Bloomberg News

U.K. Stocks Decline, Paring Weekly Gain for FTSE 100; BP Drops

January 29, 2012

Jan. 27 (Bloomberg) -- U.K. stocks fell from the highest level since July as the U.S. economy expanded less than forecast and private bondholders pressed on in talks with the Greek government for a debt-swap agreement.

BP Plc dropped 2.6 percent after a U.S. court ruled that the oil company can’t recover part of the cleanup costs of the 2010 Gulf of Mexico spill from Transocean Ltd. InterContinental Hotels Group Plc lost 2.7 percent after UBS AG advised selling the shares.

The FTSE 100 fell 61.75, or 1.1 percent, to 5,733.45 at the close in London, paring gains this week to less than 0.1 percent. The gauge has still risen 2.9 percent this year amid signs that the U.S. economy is recovering and after the European Central Bank moved to ease bank lending through its long-term refinancing operation. The FTSE All-Share Index lost 1 percent today. Ireland’s ISEQ Index dropped 0.5 percent.

“We’re still cautious on the outlook for equities at present,” said Sally Davies, a fund manager at Octopus Investments in London, which has assets of 2.5 billion pounds ($3.9 billion). “We still think that the LTRO, whilst making the potential collapse of the euro zone much less likely, is little more than a temporary sticking plaster covering a deeper wound.”

The Institute of International Finance, which represents private creditors, said that it made “some progress” at a meeting last night in Athens between managing director Charles Dallara and Greek Prime Minister Lucas Papademos. European Union Economic and Monetary Affairs Commissioner Olli Rehn said today Greece was “close” to reaching an agreement.

Greek Debt

Greece and its creditors have haggled over how to reduce the country’s borrowings three months after private bondholders agreed to a 50 percent cut in the face value of more than 200 billion euros ($262 billion) of debt by voluntarily swapping bonds for new securities.

Stocks extended declines after a report showed the U.S. economy expanded less than forecast in the fourth quarter as consumers reduced savings in order to boost spending and government agencies cut back.

Gross domestic product climbed at a 2.8 percent annual following a 1.8 percent gain in the prior quarter, according to Commerce Department figures. The median forecast of 79 economists surveyed by Bloomberg called for a 3 percent gain.

BP’s Cleanup Costs

BP dropped 2.6 percent to 464.55 pence. The U.S district judge in New Orleans ruled the company can’t collect from Transocean part of the $40 billion in cleanup costs and economic losses caused by the 2010 oil-well blowout and Gulf of Mexico spill.

BP must indemnify Transocean for pollution-related economic damage claims under its drilling contract, the judge said. London-based BP sued Transocean in April to recover a share of its damages and costs from the spill.

InterContinental Hotels slid 2.7 percent to 1,321 pence. UBS cut its recommendation on the shares to “sell” from “neutral.”

Creston Plc slumped 23 percent to 51 pence. Profit before tax for the full year at the marketing services company will be slightly below last year, Espirito Santo analysts said.

Next Plc, a retailer, rose 1.7 percent to 2,639 pence after climbing as much as 3.5 percent. The shares, which gained 39 percent in 2011, today climbed above their 30-, 50- and 100-day moving averages, prompting technical analysts to say further gains may follow.

African Barrick Gold Plc advanced 5.3 percent to 515.5 pence, its highest price in seven weeks, after it reported a fourfold increase in a deposit in Tanzania.

--With assistance from Alexis Xydias in London. Editors: Srinivasan Sivabalan, Andrew Rummer

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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