U.K. Stocks Decline as Europe Stands Divided on Crisis Response

U.K. stocks declined for a fifth day, their longest stretch of losses in six weeks, after Germany and France differed on the European Central Bank’s role in containing the sovereign-debt crisis.

Chemring Group Plc (CHG), a maker of missile-avoidance gear, slumped the most in 14 years as profit missed estimates. Aviva Plc (AV/), the second-biggest British insurer, slid 1.8 percent after selling bonds. Capita Group Plc (CPI) lost 4 percent after the provider of criminal-records services for the U.K. Home Office said it expects 2011 revenue to decline.

The benchmark FTSE 100 Index (UKX) dropped 60.2, or 1.1 percent, to 5,362.94 at the close in London. The gauge has fallen every day this week, extending this year’s losses to 9.1 percent, as the borrowing costs for Italy and Spain surged. The FTSE All- Share Index also slipped 1.1 percent today, while Ireland’s ISEQ Index retreated 1.2 percent.

“Markets are still troubled by the idea of contagion from the debt crisis to the rest of the world,” said Morten Kongshaug, chief equity strategist at Danske Bank A/S in Copenhagen. “We’re beyond political solutions and stocks drift in the direction spot news provides.”

German Chancellor Angela Merkel yesterday rejected French calls to deploy the ECB as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. Merkel listed using the ECB as lender of last resort alongside joint euro-area bonds and a “snappy debt cut” as proposals that won’t work.

Out of Options

Europe is running out of options to fix its debt crisis and it is now up to Italy and Greece to convince markets they can deliver the necessary austerity measures, Finnish Prime Minister Jyrki Katainen said.

Chemring lost 14 percent to 415.1 pence, the largest decline since 1997. The company said full-year revenue was 745 million pounds ($1.18 billion), 5 percent less than management expectations, leaving operating profit below analyst estimates.

Aviva slid 1.8 percent to 291.8 pence after selling 30-year bonds worth $400 million, which the insurer will spend on general corporate purposes.

Capita dropped 4.1 percent to 640 pence after the services company said it expects “organic revenue” to slip 7 percent for the full year.

Lloyds Falls

Lloyds Banking Group Plc (LLOY), the biggest U.K. mortgage lender, fell 2 percent to 25.2 pence as a gauge of British banks declined for a fifth day. Deutsche Bank AG Chief Executive Officer Josef Ackermann said it will “take years” for the financial system to recover from the “massive shock” that started in 2007. We should “be prepared for a prolonged period of volatility and uncertainty,” Ackermann said in a speech at a banking conference in Frankfurt today.

ARM Holdings Plc (ARM) fell 3.9 percent to 598 pence. The maker of processor chips for Apple Inc.’s iPhone expects slower growth in research spending in 2012, the Wall Street Journal reported, citing an interview with President Tudor Brown.

BT Group Plc, the U.K.’s largest fixed-line phone company, rose 0.7 percent to 186.1 pence. BT’s appeal against proposed cuts in the prices it can charge service providers for wholesale broadband access was referred to the Competition Commission. The commission has until June 2012 to determine the pricing issues.

Regus Rises

Regus Plc (RGU) advanced 1.6 percent to 84.1 pence after saying group revenue climbed 17 percent to 394 million pounds in the four months through October and the full-year earnings will meet its own projections. The world’s largest operator of serviced offices also said the “uncertain” economic outlook may cause the company to slow expansion.

Carnival Plc (CCL), the world’s biggest cruise-ship operator, added 1.7 percent to 2,086 pence as Jefferies Group Inc. recommended buying the shares.

Hamworthy Plc (HMY) jumped 20 percent to 813 pence after Waertsilae Oyj, the world’s biggest builder of ship engines, said it’s in “advanced discussions” to make a 375 million- pound cash offer for the U.K. maker of marine fluid-handling systems.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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

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