U.K. stocks declined as an increase in the cost of insuring the debt of Iberian countries outweighed an 85 billion-euro ($113 billion) aid package for Ireland.
Resolution Ltd. sank 3.1 percent as JPMorgan Chase & Co. initiated coverage of the buyout firm founded by Clive Cowdery with an “underweight” rating. Allied Irish Banks Plc and Bank of Ireland Plc surged in Ireland. Gartmore Group Ltd. rose 2.2 percent as the Financial Times reported that Henderson Group Plc hired advisers to examine its options to buy the London-based company.
The benchmark FTSE 100 Index erased previous gains, declining 0.4 percent to 5,645.80 at 11:07 a.m. in London. The broader FTSE All-Share Index slid 0.4 percent today, while Ireland’s ISEQ Index gained 0.8 percent.
“The initial sigh of relief from the Irish aid package faded - as it did with the announcement of aid seeking last week - when looking at the details,” said Christian Weber, a senior credit strategist at UniCredit SpA in Munich. He added that “equities have done better than credit over the past weeks” and “we are also nearing the year-end and people look to lock profits in a low activity environment.”
European finance chiefs ended crisis talks on Ireland yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed, to the consternation of bond traders.
The cost of insuring debt of Spain and Portugal soared to record high levels, according to CMA prices for credit-default swaps. Contracts on Spain climbed 14 basis points to 336 while Portugal rose 23 basis points to 524.
The FTSE 100 is down 4 percent since reaching the highest level in more than two-years on Nov. 5 amid concern the sovereign-debt crisis will spread from Ireland to southern Europe and speculation China will raise interest rates to tame inflation.
Resolution plummeted 3.1 percent to 218.2 pence. JPMorgan Chase initiated coverage of the stock with an “underweight” rating. The brokerage said in a note that “the corporate structure of Resolution (the value share, the management fees and the other incentive fees) means that the shares deserve a structural discount versus peers in our opinion.”
Shire Plc ended a three day gain, falling 1.1 percent to 1,550 pence. Jefferies Group Inc. downgraded the Dublin-based drug company to “hold” from “buy.”
Allied Irish Banks surged 7.9 percent to 36.9 euro cents, extending a 14 percent gain on Nov. 26, while Bank of Ireland jumped 20 percent to 31.8 euro cents, the steepest increase since May, after the government said the country’s two biggest lenders will receive money to boost their core capital ratios, which gauge financial strength.
Gartmore Group, the U.K. fund manager that slumped earlier this month after losing star money manager Roger Guy, rose 2.2 percent to 105.3 pence. Henderson Global Investors has asked advisers to examine the possibility of Henderson buying a portion or all of rival Gartmore, the Financial Times reported on its website on Nov. 26, citing unidentified people familiar with the situation.
Norkom Group Plc surged 13 percent to 1.23 euros, advancing for a third day. The Irish maker of anti-fraud banking software said it is in talks with a number of parties which may or may not lead to an offer for the company. The talks are at a “preliminary stage,” it said Nov. 26.
Unite Group Plc increased 2.8 percent to 193.8 pence, paring a 4.3 percent decline on Nov. 26. The company said it sold 143.9 million pounds of assets to the Unite U.K. Student Accommodation fund.
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