U.K. Stocks Fall; Vedanta, Shell, BP Decline While Tesco Gains

By Adam Haigh

Jan. 12 (Bloomberg) -- U.K. stocks declined as raw-material producers retreated, offsetting a gain in Tesco Plc shares after the U.K.’s biggest retailer posted better-than-expected holiday sales.

Eurasian Natural Resources Corp. and Vedanta Resources Plc sank at least 2 percent, as China’s central bank sold bills at a higher yield for the second time in a week, increasing the likelihood of an interest-rate increase in the first half of the year. Royal Dutch Shell Plc and BP Plc, Europe’s biggest oil producers, tracked crude prices lower. Tesco gained 2.4 percent after saying revenue growth in the holiday season accelerated as shoppers splashed out on its “Finest” range of food and champagne.

The benchmark FTSE 100 Index slid 18.73, or 0.3 percent, to 5,519.34 as of 10:17 a.m. in London. The FTSE All-Share Index declined 0.4 percent and Ireland’s ISEQ Index slid 1.3 percent.

The FTSE 100 surged 22 percent in 2009 for its biggest annual rally since 1997 and has rebounded 58 percent since March 3 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy.

ENRC slid 2 percent to 990 pence, while Vedanta Resources lost 2 percent to 2,771 pence. The People’s Bank of China sold one-year bills at a yield of 1.8434 percent after last week guiding three-month rates higher. Lu Ting, a Bank of America- Merrill Lynch economist, said today’s move reflects banks’ expectations for a “moderate” increase in the benchmark rate in 2010.

Shell, BP

Royal Dutch Shell fell 1.5 percent to 1,898 pence. BP sank 0.9 percent to 629.7. Crude oil fell for a second day on forecasts cold weather in the eastern U.S. will abate this week, curbing heating fuel demand in the world’s biggest energy user. Crude oil for February delivery fell as much as 93 cents, or 1.1 percent, to $81.59 a barrel in electronic trading on the New York Mercantile Exchange.

Tesco gained 2.4 percent to 427.95 pence. Sales at U.K. stores open at least a year rose 4.9 percent, excluding gasoline and adjusting for value-added tax, in the six weeks ended Jan. 9. That compares with the prior quarter’s 2.8 percent gain and the 3 percent median estimate of 10 analysts surveyed by Bloomberg.

Game Group, the U.K.’s biggest electronic-games retailer, sank 6.3 percent after saying sales for the 49 weeks to Jan. 9 fell 11 percent.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net