UK stocks drop as GOP scraps vote on tax increases

U.K. stocks slid after Republican leaders in the U.S. canceled a vote on raising taxes for the highest earners, fueling concern that party members will prevent politicians from agreeing on a compromise budget.

Eurasian Natural Resources Corp. fell 1.4 percent as Goldman Sachs Group Inc. downgraded the shares, while Evraz Plc, the Russian steelmaker, slipped 3.5 percent. United Utilities Group Plc, the U.K.'s largest publicly traded water company, gained 1.2 percent.

The FTSE 100 Index lost 18.35 points, or 0.3 percent, to 5,939.99 at the close of trading in London. The broader FTSE All-Share Index also fell 0.3 percent today, while Ireland's ISEQ Index slipped 0.2 percent.

"The markets are tracking the fiscal-cliff developments, and waxing and waning accordingly," Richard Hunter, head of equities at Hargreaves Lansdown Plc in London, wrote in an e- mail. "The latest news from the U.S. is implying something of an impasse. As such, levels are likely to remain under pressure until there is some meaningful progress reported."

The volumes of shares changing hands on the FTSE 100 was 31 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

Republican House Speaker John Boehner abandoned his plan to raise tax rates on annual incomes above $1 million, yielding to resistance from party colleagues. Talks between Boehner and President Barack Obama have already stalled with only days to go before the deadline for a budget compromise.

U.K. consumer confidence fell in December from an 18-month high as optimism about the outlook for the economy plunged, GfK NOP Ltd. said. The London-based research group's sentiment index declined to minus 29 from minus 22 in November. Economists had forecast a drop to minus 25, according to the median of 21 estimates in a Bloomberg News survey.

ENRC dropped 1.4 percent to 276.9 pence as Goldman Sachs downgraded the producer of metals in Kazakhstan to neutral from buy. The brokerage cited recent strategic announcements by the company, which produces ferroalloys and iron ore as well as copper, for the downgrade.

On Dec. 7, the commodity producer offered $550 million to buy out Israeli billionaire Dan Gertler from a company holding interests in copper and cobalt licenses in the Democratic Republic of Congo. The stock will fail to climb because of concern that it has too much debt, according to Goldman.

Evraz, which is partly owned by billionaire Roman Abramovich, fell 3.5 percent to 257.8 pence. A gauge of U.K. commodity companies slipped 0.1 percent.

Dairy Crest Group Plc slid 3.9 percent to 378.2 pence as Goldman cut its forecast price on the shares of the U.K.'s biggest milk and cheese producer to 330 pence from 364 pence. The brokerage reiterated a sell recommendation on the stock.

Goldman predicted falling dairy sales. The analysts lowered their full-year earnings before interest and taxes forecast for 2013 and 2014 by 8 percent and 14 percent, respectively.

United Utilities gained 1.2 percent to 682 pence and Severn Trent Plc, the U.K.'s second-largest water company, added 2.6 percent to 1,610 pence.