Bloomberg News

U.K. Stocks Decline as RBS, Barclays Fall; Ocado Shares Plunge

December 20, 2011

Dec. 19 (Bloomberg) -- U.K. stocks fell for a second day as banks retreated amid plans to separate their investment and consumer businesses and Fitch Ratings’ warned that it may downgrade France, Italy and Spain.

Lloyd Banking Group Plc, Royal Bank of Scotland Group Plc and Barclays Plc slid more than 3 percent as Chancellor of the Exchequer George Osborne pledged to pass laws by 2015 to force banks to split their investment and consumer units. Ocado Group Plc slumped 17 percent, the biggest slide on the FTSE 350 Index, as the U.K.’s biggest online-only grocer forecast profit that trailed analysts’ estimates.

The FTSE 100 index retreated 22.35, or 0.4 percent, to 5,364.99 at the close of trading in London, after earlier advancing as much 0.4 percent. The drop extends this year’s decline to 9.1 percent amid concern the euro-area debt crisis is hurting the global economy.

“Once again investors’ nerves have crumbled and the nine- day downtrend for the market has remained intact, with bankers and mining shares leading the way lower,” David Jones, David Jones, chief market strategist at IG Index, said in e-mailed comments. “Investors have the ever-present specter of European political procrastination regarding the debt situation to give them a reason to not hold positions for too long.”

Weekly Decline

The FTSE 100 slid 2.6 percent last week as concern lingered that the euro area’s debt crisis is deepening and the U.S. Federal Reserve refrained from taking new action to bolster the world’s largest economy. The broader FTSE All-Share Index slid 0.4 percent today, while Ireland’s ISEQ Index increased 0.2 percent.

Fitch Ratings lowered France’s credit outlook and put the grades of nations including Spain and Italy on review for a downgrade, citing Europe’s failure to find a “comprehensive solution” to the sovereign-debt crisis. Fitch placed Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which it expects to complete by the end of January, according to a statement.

Euro-area finance ministers discussed 200 billion euros ($260 billion) in additional funding through the International Monetary Fund and the mechanics of a so-called fiscal compact that were agreed in the Dec. 9 European Union summit accord, according to two people familiar with the matter.

European Central Bank President Mario Draghi damped expectations that the ECB will step up bond purchases to tame the sovereign-debt crisis, saying it can’t overstep its mandate.

ECB Credibility

“People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations,” Draghi told the Financial Times in an interview, confirmed by the Frankfurt-based ECB. “The important thing is to restore the trust of the people -- citizens as well as investors -- in our continent. We won’t achieve that by destroying the credibility of the ECB.”

Lloyd Banking Group Plc slid 4.2 percent to 23.47 pence as Osborne said the coalition government will introduce firewalls around banks’ retail divisions. RBS declined 3 percent to 19.4 pence and Barclays slid 3.2 percent to 165.95 pence.

“The government will split retail and investment banking through a ring fence,” Osborne told lawmakers in the House of Commons in London today.

Ocado Group plunged 17 percent to 59.2 pence, the lowest level since its initial public offering in July 2010. The online-only grocer that sells goods supplied by Waitrose Ltd. forecast full-year profit below analysts’ estimates after sales growth slowed amid worsening delivery times and order accuracy.

Imperial Tobacco Gains

Imperial Tobacco Plc led rising shares on the FTSE 100 Index as investors sought companies whose earnings are less tied to economic growth. Europe’s second-biggest tobacco company climbed 1.3 percent to 2,355 pence. SABMiller Plc, the brewer buying Australia’s Fosters Group Ltd. rose 1.2 percent to 2,176 pence.

Gulf Keystone Petroleum Ltd. rallied 7.7 percent to 178.25 pence. Exxon Mobil Corp. is considering a bid for the oil producer that operates in Iraq’s Kurdistan region, the Independent on Sunday reported. The newspaper didn’t say where it got the information. Gulf Keystone said it’s not in talks about selling the company.

--Editors: Andrew Rummer, 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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