U.K. stocks declined, as better- than-estimated data on the U.S. economy failed to assuage concerns that European countries are struggling to trim their budget deficits.
Compass Group Plc, the world’s largest catering company, lost 1.6 percent as it forecast full-year organic sales growth that missed JPMorgan Chase & Co.’s estimate. In Dublin, Allied Irish Banks Plc sank 7.6 percent after saying it will raise 5.4 billion euros ($7.38 billion) of capital and Finance Minister Brian Lenihan said the government will take majority control of the lender.
The benchmark FTSE 100 Index lost 20.65, or 0.4 percent, to 5,548.62 at the 4:30 p.m. close in London, trimming this month’s rally to 6.2 percent. The FTSE All-Share Index dropped 0.4 percent and Ireland’s ISEQ Index gained 0.6 today.
“Concern remains over the medium-term prospects for the Irish economy and its high debt,” Joshua Raymond, a markets strategist at City Index Ltd. in London, said. “There will be a big focus on the plan Ireland outlines in November on how it will get to grips with its debt.”
Fitch Ratings’ credit rating on Ireland “cannot be regarded as wholly secure” in light of the bank bailout figures announced today, according to Chris Pryce, a director at the agency.
“Clearly, we are going to be looking very carefully at the figures that have emerged,” London-based Pryce said in a telephone interview today. “We have been looking very closely for some months at the Irish situation.” Fitch currently has an AA- rating and “stable” outlook on Ireland.
The FTSE 100 has gained 13 percent since the end of June, the index’s biggest quarterly advance in a year, amid an increase in takeover activity and as concern eased that the global economic recovery will falter. Still, lingering concern that some European countries will fail to repay their debt has left the gauge 4.7 percent below its April high.
The U.S. economy grew at a revised 1.7 annual rate in the second quarter, more than the median forecast of economists surveyed by Bloomberg News and up from a 1.6 percent estimate issued last month, figures from the Commerce Department showed today in Washington. The world’s largest economy expanded 3.7 percent in the first three months of the year and 5 percent at the end of 2009.
American initial jobless claims decreased by 16,000 to 453,000 in the week ended Sept. 25, lower than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed. The total number of people receiving unemployment insurance and those getting extended payments fell.
Allied Irish tumbled 7.6 percent to 51 euro cents. Lenihan also said that Allied Irish Managing Director Colm Doherty will leave the company by the end of 2010. The nation’s central bank said Allied Irish and its nationalized rival, Anglo Irish Bank Corp., may need as much as 14.4 billion euros in extra capital.
Compass Group lost 3.8 percent to 530.5 pence as it forecast full-year organic sales growth of 3 percent, missing JPMorgan Chase.’s estimate of 3.2 percent.
Senior Plc, a British supplier of air ducts for the Boeing Co. 787 Dreamliner, climbed 7.8 percent to 138.9 pence, as Jefferies Group Inc. rated the stock “buy” in new coverage.
Shanks Group Plc climbed 1.3 percent to 112.7 pence as it said that trading for the six months to Sept. 30 was “in line” with its expectations.
“We remain firmly of the view that the shares warrant a higher multiple given the strong underlying profit growth in the business,” Royal Bank of Scotland Group Plc analyst Conor O’Prey wrote in a report today, keeping his “buy” rating on the shares.
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