Bloomberg News

U.K. Stocks Retreat as Italy Grabs Investors’ Attention

November 07, 2011

Nov. 7 (Bloomberg) -- U.K. stocks declined for a second day as investors weighed the possibility of a change of government in Greece and Italy, Europe’s most-indebted countries.

Weir Group Plc fell 3.7 percent after analysts said its order book has been “price in” and its unchanged revenue forecast may disappoint investors. Ryanair Holdings Plc climbed 5.1 percent in Dublin after Europe’s largest discount airline raised its earnings forecast.

The benchmark FTSE 100 Index slid 16.34, or 0.3 percent, to 5,510.82 at the close in London. The gauge earlier fluctuated between gains and losses on conflicting reports that Italian Prime Minister Silvio Berlusconi will resign today. The FTSE All-Share Index retreated 0.4 percent and Ireland’s ISEQ Index was little changed.

“It’s impossible to guess the next bit of news,” said David Miller, a fund manager and partner at Cheviot Asset Management, which has 3.5 billion pounds in assets under management in London. “You have good value and there’s been good value for some time” in equities, he said in a Bloomberg Television with Francine Lacqua.

Debt Contagion

The FTSE 100 has fallen 7 percent this year as the sovereign-debt crisis threatened to spread across the euro area. This left the gauge trading 10 times the estimated earnings of its companies, less than the average multiple of 11.4 during the past five years, according to data compiled by Bloomberg.

Investors have now turned their attention to Italy from Greece. Italy’s 10-year borrowing costs surged to a euro-era record and are close to levels that drove Greece, Ireland and Portugal to seek bailouts.

Berlusconi denied a report by Giuliano Ferrara, his former spokesman and now editor of newspaper Il Foglio, who wrote today that the premier would step down “within hours.” Berlusconi will likely resign next week in return for support in a vote on the austerity and economic-growth measures, Ferrara said in a phone interview after his initial report.

The FTSE 100 tumbled 3.1 percent last week, snapping a five-week rally, after a failed attempt by Greek Prime Minister George Papandreou to hold a referendum on the latest bailout package roiled financial markets and spurred concern Greece may default. Papandreou yesterday agreed to step down to allow the creation of a new government intended to secure international financing and avert a collapse of the country’s economy. A new government will be announced tomorrow.

Greek Pause

Papandreou met Antonis Samaras, the main opposition leader, and agreed to form a government to lead the country to elections immediately after the implementation of the bailout package that was completed on Oct. 26. Papandreou has stated he won’t lead the new government.

Weir Group Plc fell 3.7 percent to 1,860 pence, after saying its 2011 earnings will be in line with its own expectations. Andrew Wilson, an analyst with Investec Securities Ltd. said the company’s unchanged guidance may disappoint investors in the short term. Dominic Convey, an analyst at Peel Hunt, said the company’s growing order book “looks to be priced in.”

Ryanair advanced 5.1 percent to 3.52 euros after the airline raised its full-year profit forecast by 10 percent to 440 million euros ($606 million) as higher ticket prices offset a slowdown in growth. The Dublin-based company reported a 22 percent increase in second-quarter earnings to 404 million euros, in line with analysts’ estimates.

Carphone Warehouse rose 0.9 percent to 348 pence after founder Charles Dunstone agreed to sell the company’s stake in its U.S. and Canadian mobile phone joint venture to partner Best Buy Co. for 838 million pounds.

--Editors: Srinivasan Sivabalan, Will Hadfield

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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


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