By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K.'s benchmark FTSE 100 stock index
retreated from a 13-year high on Thursday, with resource firms
adding pressure after disappointing Chinese manufacturing data
fueled worries about growth recovery in the Asian nation.
The FTSE 100 index slumped 2.1% to 6,696.79, after climbing to
the highest close since December 1999 on Wednesday.
Mining firms were among the biggest decliners, after
weaker-than-expected data from China stoked concerns that demand
for natural resources will decline in line with lower growth
prospects. HSBC's preliminary or "flash" version of its Purchasing
Managers' Index for May fell to a seven-month low of 49.6, down
from April's final reading of 50.4. A result below 50 signals
contraction.
"The reading pretty much dashed hopes of a Q2 growth
recovery,"said Wei Yao, China economist at Société Générale.
"In light of this report, we expect the official manufacturing
PMI (due on 1 June) to follow suit and tank below the boom-bust
line to 49.9. As the central government looks committed to cautious
easing only, we will continue to stay on the bearish side in terms
of economic growth," she said.
Shares of Anglo American PLC dropped 5.1%, Antofagasta PLC lost
4.4% and Vedanta Resources PLC shaved off 3.7%.
Heavyweights Rio Tinto PLC (RIO) and BHP Billiton PLC (BHP) fell
4.3% and 2.9% respectively. Metals prices were mostly lower.
Oil firms also declined, tracking oil prices lower. BG Group PLC
dropped 1.7%, BP PLC (BP) lost 1.2% and Royal Dutch Shell PLC
(RDSB) fell 1.1%.
ARM Holdings PLC (ARMHY) slumped 5.2%, after Exane BNP Paribas
cut the chip maker to neutral from outperform.
Fears of a pullback in stimulus measures in the U.S. also added
pressure on stocks in London. The U.S. Federal Reserve Chairman Ben
Bernanke said on Wednesday that the central bank could start to
taper bond purchases at coming meetings if data continue to
improve, raising fears that less liquidity will tricker a selloff
in equities.
Both the Fed worries and China disappointment also weighed on
stocks in Asia, where Japan's Nikkei Stock Average closed 7.3%
lower.
Back in London, banks were also on the decline. Royal Bank of
Scotland Group PLC (RBS) dropped 3.6%, Barclays PLC (BCS) erased
3.7% and HSBC Holdings PLC (HBC) slid 3.4%.
Outside the main index in London, shares of St. James's Place
PLC lost 10.5%, after Lloyds Banking Group PLC said it sold 77
million shares of the wealth-management firm.
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