Bloomberg News

U.K. Stocks Drop as BOJ Holds Policy Unchanged, Bond Yields Rise

June 11, 2013

U.K. stocks dropped for a second day as the Bank of Japan left its stimulus measures unchanged and government bond yields climbed amid speculation the Federal Reserve is considering reductions in bond purchases.

Antofagasta Plc., Anglo American Plc (AAL) and Glencore Xstrata Plc all slid more than 2 percent as metal prices fell in London. HSBC Holdings Plc (HSBA) and Prudential Plc (PRU) led a selloff in financial companies. ICAP (IAP) Plc and Man Group Plc also tumbled.

The FTSE 100 Index lost 60.37 points, or 0.9 percent, to 6,340.08 at the close in London, after earlier sinking 1.9 percent. The gauge has posted three consecutive weekly declines amid concern the U.S. Fed will start to taper its bond-buying program that had helped drive the index to its highest level since 1999.

“When investors don’t get what they want from central banks it prompts a bit of panic,” said Ian Williams, a market strategist at Peel Hunt LLP in London. “Bond markets are really driving equities at the moment. Anticipation of central banks not being there as the buyer of the last resort means you are starting to see a correction in yields.”

The FTSE All-Share Index lost 1 percent today, while Ireland’s ISEQ Index slid 1.5 percent. The FTSE 100 (UKX) Volatility Index, a measure of options prices on the U.K. benchmark gauge, rose 6.5 percent to 17.48 today.

BOJ Tools

U.K. stocks followed declines in Asian equities after the BOJ today refrained from expanding its tools to rekindle inflation and stoke growth. Policy makers stuck with an April pledge to increase the monetary base by 60 trillion ($620 billion) to 70 trillion yen per year.

A gauge of U.K. mining companies dropped 2.4 percent, falling for a second day as gold slid to a two-week low and copper led base metals lower on the London Metal Exchange.

Antofagasta lost 2.9 percent to 884.5 pence, Anglo American lost 3.5 percent to 1,371.5 pence and Glencore Xstrata slipped 3.8 percent to 302.5 pence.

Banks and insurers also declined in London as U.S. treasuries tumbled on concern the biggest monthly surge in yields since December will prompt investors to sell government debt as a hedge against losses on mortgage bonds as borrowing costs climb to a 14-month high.

HSBC, Europe’s largest bank and the heaviest stock on the FTSE 100, lost 1 percent to 693.4 pence. Barclays Plc (BARC) dropped 1.3 percent to 304.55 pence, while Prudential, the U.K.’s largest insurer, slumped 3.7 percent to 1,055 pence.

ICAP Sinks

ICAP retreated 3.6 percent to 359.9 pence after Credit Suisse Group Plc lowered its recommendation for the world’s largest broker of transactions between banks to underperform, the equivalent of sell, citing a high level of uncertainty over volume trends.

Man Group sank 7.1 percent to 86.25 pence. The world’s largest publicly traded hedge-fund manager releases its weekly assets under management figures after the close of trading. The stock tumbled 18 percent last week after net assets of its flagship AHL Diversified fund declined 6.1 percent.

Separately, bondholders agreed to sell Man Group (EMG) $141.4 million of its subordinated notes as part of a plan to cut debt.

Aberdeen Asset Management Plc (ADN) and Henderson Group Plc (HGG) fell 4.4 percent to 395.8 pence, and 3.7 percent to 147.9 pence, respectively.

Ocado Group Plc (OCDO) rallied 4.2 percent to 325 pence, extending a record high. The shares advanced as short sellers closed their positions in the U.K.’s largest online grocer, according to analysts including Exane BNP Paribas’s Andrew Gwynn.

Short Sellers

The company is the sixth-most-shorted stocks on the FTSE 250 Index with 7.8 percent of shares out on loan, according to the most recent data from Markit. The short interest has come down 25 percent in the past month to a one-year low as Ocado unveiled a partnership with William Morrison Supermarkets Plc.

Keller Group Plc (KLR) advanced 2.1 percent to 925 pence after announcing plans to acquire Canadian foundations company North American Piling for a maximum payment of C$320 million ($313 million). Jefferies Group said the acquisition would lead to an 11 percent upgrade of estimates for 2013 pretax earnings.

In Dublin, Bank of Ireland (BKIR) Plc dropped 7 percent to 15.9 euro cents, extending yesterday’s 5 percent selloff, after Fitch Ratings warned that loan impairments at the biggest Irish lender by assets and rival Allied Irish Banks Plc (ALBK) may rise and the lenders may need more capital. AIB also slid 7 percent to 6.6 cents.

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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