London slips after French borrowing costs rise on possible downgrade

FTSE: 5,444.82 (–15.56) Mid-250: 10,187.44 (–81.43) Small Cap: 2,787.91 (–21.41):UK STOCKS fell yesterday, as French bond yields surged after Egan-Jones Ratings said that rating companies will probably downgrade the country's debt.

The benchmark FTSE 100 Index retreated 0.3 per cent at the close in London.

There’s “serious concern for the euro zone and even the global economy as a whole as almost everyone on the planet has lent to them, even if they don’t think they have,” said Angus Campbell, the head of sales at Capital Spreads in London. “If it does come to having to bail them out, then at this moment in time there simply isn’t enough cash.”

French 10-year bonds extended their declines, sending the yield climbing 20 basis points to 3.40 per cent in London. The difference in yield with similar-maturity benchmark German bunds increased 18 basis points, the most since the euro started in 1999.

Sean Egan, the president and founding principal of Egan-Jones told Bloomberg yesterday that the sovereign-debt rating of France is “probably headed south”.

The Bank of England maintained its target for asset purchases as policy makers assessed the capacity of their second round of stimulus to ward off the danger posed by Europe’s debt crisis.

The Monetary Policy Committee led by governor Mervyn King held the ceiling for so-called quantitative easing at £275 billion, as forecast by a Bloomberg survey. The central bank, which expanded QE by £75 billion last month, also kept its key interest rate at a record low of 0.5 per cent.

Vedanta sank 9.5 per cent to 1,131p after the copper producer reported a 92 per cent plunge in fiscal first-half profit.

Xstrata declined 1.7 per cent to 1,003p and Antofagasta slid 2.2 per cent to 1,159p.

Admiral lost 7.6 per cent to 820p. Deutsche Bank, UBS and Numis Securities were among brokerages to downgrade the stock.

Mining firm Anglo American rose 1.3 per cent to 2,383.5p as it thwarted Chile’s state-owned Codelco from getting a 49 per cent stake in its unit in the country.

Experian rallied 5.4 per cent to 826p after saying that sales growth in the second half of the year will be “at least as strong” as in the first half.

Homeserve surged 17 per cent to 256p, rebounding from a 55 per cent slump in October. – (Bloomberg)