By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- U.K. equities lost ground Tuesday, with
weakness in Diageo PLC shares as the drinks maker sought control of
an Indian liquor company, and declines for G4S PLC in the wake of a
ratings downgrade.
The FTSE 100 fell 0.3% to 6,561.55, wiping out Monday's rise of
the same amount.
Contributing to the FTSE's pullback, shares of Diageo slipped
0.5% as the British company and a Dutch unit offered $1.9 billion
to buy another 26% stake in United Spirits Ltd. . The Indian
company's brands include McDowell's No. 1, Black Dog Scotch whisky
and Pinky vodka. A successful bid would push Diageo's stake in
United Spirits to nearly 55%.
At the same time, shares of G4S lagged behind all others on the
FTSE, falling 4% after Deutsche Bank said it doesn't see
significant "hidden value" in G4S to warrant the security company's
current valuation, and downgraded its rating on G4S to sell from
hold. "We expect a lower Group growth profile in this cycle despite
benefits from [emerging markets] exposure. We see limited scope for
large cost saving surprises," wrote Deutsche Bank analysts. "We
trust the new management's plans for the business can improve
operating results however in our view the benefits are more than
priced in."
But Aggreko PLC was among the index's top percentage gainers,
with a 2% rise after the temporary-power provider said it's made
"an encouraging start to the year," with two of three regions
delivering strong revenue growth in the first quarter. Its local
business is showing underlying revenue up 11% in the first
quarter.
Engineering company GKN PLC said demand in its principal markets
in line with its expectations. The shares traded 1.3% higher.
On the economic front, U.K. inflation slowed in March to its
lowest annual rate since October 2009. Annual inflation was 1.6% in
March, down from 1.7% in February, said the Office for National
Statistics. The Bank of England's inflation target is 2%.
"Considering the movements in producer prices, we believe that
inflation is unlikely to move up in the coming months," said ICICI
Bank in a note Tuesday, adding that it expects the Bank of England
to hold monetary policy unchanged this year.
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