U.K. stocks dropped Wednesday, leaving the benchmark FTSE 100 close to losing its gain for the year, after China devalued its currency for a second straight time, highlighting fears about slowing growth in the world's second-largest economy. The FTSE 100 UKX, -1.40% fell 1.4% to close at 6,571.19, with all but the oil and gas sector logging losses. Energy stocks had tracked a turn higher in oil prices after International Energy Agency said oil demand is increasing at its fastest pace in five years. BP PLC BP., +0.81% BP, +0.65% rose 0.8% and Royal Dutch Shell PLC RDSB, +0.64% RDS.B, -0.21% picked up 0.6%. Wednesday's drop left the FTSE 100 with a meager 0.1% gain year-to-date. The Stoxx Europe 600 SXXP, -2.70% fell 2.7% Wednesday, for its worst daily performance since October last year. Read more in European Markets. The slide in stocks follows a decision by China's central bank to set its daily reference rate to the U.S. dollar down 1.6% on Wednesday from Tuesday's rate. A day earlier, China unexpectedly set the rate 1.9% lower. The moves follow a recent slate of data underscoring sluggish conditions in China. Industrial production in July, released Wednesday, slowed to 6.0% from a year earlier. As China "has been slowing rapidly for years against the backdrop of a slower global economy, it is little wonder the data has been disappointing and the [People's Bank of China] has been upping the ante on the monetary stimulus front," said Angus Campbell, senior analyst at FxPro, in a note. "This move is impacting risk assets due to the unpredictability of the PBOC's action and as it will have a knock on deflationary impact for China's big trading partners," he said. Sterling: The pound GBPUSD, +0.4174% was buying $1.5640, but earlier fell to as low as $1.5534, according to FactSet data, from $1.5593 after U.K. data showed the unemployment rate was 5.6% in June. Meanwhile, the pace of average earnings slowed. Average earnings rose 2.4% including bonuses, compared with a FactSet-compiled estimate for 2.8% growth. Wages including bonuses rose 2.8%, meeting expectations. Annual pay growth is still running at its fastest pace since early 2009, data show. Pay growth "remains robust, and combined with zero inflation this is good news for the U.K. consumer," and positive for growth prospects during the second half of the year, said Ben Brettell, senior economist at Hargreaves Lansdown, in a note. "Sterling fell on today's announcement, which could be an indication that analysts feel the timing of the first rate rise is once again being pushed back," Brettell added. Source: MarketWatch
