By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- The negative sentiment across global
financial markets weighed on U.K. stocks on Tuesday, offsetting a
strong reading on the country's services sector and a solid growth
forecast from the European Commission.
The FTSE 100 index dropped 0.3% to close at 6,746.84, snapping a
two-session winning streak.
Shares of RSA Insurance Group PLC led losers in London, off
6.3%, after the company said it expected its full-year
weather-related losses to be "materially above planning
assumptions" on the back of severe weather events in 2013.
Associated British Foods PLC lost 2.1% after the food and retail
firm said it expected earnings per share in fiscal 2014 to be
similar to 2013, as a decline in profit at the sugar division will
offset improvement at the Primark clothing chain.
On a more upbeat note, shares of Marks and Spencer Group PLC
gained 4.5% after the retailer reported a rise in first-half profit
on a lower tax charge that helped outweigh the growing costs of the
company's turnaround plan.
The broader U.K. market ignored an encouraging reading on the
country's services sector. The Markit/CIPS U.K. Services PMI for
October showed that a sharp rise in new business drove the biggest
rise in activity for over 16 years. The index rose to 62.5 in
October, versus September's 60.3, the largest increase since May
2007.
The pound (GBPUSD) jumped after the data, climbing to $1.6041
from late Monday's $1.5951.
Additionally, the European Commission more than doubled its
growth forecast for the U.K. in 2013. In its autumn forecast, the
European Union's executive arm said the economy would grow 1.3% in
2013, considerably higher than the 0.6% growth it projected in
May.
The reports, however, weren't enough to lift the U.K. index out
of red territory, as the benchmark tracked a broader negative
sentiment across financial markets. European stocks were mostly
down after the European Commission lowered the growth forecast for
the euro zone for 2014 and raised the region's unemployment
estimates.
Data from the British Retail Consortium on Tuesday showed retail
sales rose only modestly in the U.K. in October, raising doubts
about consumers' ability to support an economic recovery.
Banks were among major decliners, playing a part in dragging the
FTSE 100 index lower. Shares of Barclays PLC (BCS) fell 2.4%, Royal
Bank of Scotland Group PLC (RBS) dropped 1.7%, Lloyds Banking Group
PLC (LYG) gave up 2.4% and sector heavyweight HSBC Holdings PLC
(HBC) erased 0.7%.
Among other notable movers, Imperial Tobacco Group PLC (ITYBY)
climbed 3.1% after the company reported a rise in full-year
profit.
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