Bloomberg News

U.K. Stocks Decline as Investors Fret Over Europe Summit Outcome

October 25, 2011

Oct. 25 (Bloomberg) -- U.K. stocks fell after a meeting of European Union finance ministers was canceled, raising concern an agreement may be delayed at the region’s debt-crisis summit tomorrow.

Reckitt Benckiser Group Plc paced declining shares as the company forecast lower earnings at its pharmaceutical unit. ICAP Plc retreated 3.8 percent after UBS AG recommended selling the shares. BP Plc and BG Group Plc both still rallied more than 3.5 percent after earnings topped analyst estimates.

The FTSE 100 Index slipped 22.52, or 0.4 percent, to 5,525.54 at the close in London, after earlier rising as much as 0.5 percent and tumbling as much as 1.5 percent. The FTSE All- Share Index also declined 0.4 percent today, while Ireland’s ISEQ Index slid 1.4 percent.

“Today’s session was volatile as investors panicked at one stage thinking that tomorrow’s summit had been postponed once again,” said Angus Campbell, head of sales at Capital Spreads in London. “Risk aversion crept in ahead of tomorrow’s crucial European Union summit with some investors positioning themselves in case of the worst case scenario.”

European leaders are holding a second summit in four days tomorrow in a bid to contain the debt crisis and avoid contagion spreading to Italy and Spain. They seek an agreement to bolster the region’s rescue fund, recapitalize banks and provide debt relief to Greece. The summit follows an Oct. 23 meeting, where leaders excluded a forced restructuring of the Greece’s debt.

Summit Tomorrow

Stocks extended losses after the U.K. government said a meeting of EU finance ministers scheduled for tomorrow was canceled. They pared some of their losses on confirmation that the summit of the 27 EU leaders and 17 euro-area heads of government will take place in Brussels as planned.

Reckitt Benckiser lost 3.4 percent to 3,330 pence after the company forecast lower sales and profit at its pharmaceutical unit in the fourth quarter because of a price increase for its Suboxone tablets and U.S. health-care policy changes. Third- quarter adjusted net income of 470 million pounds ($752 million) still beat the average analyst estimate in a Bloomberg Survey.

ICAP dropped 3.8 percent to 410.8 pence after UBS lowered its recommendation for the world’s largest broker of transactions between banks to “sell” from “neutral.” Rival Tullett Prebon Plc, which was also downgraded to “sell,” slid 3.3 percent to 368.8 pence.

BP, BG Group

BP paced advancing shares, gaining 4.4 percent to 457.2 pence. Europe’s second-largest oil company reported adjusted third-quarter earnings of $5.3 billion, beating the average analyst estimate of $5 billion in a Bloomberg survey.

Chief Executive Officer Bob Dudley plans to increase the company’s cash flow by 50 percent by 2014 by focusing on the most profitable production projects. The higher asset sales target includes the disposal of half of its U.S. refining capacity in the Carson and Texas City plants.

BG Group rose 3.8 percent to 1,378 pence after Britain’s third-largest natural-gas producer reported a 25 percent jump in third-quarter earnings to $1.06 billion. Excluding disposals and one-time items, earnings of $1.02 billion topped the average analyst estimate of $973 million.

ARM Holdings Plc gained 2.5 percent to 590 pence. The U.K. designer of chips that help power Apple Inc.’s iPhone and iPad forecast sales to rise about 21 percent to about $763 million, on new business. The company more than doubled third-quarter pretax profit to 43 million pounds, while sales rose 22 percent.

F&C Asset Management Plc added 2.7 percent to 64 pence after the company tripled cost reduction plans and cut jobs as part of a strategic review.

Vectura Group Plc, the U.K. developer of inhaled drugs, plunged 21 percent to 67.5 pence after partner Novartis AG said a U.S. regulatory review of an experimental medicine would be delayed.

--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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