Bloomberg News

U.K. Stocks Decline From Three-Month High; Banks Pare Gains

October 28, 2011

Oct. 28 (Bloomberg) -- U.K. stocks fell, led by a retreat in banks, after yesterday’s rally sent the benchmark FTSE 100 Index to the highest level in almost three months.

Lloyds Banking Group Plc, Barclays Plc and Royal Bank of Scotland Group Plc all fell more than 4 percent, after a surge of at least 8 percent each yesterday. Man Group Plc dropped 4.7 percent before reporting earnings next week. Royal Dutch Shell Group Plc slid 1.3 percent.

The FTSE 100 fell 11.58, or 0.2 percent, to 5,702.24 at the close in London after the gauge briefly climbed above its 200- day moving average. The FTSE All-Share Index lost 0.1 percent and Ireland’s ISEQ Index slipped 0.4 percent.

“After the jubilant response from markets yesterday, there is a degree of consolidation taking place,” said Ben Critchley, a sales trader at IG Index. “While there could be some concern that the rally hasn’t been sustained, it’s worth acknowledging that we haven’t seen any notable reversion as a result of profit-taking.”

Stocks surged 2.9 percent yesterday, to the highest since Aug. 2, after the euro area’s leaders agreed to expand their bailout fund to 1 trillion euros ($1.4 trillion) in a bid to contain the debt crisis that has Greece on the edge of default. The U.K. gauge has rallied 3.9 percent so far this week and 11 percent in October, its biggest monthly advance since 1990.

Consumer Confidence

Stocks fell as a GfK NOP Ltd. report today showed that U.K. consumer confidence slipped to its lowest level in more than 2 1/2 years this month, adding to signs the British economy may slip back into recession.

Lloyds dropped 5.2 percent to 35.15 pence, paring some of yesterday’s 8.2 percent rally. Barclays declined 4.2 percent to 201.2 pence and RBS retreated 3.6 percent to 26.29 pence.

A gauge of U.K. lenders has still jumped 9 percent this week after the European Banking Authority said the lenders won’t need to raise extra capital to insulate themselves against losses on government debt.

HSBC Holdings Plc still advanced today, climbing 1.8 percent to 565.3 pence and limiting losses on the FTSE 100 Index. Analysts at Exane BNP Paribas wrote in a report that investors should focus on “high quality” lenders including HSBC, Europe’s biggest bank.

Man Group lost 4.7 percent to 153.4 pence before the world’s largest hedge fund reports its first-half results next week. Bank of America Corp. wrote in a report today it sees “significant cuts” in performance fees for the first half of 2012. The bank still reiterated its buy rating.

Shell retreated 1.3 percent to 2,250 pence as crude oil slid in New York. Europe’s largest oil company was also downgraded to “hold” from “buy” at Liberum Capital.

International Consolidated Airlines Group SA dropped 3.2 percent to 174.60 pence, paring some of yesterday’s 8.5 percent rally. Analysts at Oddo & Cie downgraded the airline to “reduce” from “neutral” today.

--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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