million pounds a year earlier. The insurer increased its dividend by 20 percent to 2.1 pence a share.
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