Bloomberg News

Most U.K. Stocks Drop as Optimism Over Spain Deal Fades

June 11, 2012

Most U.K. stocks declined, erasing gains in the final half hour of trading, as initial optimism over Spain’s bailout plan gave way to concern it won’t stop the debt crisis from spreading.

Severfield-Rowen Plc dropped 6.9 percent after saying full- year profit may be lower than forecasts. Eurasian Natural Resources Corp. fell after RBC Capital Markets cut its recommendation on the stock. Lloyds Banking Group Plc (LLOY) gained 1.7 percent.

The FTSE 100 Index (UKX) lost less than 0.1 percent to 5,432.37 at the close in London, after earlier rallying as much as 1.9 percent. Fifty nine shares on the gauge slid, while 41 rose. The FTSE 100 has retreated 8.9 percent from this year’s high on March 16. The broader FTSE All-Share Index fell 0.1 percent and Ireland’s ISEQ Index slid 0.2 percent today.

“There is a concern that this debt contagion could move into Italy’s direction,” Michael Hewson, a market analyst at CMC Markets said in a Bloomberg Television interview. “This bailout really hasn’t solved anything. There’s a question of which bailout fund is it coming from, concern about Spain’s contingent liabilities, the lack of growth, the rising unemployment. All of these, none of them have been resolved.”

The volume of shares changing hands on FTSE 100 companies was 5.6 percent more than the average of the last 30 days, data compiled by Bloomberg showed.

Spain Bailout

Spain asked euro-area governments over the weekend for as much as 100 billion euros ($126 billion) to help shore up its banking system, becoming the fourth euro member to seek a bailout since the debt crisis began almost three years ago. The rescue request followed weeks of escalating concern that bad loans at Spain’s banks might overwhelm public finances.

The bailout loan will be channeled through the state’s bank-rescue fund, known as FROB, and extended to lenders that need it. It is equivalent to about 10 percent of Spain’s gross domestic product. FROB debt counts as public debt, which amounted to 69 percent of GDP last year.

U.K. indexes of business confidence and job prospects dropped in May, indicating the economy will weaken and employment may fall later this year, BDO LLP said.

A gauge of company sentiment fell to 95.5 from 96.2 in April, the accountancy firm said. An employment measure declined to 94.9 from 95.5. A reading below 95 indicates contraction.

Chinese Trade

China’s exports rose in May at more than double the pace analysts estimated. Overseas shipments climbed 15.3 percent from a year earlier, the customs bureau said yesterday, exceeding all 29 estimates in a Bloomberg News survey.

Severfield-Rowen fell 6.9 percent to 153 pence, the lowest since October. The supplier of structural steelwork to Heathrow Airport and the Shard skyscraper in London said full-year profit may be lower than expectations, citing operational overruns of 1.6 million pounds on two “complex projects” in the U.K.

Eurasian Natural Resources Corp., a metal producer in Kazakhstan, fell 4 percent to 406.8 pence. The stock was cut to underperform, meaning investors should sell the shares, from sector perform at RBC Capital Markets.

Fresnillo Plc (FRES), the world’s largest primary silver producer, slid 3.2 percent to 1,396 pence.

Man Group Plc (EMG), the world’s biggest publicly traded hedge- fund manager, dropped 3.9 percent to 76.7 pence.

Cove, BP

Cove Energy Plc (COV), the U.K. explorer with a share in gas fields off Mozambique, increased 1.9 percent to 267 pence, its highest price since it sold its shares to the public in May 2005, after it announced additional gas finds at its Atum well. The well pushes total discoveries in the block to between 30 trillion and 60 trillion cubic feet of recoverable gas resources or three to six times the U.K.’s existing reserves.

BP Plc (BP/), Europe’s second-largest oil company, climbed 1.4 percent to 414.90 pence. The company hopes to settle penalties and damages from the Deepwater Horizon spill for less than $15 billion, the Financial Times reported on June 8, citing a person familiar with the matter.

Lloyds, Britain’s biggest mortgage lender, rose 1.7 percent to 28.50 pence, gaining for fourth day. Schroders Plc added 1.3 percent to 1,246 pence.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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