FTSE 100 index down 1.5%; Vodafone Group shares shine
LONDON (MarketWatch) - London shares fell on Tuesday, with more downbeat data on the economy and weakness for commodity producers and banks offsetting a strong performance for Vodafone Group.
The U.K. FTSE 100 index declined 1.5%, or 66.32 points, to 4,336.58.
Other European shares were also under pressure in morning trading after a disappointing end to trade on Wall Street on Monday. Read more in Europe Markets.
Some of the sharpest decliners on Tuesday were commodity producers, with natural gas producer BG Group down 4.1%, Tullow Oil down 4% and Cairn Energy (UK:CNE: news, chart, profile) down 3.4%.
The losses for the sector came as light sweet crude futures fell another $1.71 to $60.76 a barrel as investors continue to fret about demand trends in an environment of contracting growth.
Banks also dragged, with HSBC Holdings down 5.9% and Standard Chartered (UK:STAN: news, chart, profile) down 4.6%, as both lenders extended losses made Monday. HSBC on Monday said third-quarter profit climbed but noted difficulties in the U.S. See HSBC story.
Merrill Lynch reiterated an underperform rating on HSBC and cut its price target on Hong Kong-listed shares by 28%.
"Several pillars underpinning HSBC's share price over the past year, specifically comparatively higher capital and liquidity position, and earnings diversification afforded by Asia are waning in our opinion," the brokerage said.
Data weak
Companies sensitive to consumer spending trends also fell as U.K. economic data continued to worsen. Building materials group Wolseley and Whitbread , the operator of Premier Inn hotels and Costa Coffee shops, dropped more than 5% each.
On Tuesday, figures showed that U.K. house completions fell to the lowest level since the Royal Institution of Chartered Surveyors started keeping records in 1978, while U.K. retail sales fell 2.2%, according to the British Retail Consortium.
"These are seriously poor numbers, especially in the run up to Christmas. For the first time in three years total retail sales fell into negative territory -- further evidence of how difficult trading conditions are for retailers," said Stephen Robertson, the BRC's director general. See related story.
Michael Saunders, economist at Citigroup said that the only real bright spots for the U.K. economic outlook are that the weak pound will eventually support exports and the rapid decline in inflation pressures will allow the MPC to go on cutting rates quickly.
"Today's data make it clear that such stimulus is much needed," he added.
Sterling fell 0.1% to $1.5608 against the dollar on Tuesday.
Vodafone rises
Still, shares of telecom giant Vodafone Group climbed 6.8% after it raised its free cash-flow outlook for the year and launched a one-billion pound cost-saving program.
The world's largest mobile operator reported a 35% drop in first-half profit to 2.17 billion pounds and cut its sales forecast for the second time in four months. See full story.
InterContinental Hotels shares dropped 4.3% after it warned of deteriorating market conditions in October. See InterContinental story.
Home builder Taylor Wimpey dropped 5.7% outside the top index.
It said that conditions in the U.K. housing market have remained extremely challenging, with net reservations down around 27% at 165 a week.
The absence of any improvement in market conditions increases the likelihood of it taking further provisions against its land and work-in-progress.
Across the Atlantic, sales rates in the U.S. have declined in recent weeks, with higher levels of cancellations, the company said.
