U.K. Stocks Fall, Led by Lloyds, RBS on Irish Loan Losses; Autonomy Climbs
U.K. stocks fell for a third day, led by a decline in banks, as an agreement among Europe’s leaders to create a crisis-management mechanism failed to ease concern that some euro-area nations will default on their debt.
Lloyds Banking Group Plc lost 3.6 percent after saying it expects to report an increased impairment charge because of Irish loan losses. AstraZeneca Plc slid the most in two years after Britain’s second-biggest pharmaceutical company failed to get U.S. approval for a blood thinning drug. Autonomy Corp. gained 5.3 percent following takeover speculation and a better- than-estimated earnings forecast at Oracle Corp.
The FTSE 100 Index fell 0.2 percent to 5,871.75 at the 4:30 p.m. close in London, trimming this week’s advance to 1 percent. The gauge has risen for three straight weeks as China refrained from raising interest rates and economic data bolstered confidence in the U.S. recovery. The FTSE All-Share Index was little changed, while Ireland’s ISEQ Index slid 0.5 percent.
“We are getting to the stage now that euro-zone debt fears could keep a leash on any potential gains to be made next year,” said Joshua Raymond, a market strategist at City Index in London. “Being triple witching day, where options and futures contracts expire, and just over a week away from Christmas day, it seems that traders are in the process for wrapping things up for an expected leave of absence from the market.”
European Union leaders agreed to amend the bloc’s treaties to create a permanent debt-crisis mechanism in 2013 as they struggled to bridge divisions over immediate steps to stabilize bond markets. The mechanism fails to solve the current sovereign-debt crisis, according to economists including Carsten Brzeski at ING Group NV in Brussels.
Lloyds retreated 3.6 percent to 66.5 pence after saying it expects to report an increased impairment charge of 4.3 billion pounds ($6.7 billion) because of Irish loan losses. An additional 10 percent of its 26.7 billion pounds of loans in the republic will likely be classified as impaired before the fiscal year-end, Lloyds said.
Royal Bank of Scotland Group Plc, which today sold about 3.9 billion pounds of project finance assets to Bank of Tokyo- Mitsubishi UFJ Ltd., declined 5.7 percent to 37.82 pence. Barclays Plc slid 1.4 percent to 259.75 pence.
The Bank of England said U.K. financial stability remains vulnerable to Europe’s sovereign-debt crisis even after banks rebuilt capital and the strength of the system improved.
British institutions also face risks from a sudden increase in bond yields, higher interest rates, and overheating in emerging markets, the central bank said in its Financial Stability Report published today.
Bank of Ireland Plc dropped 14 percent to 31.85 euro cents and Allied Irish Banks Plc lost 1.1 percent to 45 cents.
Moody’s Investors Service, which today downgraded Ireland’s credit rating to Baa1 from Aa2, said the banks may need to use 10 billion euros ($13.3 billion) out of a 25 billion-euro contingency capital fund as part of an international bailout.
AstraZeneca tumbled 6.7 percent to 2,941 pence, the biggest drop since November 2008, after the drugmaker failed to win U.S. approval for Brilinta, its rival to Plavix, the world’s second- best selling drug.
The Food and Drug Administration asked for additional analysis of a study called Plato comparing Brilinta with Plavix in patients with severe chest pain or earlier heart attacks.
Autonomy, Britain’s second-largest software company, jumped 5.3 percent to 1,543 pence. The Daily Mail yesterday reported that the software maker could be the subject of a bidding war between Microsoft Corp. and Oracle in January. The newspaper did not cite anyone.
Autonomy is gaining “on press speculation that it may be a bid target for Microsoft or Oracle,” said Ben Critchley, a sales trader at IG Index in London.
Separately, Oracle, the world’s second-largest software maker, and Research In Motion Ltd., maker of the BlackBerry smartphone, forecast profit that topped analysts’ projections.
Panmure Gordon & Co. raised its price estimate for Autonomy shares to 1,726 pence and reiterated its buy recommendation, saying earnings guidance from Oracle, RIM and Accenture Plc point to a “strengthening of the corporate B2B IT market.”
Punch Taverns Plc surged 12 percent to 74.45 pence. The U.K. operator of more than 6,700 pubs said it’s likely to meet its full-year forecast after sales rose in its managed-pubs division.
ITE Group Plc, the London-based international events organizer, rallied 12 percent to 244.1 pence after saying it bought International Exhibition Company CJSC for 33 million euros.
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