By Steve Goldstein
Downbeat data on U.K. employment combined with worries about Rio
Tinto's China deal and Royal Dutch Shell's long-term growth to drag
U.K. stocks lower on Wednesday.
After an early rise, the FTSE 100 closed down 1.4%, or 52.11
points, to 3,804.99, contrasting with the gains seen out of
Frankfurt.
The losses came as a tally of unemployed British workers rose to
2.03 million in the November-to-January period for an unemployment
rate of 6.5% when measured by International Labor Organization
standards, the Office for National Statistics reported
Wednesday.
The number of unemployed rose by 165,000 from the previous three
months and the unemployment rate jumped from 6%. The number of
people claiming jobless benefits in February 2009 rose by a record
138,400 from January to 1.39 million. Economists had expected a
rise in claimants of 87,500.
"If there had been any doubt, today's release of the latest
unemployment figures and this month's MPC minutes confirm that the
U.K. has entered a new pernicious stage of the economic downturn
and a new era in terms of monetary policy," said Adam Chester,
analyst at the Bank of Scotland Treasury.
Balfour Beatty , a construction firm, dropped 2.1%.
Also released on Wednesday were the suggested new rules from the
Financial Services Authority in response to the credit crunch. One
suggestion from the FSA was to impose new capital and liquidity
requirements to limit proprietary trading activities.
The downbeat news on the economy contrasts with more positive
news from the financial sector.
Philip Hampton joined the recent chorus of positive voices from
the banking sector, with the chairman of Royal Bank of Scotland
(RBS) saying in an interview with the Financial Times that the
Edinburgh lender has benefited from buoyant corporate-banking
activity in 2009. RBS shares rose 4.1%.
Old Mutual , the Anglo-South African life insurer, climbed 2.5%
following a decision to close its U.S. life offshore business.
Rio Tinto (RTP) fell 6.8% on fears that the Australian
government may block the miner's $19.5 billion funding deal with
Chinalco. If that deal were blocked, Rio Tinto may turn to a rights
issue, or a discounted share sale to existing shareholders.
Royal Dutch Shell (RDSA) fell 3.3% as brokers reacted to the
group's strategy update held Tuesday.
Citigroup downgraded the oil major to hold from buy, saying the
company's performance over the next year will be constrained by
limited visibility over the speed and size of reductions in capital
expenditure.
Macquarie Securities drew attention to Shell's decision to amend
its production forecast timing from "long term" to "2012," which it
believes could imply a reduction after 2012 given that Shell is
deferring some of its less attractive projects.
Venture Production shot up 27% after Centrica said it purchased
a 22% stake in the gas producer for 239 million pounds and said it
might make an offer in the future.
Centrica edged up 0.3%.
Outside the FTSE 100, SIG dropped 3.8% as the U.K. roofing
supplier said it would sell 341 million pounds of shares at a 29%
discount to Tuesday's close. The group's profit fell to 6.3 million
pounds from 86.2 million pounds.