By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- U.K. stocks dropped Monday, opening the
week with broad-based losses after fresh data from Asia's largest
economies heightened worries about slowing global growth.
Adding to the theme of sluggish growth, European Central Bank
Governing Council member Ewald Nowotny warned at a conference in
Frankfurt that the eurozone -- the U.K.'s largest trading partner
-- was undergoing "massive weakening," and that the region has
become the weak spot in the world economy. Echoing that bearish
sentiment, the Organization for Economic Cooperation and
Development said the eurozone is at risk of sliding back into
contraction.
The mix of bleak updates sent the FTSE 100 down 1.1% to
6,672.15, erasing its 1% climb on Friday, with that move coming
after a stronger-than-expected U.S. November jobs report.
Most energy and mining issues fell after a government report
showed imports to China -- a major buyer of commodities --
unexpectedly fell in November, sinking 6.7% versus expectations of
3% growth. Shares of miner Anglo American PLC lost 1.6%, Glencore
PLC fell 0.5%, while oil producers Royal Dutch Shell PLC and BP PLC
dropped 2.4% and 1.5%, respectively.
"The decline in imports highlights further weakening domestic
demand as well as a slowing housing sector, as well as weakness in
commodity prices which in themselves reflect the weaker outlook for
the Chinese economy," wrote Craig Erlam, market analyst at Alpari
UK, in a Monday note.
The poor figures leave the door open to further stimulus
measures from China's central bank, he said.
The Japanese economy shrank more during the third quarter than
economists had initially estimated, contracting an annualized 1.9%
from the previous three-month period. The government last month
estimated contraction at a rate of 1.6%.
Closer to home, Marks and Spencer Group PLC shares fell 2.5%, as
the retailer deals with delays in deliveries of its online orders.
The sharp drop in the share prices is "highlighting the importance
markets are placing on online shopping," said Alastair McCaig,
market analyst at IG, in a blog posting.
Meanwhile, activist fund Crystal Amber is talking to several
other investors about embarking on a share raid of supermarket J
Sainsbury PLC , the Sunday Telegraph reported. Sainsbury shares
earlier in the session topped the FTSE 100, but eventually turned
lower, ending down by 0.8%.
Oil and the U.K.: Oil prices took another beating on Monday,
sending Brent crude down more than 3% during the session, below $67
a barrel, with recent losses stemming largely from oversupply in
the oil market.
Citi analysts, in a Dec. 5 note about the effect of the
oil-price slide on the U.K., said that while profit for oil
companies is poised to decline, they doubt the impact on growth
will be severe because the oil-producing sector has a "relatively
high tendency to save rather than spend." Profits in 2013 at oil
and gas companies totaled 23.1 billion pounds ($36.42 billion),
representing 8.2% of aggregate corporate profits, while investment
by the sector totaled GBP12.2 billion, or 7.4% of aggregate
business investment, according to Citi.
Weakness in investment in the oil sector may be offset in part
by higher investment elsewhere "as lower fuel costs increase firms'
confidence in their future profits," wrote Citi analysts Michael
Saunders and Ann O'Kelly. "We suspect that erosion of oil company
profits will be mainly reflected in lower dividend payments to U.K.
and external investors, and lower flows of repatriated profits to
foreign-based companies."
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