U.K. Stocks Decline as Glaxo Retreats After Drug Trial; Barclays Sinks

U.K. stocks (UKX) dropped for the third time in four days as banks declined and GlaxoSmithKline Plc retreated after a disappointing study on an experimental respiratory drug.

Glaxo, which accounts for 5 percent of the FTSE 100 Index’s weighting (UKX), sank the most in three years after saying Relovair didn’t prove superior to an existing medicine in a late-stage study. Barclays Plc (BARC), the U.K.’s second-largest bank by assets, slid 4.5 percent.

The FTSE 100 fell 37.42, or 0.7 percent, to 5,612.26 at the close of trading in London, after earlier rising as much as 0.4 percent. The gauge has still advanced 0.7 percent so far this year after a 5.6 percent drop in 2011. The broader FTSE All- Share Index slid 0.6 percent today, while Ireland’s ISEQ Index increased 1.4 percent.

German Chancellor Angela Merkel and French President Nicolas Sarkozy outlined the increased pace of their response to the financial crisis at a press conference today. Euro-area leaders may complete their new budget rulebook by Jan. 30, one month ahead of schedule, and are considering accelerating capital contributions to the bailout fund being set up this year to stem the debt crisis, Merkel said

“The press conference didn’t produce anything of much substance,” Chris Beauchamp, a market analyst at IG Index in London, said by telephone. “It was a grand non-event.”

Debt Crisis

The FTSE 100 fell 5.6 percent last year, at one stage losing as much as 19 percent from the year’s high, as European leaders struggled to contain the sovereign-debt crisis and assure the euro’s survival. The euro area is the U.K.’s largest export partner.

Germany sold six-month treasury bills at a negative yield for the first time today amid demand for the debt securities of Europe’s biggest economy as a haven from the debt crisis. The European Central Bank said overnight deposits from commercial banks rose to a record 463.6 billion euros ($591 billion) on Jan. 6, the most since the euro was introduced in 1999.

“Banks would rather pay the ECB to hold their cash rather than lend it to each other,” Ben Critchley, a sales trader at IG Index in London, wrote in e-mailed comments. “Fund managers and other institutions are so desperate for a safe haven that they’d rather pay Berlin to borrow money than purchase other assets. None of this means Armageddon is on its way, but it’s not exactly an encouraging sign.”

Glaxo (GSK) Slides

Glaxo dropped 4.1 percent to 1,435 pence, the largest decline since January 2009. The U.K.’s biggest drugmaker said there was “no statistical difference” between Relovair and Glaxo’s Seretide, known as Advair in the U.S., in a 12-week study. Glaxo developed Relovair as a successor to Advair, its best-selling drug.

Barclays Plc slid 4.5 percent to 178.1 pence, the lowest level this year. Lloyds banking Group Plc declined 3.4 percent to 26.19 pence.

Antofagasta Plc (ANTO) retreated 2.8 percent to 1,234 pence after Citigroup Inc. lowered its recommendation for the copper producer to “sell” from “neutral,” while Deutsche Bank AG cut its rating to “hold” from “buy.”

Heritage Oil Plc (HOIL) dropped 5.7 percent to 182.4 pence, the largest decline since October, as RBC Capital Markets downgraded the oil explorer to “underperform” from “sector perform.”

InterContinental Hotels Group Plc (IHG) climbed 1.8 percent to 1,195 pence as Deutsche Bank upgraded the hotelier’s shares to “buy” from “hold.”

Persimmon Plc (PSN) rallied 5.3 percent to 506.5 pence after the U.K.’s second-biggest homebuilder said 2011 results will be toward the top end of analysts’ estimates. The company said underlying operating margin will approach 10 percent and forecast a 50 percent increase in pretax profit.

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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