Bloomberg News

U.K. Stocks Are Little Changed Before ECB, BOE Meetings

July 04, 2012

U.K. stocks closed little changed, after the benchmark FTSE 100 Index rallied to a two-month high yesterday, as investors awaited the outcome of tomorrow’s central-bank policy meetings.

Barclays paced banks lower as former Chief Executive Officer Bob Diamond attended a Treasury Select Committee hearing. Man Group (EMG) Plc slid 4.7 percent after the hedge-fund manager reported a decrease in assets last week at its flagship fund. Tullow Oil Plc (TLW) fell 1.9 percent after the oil producer suspended drilling at a well in Kenya.

The FTSE 100 slid 3.26, less than 0.1 percent, to 5,684.47 at the close in London. The volume of shares changing hands on the gauge was 50 percent below the 30-day average with the U.S. closed for the Independence Day holiday. The broader FTSE All- Share Index also slid less than 0.1 percent today, while Ireland’s ISEQ Index rallied 0.8 percent.

“The recent risk rally across global markets appears to be alluring clients into booking some profits,” said Ishaq Siddiqi, a market strategist at ETX Capital in London. “Today’s price-action is likely to continue until the European Central Bank and Bank of England policy decisions tomorrow.”

The FTSE 100 has advanced 1.9 percent so far this week and yesterday reached the highest since May 3 after measures of manufacturing from China to the euro area topped economists’ forecasts and speculation grew that central banks will take further measures to stimulate growth.

Stimulus Plans

The ECB is expected to lower its benchmark rate by 25 basis points to a record low 0.75 percent, according to the median forecast in a Bloomberg survey of 62 economists. Five predict a cut of 50 basis points and 11 foresee no change.

In the U.K., the BOE will expand its quantitative easing program by 50 billion pounds ($78 billion), while leaving its benchmark rate unchanged at 0.5 percent, according to economists.

Barclays slid 0.6 percent to 166 pence. The shares rallied as much as 1.8 percent and fell as much as 2.1 percent as Diamond, who resigned yesterday, faced questions from lawmakers on how the bank failed to prevent the abuse of a benchmark used to set interest payments on $500 trillion of securities from mortgages to swaps.

Diamond today apologized for the “reprehensible” behavior at the bank that led to a record fine of 290 million pounds last week for rigging the London Interbank-Offered Rate, known as Libor.

Barclays Probe

Barclays, which has lost a fifth of its market value in two weeks, is one of at least 12 banks including Citigroup Inc., Royal Bank of Scotland Group Plc (RBS), HSBC Holdings Plc (HSBA) and Lloyds Banking Group Plc (LLOY) are under investigation into Libor-setting practices.

Lloyds lost 0.5 percent to 31.66 pence and HSBC, Europe’s largest bank, declined 0.5 percent to 567.6 pence. RBS slid 0.9 percent to 214.5 pence. ICAP Plc (IAP), which is also being investigated, dropped 1.1 percent to 331 pence.

Man Group tumbled 4.7 percent to 67.55 pence, extending its retreat this week to 11 percent, after the world’s largest publicly traded hedge-fund manager said the net asset value of its Man AHL Diversified fund lost 2.5 percent last week.

JPMorgan Chase & Co. also reduced its dividend estimates for Man Group and cut its price target for the shares by 55 percent to 45 pence, citing a “disappointing” investment performance by AHL in the second quarter.

Tullow, Carillion

Tullow Oil declined 1.9 percent to 1,502 pence after the oil producer suspended drilling of the Ngamia-1 well in Kenya at 2,340 meters, short of its previous target depth. Tullow will move the rig to a second location in the country to drill the Twiga-1 well.

Tullow and its Canadian partner Africa Oil Corp. announced Kenya’s first oil discovery at the Ngamia-1 well in Block 10BB in the Turkana region on March 26.

Carillion Plc (CLLN) led construction-related companies lower, falling 3.2 percent to 273.1 pence even as the builder of the London Olympics media center said it was on track to meet full- year earnings expectations.

Carillion said first-half revenue will be lower year-on- year, as estimated, due a decline in U.K. construction revenue. The shares had climbed 4.9 percent in the three days through yesterday.

Taylor Wimpey Plc (TW/) dropped 2.6 percent to 48 pence after giving the first-half financial update. Britain’s second-largest homebuilder by volume posted an 8 percent increase in U.K. house sales and a 2.6 percentage-point increase in its operating margin. The stock had climbed 8.8 percent in the previous three sessions.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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


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