Bloomberg News

U.K. Stocks Decline After U.S. Manufacturing Slows; HSBC Rallies

August 01, 2011

Aug. 1 (Bloomberg) -- U.K. stocks declined for a second day as a report showed that U.S. manufacturing expanded at its slowest pace in two years, overshadowing earnings that topped estimates at HSBC Holdings Plc.

Lloyds Banking Group Plc and BAE Systems Plc sank more than 2 percent after the Institute for Supply Management’s U.S. factory index fell. Laird Plc slumped 15 percent after Cooper Industries Plc withdrew its proposed takeover offer. HSBC, Europe’s biggest bank, climbed the most in four months.

The FTSE 100 Index lost 40.76, or 0.7 percent, to 5,774.43 at the 4:30 p.m. close in London, having earlier climbed 1.7 percent. The gauge has tumbled 5.2 percent from this year’s high on Feb. 8 amid speculation that Europe’s debt crisis would spread and as concern mounted that U.S. lawmakers would fail to agree on increasing the federal debt limit. The FTSE All-Share Index also dropped 0.7 percent today, while Ireland’s ISEQ Index declined 2.3 percent.

Today’s manufacturing data “brought the focus back onto a stuttering U.S. recovery,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London. “It had looked quite frothy on the back of the weekend’s events but the ISM number turned the market on a sixpence.”

ISM’s factory index fell to 50.9 in July from 55.3 in June. Economists had predicted that the gauge would drop to 54.5, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.

Debt Ceiling

President Barack Obama said yesterday that Republican and Democrat leaders in both the U.S. House and Senate had reached an agreement to increase the debt ceiling by at least $2.1 trillion and cut government spending by $2.4 trillion or more. The House planned to vote on the deal today and the Senate may follow.

Lloyds, the U.K.’s largest mortgage lender, sank 5 percent to 41.19 pence. BAE Systems, the arms company that last year made 48 percent of revenue in the U.S., dropped 3 percent to 295 pence.

Laird slumped 15 percent to 159.8 pence, its largest drop since November 2008. Cooper Industries withdrew its proposed offer for the biggest maker of electronic shields for laptops and televisions.

Kofax Plc tumbled 8 percent to 333 pence. Jefferies Group Inc. downgraded the U.K. maker of image-scanning software to “hold” from “buy” after the company last week said software- business revenue trailed its forecasts.

HSBC rose 2.2 percent to 607.5 pence, the biggest gain since April, after reporting first-half earnings of $9.22 billion, beating analyst estimates of $7.82 billion. The company said it will cut 30,000 jobs as part of a plan to reduce costs by as much as $3.5 billion over the next two years.

Intertek, Hammerson

Intertek Group Plc, the world’s largest consumer-goods testing company, jumped 3.9 percent to 1,990 pence after revenue and earnings grew. The company predicted higher single-digit sales growth for the full year and increased its interim dividend.

Hammerson Plc, Britain’s third-largest real-estate investment trust, increased 1.4 percent to 472.5 pence after the company said first-half profit excluding items was little changed as higher rents reduced the effect of disposals.

African Minerals Ltd. rallied 4.4 percent to 647 pence after completing an investment accord with Shandong Iron & Steel Group Co.

--Editors: Will Hadfield, Andrew Rummer

To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net; Ben Edwards in London at bedwards35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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