Bloomberg News

U.K. Stocks Drop as Investors Await ECB Meeting; BP Sinks

September 05, 2012

U.K. stocks declined for a second day, extending a one-month low, as investors awaited tomorrow’s European Central Bank meeting.

BP Plc (BP/), owner of the Macondo well that caused the worst accidental U.S. oil spill in history, sank the most in a month as the Department of Justice reiterated it will pursue charges of gross negligence in the case. Imperial Tobacco Plc lost 1.8 percent after Le Parisien said France plans to increase cigarette prices.

The FTSE 100 Index (UKX) fell 14.15 points, or 0.3 percent, to 5,657.86 at the close in London. The gauge has still gained 7.6 percent since the 2012 low on June 1 as ECB President Mario Draghi pledged to do all it takes to preserve the euro. The broader FTSE All-Share Index slipped 0.2 percent today, while Ireland’s ISEQ Index added 0.6 percent.

“Investors are waiting for tomorrow’s ECB meeting,” said Angus Campbell, head of market analysis at Capital Spreads in London. “There’s a tussle between political leaders about whether the ECB will remain within its mandate, so we might see some uncertainty and fluctuations in the market until we hear what Draghi has to say.”

Draghi told the European Parliament this week that the ECB needs to intervene in bond markets to wrest back control of interest rates in the fragmented euro-area economy and ensure the survival of the common currency.

ECB Plans

The bond-buying proposal includes unlimited purchases of government debt that will be sterilized to ensure a neutral impact on money supply, two central bank officials said today. Policy makers will start deliberating on the plan later today and Draghi will announce whether it has been agreed to at a press conference tomorrow.

Michael Fuchs, a senior member of German Chancellor Angela Merkel’s ruling coalition, told Bloomberg Television today that Germany would oppose any ECB plan that involves “too much” bond buying without ensuring countries in need of help commit to overhaul their economies.

“Today’s events have left investors extremely uncertain over the ECB’s action on Thursday,” Ishaq Siddiqi, a market strategist at ETX Capital in London, wrote in e-mailed comments. “The ECB does have the firepower to significantly ease tensions in the debt markets in the near term, however the central bank is extremely constrained with Germany’s opposition.”

European Economy

Euro-area services and manufacturing output contracted more than initially estimated in August. A composite index based on a survey of purchasing managers in both industries fell to 46.3 from 46.5 in July, London-based Markit Economics said today. That’s below an initial estimate of 46.6 published on Aug. 23. A reading below 50 indicates contraction.

The Bank of England’s Monetary Policy Committee began a two-day meeting today. The central bank will leave its benchmark interest rate unchanged at 0.5 percent tomorrow, according to a Bloomberg survey of 51 economists.

BP slid 2.9 percent to 423.85 pence, the largest drop since July 31. Europe’s second-biggest oil company engaged in “gross negligence and willful misconduct” pertaining to the Gulf of Mexico spill in 2010, the U.S. Department of Justice said in a court filing from Aug. 31. If BP is found guilty of gross negligence, the maximum level of penalty could rise to $17.6 billion from $4.51 billion using the government’s estimate of the size of the spill.

Imperial Tobacco

Imperial Tobacco, which owns the Gauloises brand, retreated 1.8 percent to 2,406 pence after Le Parisien said French Health Minister Marisol Touraine will announce a plan in the coming weeks to remove branding labels from cigarette packs and increase the price by 40 cents per packet from Oct. 1.

Lonmin Plc (LMI) dropped 6.2 percent to 529.5 pence. About 3,000 South African protesters wielding sticks marched to Lonmin’s Marikana mine where police shot dead 34 people last month during a strike at the third-largest platinum company. Five worker representatives threatened to kill management officials unless they stop operations, the South African Press Association reported today, citing a Lonmin manager, Jan Thiroun.

BG Group Plc (BG/) slid 3.9 percent to 1,221 pence as a person familiar with the matter said Deutsche Bank AG was placing 41 million shares in the natural-gas producer at 1,225 pence each.

Xstrata Plc (XTA) rose 1.9 percent to 935.1 pence as Sanford C. Bernstein & Co. said Glencore International Plc (GLEN)’s offer undervalues the mining company by 13 percent. Xstrata’s shareholders are due to vote on Glencore’s $33.5 billion all- share takeover bid on Sept. 7.

Glencore advanced 1.1 percent to 389.5 pence.

Britvic Plc (BVIC) surged 13 percent to 369.9 pence. The U.K. maker of Robinsons Barley Water said it’s been approached by A.G. Barr Plc about an all-share merger and has started talks to create one of Europe’s biggest soft-drink businesses.

Barr jumped 8.3 percent to 450.2 pence.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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