Bloomberg News

U.K. Stocks Decline as Man Group, Banks Drop; BG Group Rallies

September 28, 2011

Sept. 28 (Bloomberg) -- U.K. stocks retreated for the first time in four days, paring yesterday’s biggest rally for the FTSE 100 Index in 16 months, as investors sought further signs that policy makers are addressing Europe’s debt crisis.

Man Group Plc plunged 25 percent, the most in almost three years, after the world’s largest hedge fund said assets under management will drop by 8.5 percent. Banks also retreated, snapping a three-day rally. BG Group Plc paced advancing shares after Goldman Sachs Group Inc. recommended the oil producer.

The benchmark FTSE 100 slid 76.42, or 1.4 percent, to 5,217.63 at the 4:30 p.m. close in London, after swinging between gains and losses at least 10 times today. The gauge yesterday jumped 4 percent. The broader FTSE All-Share Index slid 1.4 percent while Ireland’s ISEQ Index fell 1 percent.

“Trader sentiment remains dominant,” said Ben Critchley, a sales trader at IG Index in London. “So long as mixed messages keep emerging from politicians and central banks, the threat of volatility will continue to loom.”

The Financial Times said yesterday that some euro-area countries are demanding private creditors take bigger writedowns on their Greek bond holdings. The European Commission said it’s unaware of any move to increase private bondholders’ shares in Greece’s next bailout.

German Chancellor Angela Merkel is waiting for a report from the European Union, European Central Bank and International Monetary Fund on Greece’s budget progress before deciding whether revisions are needed to the finance package agreed in July.

Debt Crisis

More than $3.5 trillion was wiped from equity values globally last week amid concern policy makers are struggling to contain a debt crisis that has Greece on the verge of a default. The selloff has left the FTSE 100 trading at about 9.2 times the estimated earnings of its companies, below the average multiple of 11.4 during the past five years, Bloomberg data shows.

Man Group tumbled 25 percent to 180 pence after saying assets under management will decline by $6 billion through September amid “suppressed” demand for investment products. Chief Executive Officer Peter Clarke said “extreme” volatility in markets had “tested investor appetite for risk.”

Barclays Plc lost 1.2 percent to 166.4 pence today after surging 21 percent the previous three trading days. Royal Bank of Scotland Group Plc dropped 3.6 percent to 24.1 pence and HSBC Holdings slid 2 percent to 510 pence.

Market Strains

The Bank of England’s Financial Policy Committee today said market strains related to the euro-area debt crisis have dented the outlook for bank earnings and may impede their ability to strengthen balance sheets.

Cairn Energy Plc declined 6.5 percent to 276.5 pence, erasing yesterday’s 5.2 percent rally, after abandoning its third well in less than two months. The Scottish oil company exploring in Greenland said it will plug the Delta-1 exploration well in the Napariaq Block after failing to find “hydrocarbon shows.”

Cairn had planned to drill as many as four wells off the island at a cost of $600 million this year, it said in May. So far, it has not found any commercially viable oil resources in its two-year exploration campaign off the island.

Miners Slide

Vedanta Resources Plc led mining companies lower as copper declined in London. The stock slid 3.8 percent to 1,151 pence. Antofagasta Plc lost 5.9 percent to 990 pence and BHP Billiton Ltd., the world’s largest mining company, declined 4.1 percent to 1,799 pence.

Bwin.Party Digital Entertainment Plc tumbled 6.7 percent to 119.2 pence after Germany’s highest civil court upheld a ban on online gambling.

BG Group climbed 3.4 percent to 1,262.5 pence, one of just 13 companies to advance on the FTSE 100 today. Goldman Sachs added the oil producer to its “conviction buy” list. The stock yesterday paced a rally in energy companies as crude oil surged more than 5 percent in New York.

The Daily Mail, the Independent and the Guardian all attributed yesterday’s move to speculation companies including China’s CNOOC Ltd. may make a takeover offer for BG. The newspapers did not cite anyone.

Melrose Plc climbed 4.6 percent to 303.3 pence after the U.K. investment firm said it won’t proceed with an offer for Charter International Plc because it isn’t in shareholders’ best interests. Charter slipped 0.1 percent to 867.5 pence.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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


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