U.K. Stocks Drop as U.S. Industrial Production Contracts

U.K. stocks dropped from their highest level in more than 14 years as a report showed U.S. industrial production unexpectedly contracted last month.

Dixons Retail Plc and Carphone Warehouse Group Plc fell more than 8 percent after agreeing to merge. Vodafone Group Plc slid 2.3 percent as Goldman Sachs Group Inc. lowered its rating on the mobile-phone operator. Serco Group Plc slipped after MSCI Inc. said it will remove the shares from its U.K. equity benchmark this month.

The FTSE 100 Index lost 37.6 points, or 0.6 percent, to 6,840.89 at the close of trading in London. The gauge has still climbed 4.9 percent from a March 24 low amid an increase in mergers-and-acquisitions activity. The FTSE All-Share Index fell 0.8 percent today, while Ireland’s ISEQ Index lost 3.1 percent.

“There’s some hesitancy in the market as investors look for something to grasp at,” said Leigh Himsworth, head of U.K. equities at City Financial Investment Co. in London. “There has been no earnings growth to justify valuations. Investors really need more positive news to come through because a lot of their optimism is already in the price. Corporate spending and activity needs to broaden for us to get excited about it.”

A report from the Federal Reserve showed U.S. industrial production declined 0.6 percent in April. Economists surveyed by Bloomberg had predicted the measure of output would remain unchanged from the previous month.

Dixons Drops

Dixons, whose Currys chain sells everything from tablet computers to vacuum cleaners, slumped 10 percent to 45.7 pence, while Carphone Warehouse dropped 8.1 percent to 301.3 pence. Investors in each company will hold 50 percent of the new entity, to be known as Dixons Carphone Plc. The transaction will lead to 80 million pounds of annual savings by 2018.

Vodafone fell 2.3 percent to 217 pence, wiping 5.4 points off the FTSE 100. Goldman Sachs cut its rating on the stock to neutral from buy, saying potential acquirers of Vodafone, such as AT&T Inc., SoftBank Corp. and America Movil SAB, may be planning alternative deals.

Serco slipped 0.9 percent to 349.5 pence. The operator of London’s Docklands Light Railway will be removed from the MSCI United Kingdom Index after the close of trading on May 30, MSCI said in a statement yesterday.

Lloyds Banking Group Plc fell 4.3 percent to 73.8 pence as Britain’s biggest mortgage lender held its annual general meeting with investors in Edinburgh.

Old Mutual Plc dropped 4.9 percent to 199.1 pence after climbing to its highest price in almost a year yesterday. Africa’s biggest insurer said net client cash flows declined in the first quarter.

Thomas Cook

Thomas Cook Group Plc plunged 13 percent to 156.1 pence, its largest decline March 2012. Summer bookings by British holidaymakers, who accounted for about a quarter of sales in the first half of its financial year, slipped 1 percent from a year earlier, Europe’s second-largest tour operator said. Average selling prices fell 3 percent in the U.K. as customers chose shorter holidays.

Greetings-card retailer Card Factory Plc sank 11 percent to 201 pence on the first day of trading after its initial public offering.