Bloomberg News

U.K. Stocks Are Little Changed as Europe Offsets U.S. Economy

November 15, 2011

Nov. 15 (Bloomberg) -- U.K. stocks were little changed after Italian borrowing costs gained as premier-in-waiting Mario Monti struggled to build political support for a new cabinet, offsetting U.S. economic data that exceeded forecasts.

Burberry Group Plc sank 5.2 percent after reporting earnings. London Stock Exchange Group Plc slid 3.9 percent after Goldman Sachs Group Inc. downgraded the shares.

The FTSE 100 Index declined 1.6, or less than 0.1 percent, to 5,517.44 at the close in London, after earlier climbing as much as 0.6 percent and tumbling 1.6 percent. The gauge added 0.3 percent last week as Italy’s Senate approved debt-reduction measures and Greece named a national-unity government. The FTSE All-Share Index dropped 0.1 percent today, while Ireland’s ISEQ Index slipped 1 percent.

“European debt remains the main concern,” Ben Critchley, a sales trader at IG Index in London, wrote in e-mailed comments. “Reports that the new Italian PM Mario Monti is struggling to get political approval is encouraging investors to play a waiting game to see just exactly what the next step in this political and economic drama will be.”

Monti, a former European Union competition commissioner, struggled to get political parties to agree to participate in his so-called technical Cabinet during talks in Rome yesterday. The new government faces the task of reassuring investors that Italy can cut its 1.9 trillion-euro ($2.6 trillion) debt and spur economic growth that has lagged behind the euro-region average for more than a decade.

Retail Sales

In the U.S., retail sales rose more than projected in October as American shoppers gave the economy a boost at the start of the fourth quarter. The 0.5 percent gain, helped by the biggest jump in electronics purchases in two years, followed a 1.1 percent increase for September, Commerce Department figures showed today.

U.K. Prime Minister David Cameron rebuffed a call by German Chancellor Angela Merkel to embrace a “political union” in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign-debt crisis. The crisis offers an opportunity for powers to “ebb back” from Europe to nation states, Cameron said in a speech in London last night before meeting Merkel on Nov. 18.

U.K. inflation slowed to 5 percent from 5.2 percent in September, the Office for National Statistics said today in London, led by a drop in food, transport and gasoline costs. As the rate exceeds the government’s 3 percent upper limit, Bank of England Governor Mervyn King must write a letter to Chancellor of the Exchequer George Osborne saying what will be done to tame price gains.

UBS Strategy

U.K. stocks will rally 11 percent through the end of 2012, pushing the FTSE 100 to 6,100, as economic growth outside Europe outweighs concern about the euro-area debt crisis, UBS AG strategists wrote in a report today.

MSCI Inc. is due to announce the results of its semi-annual index review at 10 p.m. London time today. Investors and funds that track indexes may buy or sell stocks depending on their inclusion in gauges.

Burberry tumbled 5.2 percent to 1,347 pence, the biggest retreat in six weeks, even after reporting first-half earnings that beat analysts’ estimates. The shares rallied 30 percent from Oct. 3 through yesterday.

LSE, the operator of Europe’s oldest independent stock exchange, slid 3.9 percent to 830 pence as Goldman Sachs cut its recommendation on the shares to “sell” from “neutral.”

Cable & Wireless Worldwide Plc tumbled 26 percent to 22.31 pence, the biggest drop since it started trading in March 2010. The company suspended future dividend payments and named Gavin Darby as chief executive officer after profit and sales declined.

Barclays Plc fell 1.6 percent to 171.2 pence and Royal Bank of Scotland Group Plc sank 3.2 percent to 21.23 pence.

Oxford Instruments Plc rallied 14 percent to 960 pence after the maker of instrumentation equipment reported increased first-half revenue.

--With assistance from Nandini Sukumar in London. Editors: Andrew Rummer, Will Hadfield

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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