FTSE 100 index down 1.2%; Rolls Royce upgraded at Goldman Sachs
LONDON (MarketWatch) - Mineral extractors led British stocks lower in London on Monday, as investors fretted about the sustainability of recent gains.
UK:UKX 4,385, -53.96, -1.22%
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The U.K. FTSE 100 index (UK:UKX 4,385, -53.96, -1.22%) declined 1.2% to 4,384.64, giving up Friday's advance.
That rise was partly due to sharp gains from Rio Tinto (RTP 182.95, -10.81, -5.58%) (UK:RIO 2,873, -131.00, -4.37%) after the mining giant firm pulled out of a Chinese investment deal.
Rio Tinto shares fell 4.9% on Monday, while rival BHP Billiton (BHP 57.50, -2.80, -4.64%) (UK:BLT 1,480, -75.00, -4.82%) was also weak, down 5%.
Vedanta Resources (UK:VED 1,562, -106.00, -6.35%) shares fell 6.8% and Xstrata (UK:XTA 696.00, -27.00, -3.73%) shares lost 4.3%.
The sector is seen as seen as one of the most closely linked to any improvement in economic trends. On Friday, data showed better-than-expected U.S. payroll data in May but a higher jobless rate.
Joshua Raymond, strategist at City Index, noted that payroll data wasn't enough to break the FTSE 100 out of a 200-point trading range and said this "indicates the anxiety investors are feeling as to whether the markets can maintain upward momentum at these levels."
The losses also came as the results from last week's European elections were tabulated.
"On average, equities do better before the election than after it, particularly so when there is a change of governing party," noted Gareth Williams, equity strategist at ING.
A broad move towards conservative parties was widely viewed as ratcheting up pressure on British Prime Minister Gordon Brown.
"Following Labour's resounding defeat in the European elections and the continuing uncertainty over Gordon Brown's future, sterling has slumped," said Mark O'Sullivan, director of dealing at Currencies Direct.
Sterling weakened 0.8% to $1.5844 against the dollar.
The lender said it has received other proposals for its iShares business and its broader BGI business. It has had discussions with a number of parties, including with BlackRock, about both iShares and BGI.
The lender said that shareholders have taken up 87% of the 9,043,154,385 shares in its open offer. Lloyds will use proceeds of the offer, together with existing cash resources, to redeem preference shares held by the U.K. government.
Rolls Royce (UK:RR. 335.00, +5.50, +1.67%) shares rose 1.1% after Goldman Sachs upgraded the aerospace firm to neutral from sell.
On the downside, the broker downgraded BAE Systems (UK:BA. 333.25, -6.50, -1.91%) and Cobham (UK:COB 174.30, -5.90, -3.28%) to sell from neutral.
BAE Systems shares fell 1.7% and Cobham shares declined 3.7%.
Goldman Sachs said that companies with a significant exposure to the U.S. and U.K. defense hardware markets face a much tougher revenue outlook after 2011 as operations in Iraq and Afghanistan are reduced.
In the civil aerospace market, Goldman said 2011 should mark the bottom of the new aircraft delivery cycle.
Turning to deal news and BPP (UK:BPP 617.00, +50.00, +8.82%) shares climbed 8.6% to 616 pence after Apollo Group said it's going to buy the firm for 303.5 million pounds ($540 million) in cash, or 620 pence a share.
