By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- U.K. stocks dropped Thursday as a profit
warning from British Gas's parent company weighed on its shares,
while miners declined after a lackluster update on China's
manufacturing sector.
The benchmark FTSE 100 index lost 0.7% to 6,651.42, with losses
accelerating after downbeat manufacturing -- and services-activity
figures from the eurozone, the U.K.'s largest trading partner.
Earlier Thursday, activity in China's manufacturing sector
slowed in November, according to a closely watched report from
HSBC, adding to worries about growth for a key buyer of metals.
Pressure was on mining stocks after the report, leaving Rio Tinto
PLC (RIO) lower by 3%, BHP Billiton PLC (BHP) off 3.2%, and
Fresnillo PLC down 1.6%.
On Wednesday, shares of iron-ore producers were hit as iron-ore
prices sagged to a more than five-year low.
Credit Suisse analysts said Thursday they remain underweight the
mining sector. "On a one-to-three-year view, we see the risk of a
hard landing in China as significant; in a bear market, 40% of
production has to fall below cash costs (as with thermal coal), and
that is not in the price," they said. "Top down, we find ourselves
most bearish on copper, aluminum and carbon steel."
Also among FTSE 100 decliners, Centrica PLC shares fell 1.8%
after the utilities company said it now expects full-year adjusted
earnings of 19 pence to 20 pence a share, down from a previous
expected range of 21 pence to 22 pence. Mild weather in the U.K.
and trading conditions for British Gas Services are among the
factors driving the profit forecast lower, the company said.
But topping the benchmark was Babcock International Group PLC ,
climbing 5.9% as the engineering services firm said interim profit
rose to 114.1 million pounds ($178.5 million) from GBP91.6 million
the previous year, on higher revenue of GBP1.94 billion.
Shares of chemicals and precious metals company Johnson Matthew
PLC gained 5.9% after raising its profit view for the year.
Outside of the FTSE 100, Mothercare PLC shares climbed 2.7%,
with the baby products retailer swinging to a half-year profit.
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