U.K. Stocks Fluctuate; Rio Tinto Falls, Friends Provident Jumps

By Alexis Xydias

July 13 (Bloomberg) -- The U.K.’s benchmark FTSE 100 Index swung between gains and losses as a sell-off in mining companies was countered by a rally in Friends Provident Plc.

Rio Tinto Group and Vedanta Resources Plc retreated after Treasury Secretary Timothy Geithner said the U.S. economy still faces “enormous challenges.” Xstrata Plc declined following a report the mining company may offer as much as 5 billion pounds ($8.1 billion) more to convince Anglo American Plc investors of its merger bid. Friends Provident jumped 5.5 percent after rejecting a takeover bid from Resolution Ltd.

The FTSE 100 lost 4.09, or 0.1 percent, to 4,123.08 as of 11:00 a.m. in London, after gaining as much as 0.3 percent earlier. The FTSE All-Share Index slipped 0.1 percent and Ireland’s ISEQ Index decreased 0.3 percent.

The FTSE 100 has slumped 8.5 percent since June 1 amid speculation stock prices have outpaced the outlook for economic growth as a three-month, 28 percent rally pushed valuations to the highest in five years.

“The market is taking a breather since sentiment was running ahead of fundamentals,” said Boris Boehm, board member at Hamburg-based Aramea Asset Management, which oversees about 800 million euros ($1.23 billion). “This is now a normal recession and not the doom scenario of last year, so the market should get back on its recovery.”

Rio Tinto, the world’s second-largest iron-ore producer, lost 2.7 percent to 1,850.5 pence. Vedanta Resources, the biggest copper producer in India, dropped 2.5 percent to 1,300 pence.

Aluminum, nickel and zinc were among commodities that fell in the London Metals Exchange on concern the economy may take longer than expected to recover.

‘Going to be a While’

While the pace of decline in the U.S. economy has “slowed dramatically,” there are still “enormous challenges,” Geithner said. “It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” he said in an interview with CNN’s “Fareed Zakaria GPS” show.

Xstrata slipped 4.7 percent to 569 pence. The company may offer a cash payment to convince Anglo American shareholders to consider its merger proposal, the Observer said, citing unidentified people in the City of London. Xstrata spokeswoman Claire Divver declined to comment on the story. Anglo fell 1.7 percent to 1,627 pence.

Friends Provident soared 5.5 percent to 63.74 pence. The 177-year-old U.K. insurer rejected a 1.7 billion-pound takeover approach from Clive Cowdery’s Resolution, saying the bid was too low.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.