FTSE: 6,020.01 (–32.28) Mid-250: 11,721.60 (–75.01) Small Cap: 3,277.30 (–16.28)UK STOCKS fell for a second day yesterday, as sales at Diageo missed analysts' estimates and an unexpected loss at Air France-KLM weakened the shares of International Consolidated Airlines.

The benchmark FTSE 100 Index declined 32.28, or 0.5 per cent, to 6,020.01 at the close in London. Even so, the gauge has advanced 2 per cent this year, bringing its rally since March 2009 to 71 per cent, as investors bet that the strengthening global economic recovery will help corporate earnings.

The FTSE All-Share Index fell 0.6 per cent.

“The pullback is further evidence of the fragility of sentiment,” said Richard Hunter, the head of UK equities at Hargreaves Lansdown in London. “Some weaker than expected corporate numbers have also weighed on the market.”

The Bank of England maintained its emergency stimulus yesterday and kept the benchmark interest rate at a record low of 0.5 per cent as predicted by all 62 economists in a Bloomberg News survey.

Former rate setter DeAnne Julius said yesterday the bank needs to tighten policy “sooner rather than later” or risk losing credibility.

Diageo slumped 4.6 per cent to 1,195p. Organic sales at the London-based spirits maker, which exclude the effect of acquisitions and currency swings, gained 4 per cent.

That missed the 4.5 per cent median estimate of 11 analysts surveyed by Bloomberg News. So-called organic operating profit rose 2 per cent, missing a 6.5 per cent median estimate.

International Consolidated Airlines tumbled 3.3 per cent to 251p. Air France-KLM posted a third-quarter net loss of €46 million ($62.7 million). Analysts had predicted a €60 million profit, based on the average of seven estimates.

Rio Tinto slipped 2.4 per cent to 4,549p. Net income rose to $8.5 billion in the six months ended December 31st from $2.4 billion a year earlier as the prices of iron ore and copper climbed.

Smith Nephew climbed 2.1 per cent to 727p after Europe’s largest maker of shoulder and knee implants named Olivier Bohuon as chief executive officer to replace Dave Illingworth, who has decided to retire after four years in the job. – (Bloomberg)