U.K. Stocks Decline After World Bank Cuts Growth ForecastInyoung Hwang
U.K. stocks declined after the World Bank cut its global-growth forecast, overshadowing a report that showed the unemployment rate in Europe’s third-largest economy dropped to a five-year low.
Rolls-Royce Holdings Plc, which makes engines for A350 planes, fell the most in almost four months after Emirates canceled its entire order to Airbus Group NV for the wide-bodied aircraft. J Sainsbury Plc rose 1 percent after saying sales growth will resume this year. Vodafone Group Plc and Johnson Matthey Plc traded without the rights to their latest dividends, trimming 8.2 points from the FTSE 100 Index.
The FTSE 100 dropped 34.68 points, or 0.5 percent, to 6,838.87 at the close of trading in London. The gauge traded at a price-to-earnings multiple of 14.2 times the projected earnings of its constituents, near the highest level since 2009. The broader FTSE All-Share Index slid 0.5 percent today, while Ireland’s ISEQ Index lost 1.2 percent.
“The World Bank downgrade of global growth, due to weaker outlook from the U.S. and BRICs, is disappointing,” Lena Komileva, chief economist at G Plus Economics Ltd. in London, said in a message. “It raises questions over whether the low interest-rate environment creates enough real income growth in real economies to justify the degree of risk-taking taking place in financial markets.”
The World Bank forecast that the global economy will expand 2.8 percent this year, lower than its January projection of 3.2 percent. The international financier predicted slower growth for the U.S., China, Russia, India and Brazil. It left estimates for world growth in 2015 unchanged at 3.4 percent.
A report showed that the U.K.’s unemployment rate, as measured by International Labour Organization methods, fell to 6.6 percent in the three months through April, the lowest level since January 2009. That compares with 6.8 percent in the quarter through March. The median estimate in a Bloomberg News survey of 34 economists had called for 6.7 percent.
Rolls-Royce fell 5.5 percent to 1,017 pence after saying the cancellation of Emirates’s order for 70 A350 planes will cut its order book by about 2.6 billion pounds ($4.4 billion).
IAG SA, the British Airways parent, dropped 3.1 percent to 400 pence, tracking European travel companies lower. In Frankfurt, Deutsche Lufthansa AG fell the most in five years after cutting earnings forecasts for this year and the next.
SABMiller Plc lost 1.9 percent to 3,395 pence. The maker of Peroni and Grolsch lager was cut to sell from hold at Shore Capital Group Ltd.
Hyder Consulting Plc declined 5.6 percent to 449.5 pence. The infrastructure company increased its full-year dividend by 8.3 percent to 13 pence a share.
Sainsbury rose 1 percent to 333 pence for the biggest gain in the FTSE 100. The grocer will perform better than the wider supermarket industry for the rest of the year, overcoming competitive price cuts, Justin King, Sainsbury’s outgoing chief executive officer, said.
Premier Foods Plc jumped 6.5 percent to 61.50 pence, its biggest increase in more than three months. Goldman Sachs Group Inc. upgraded the British maker of Mr Kipling cakes to buy from neutral. The company has sufficient funding to drive growth and may be able to announce a dividend by the end of 2015, marking the first payout since 2007, the brokerage said.