U.K. Stocks Retreat for a Second Day; Cove Energy Rallies

U.K. stocks fell for a second day as a measure of services and manufacturing in the euro area unexpectedly shrank and concern mounted that a second bailout for Greece may not resolve the euro area’s debt crisis.

Vodafone Plc slipped 1.1 percent. Cove Energy (COV) Plc rallied 26 percent after Royal Dutch Shell Plc, Europe’s biggest oil producer, offered to buy the company for 992.4 million pounds ($1.6 billion) in cash. Hays Plc soared 7.9 percent as it reported a gain in first-half operating profit.

The FTSE 100 declined 11.65, or 0.2 percent, to 5,916.55 at the 4:30 p.m. close in London. The benchmark measure has still rallied 20 percent from its low in October as the European Central Bank lent 489 billion euros ($648 billion) to banks and U.S. economic reports exceeded estimates. The FTSE All-Share Index slipped 0.1 percent, while Ireland’s ISEQ Index decreased 0.5 percent today.

“Markets are likely to remain hamstrung by the European situation,” said Richard Hunter, the head of equities at Hargreaves Lansdown Plc in London. “It is clear that the Greek move was a reprieve rather than a rescue. Many of the overarching questions still remain.”

Reckitt Benckiser Group Plc, Barclays Plc and Carnival Plc trade today without the right to their current dividend.

A euro-area composite index based on a survey of purchasing managers in both services and manufacturing dropped to 49.7 in February from 50.4 in January, London-based Markit Economics said in an initial estimate today. Economists had forecast a reading of 50.5, according to the median of 16 estimates in a Bloomberg News survey. A reading below 50 indicates contraction.

Greece’s Bailout

Greece’s second rescue package may fail to end the sovereign-debt crisis, Bank of England Deputy Governor Charlie Bean said in a speech late yesterday in Glasgow, Scotland.

While the agreement “is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future,” Bean said.

Euro-area finance ministers approved a 130 billion-euro package for Greece early yesterday by tapping into ECB profits and convincing investors to provide more debt relief to the Mediterranean country. The deal includes a 53.5 percent writedown for investors in the nation’s debt.

Asset-Purchase Target

Seven of the nine members of the U.K. central bank’s Monetary Policy Committee, including Governor Mervyn King, voted to increase their bond-purchase target by 50 billion pounds to 325 billion pounds, according to the minutes of the Feb. 8-9 meeting published today in London. They argued that a larger increase “risked sending a signal that the committee thought the economic situation was weaker than it was,” the minutes showed. The MPC was unanimous in keeping the benchmark interest rate at a record low of 0.5 percent.

China’s manufacturing may shrink for a fourth month in February, an early survey of purchasing managers indicated. The preliminary 49.7 reading of an index from HSBC Holdings Plc and Markit Economics today compared with a final 48.8 in January.

Vodafone slipped 1.1 percent to 173.9 pence. Rio Tinto Group declined 1 percent to 3,662.5 pence.

Cove Energy surged 26 percent to 194 pence. Shell offered 195 pence for each Cove share, a 26 percent premium to the closing price of the London-based company yesterday. Cove’s board separately said that it expected to recommend the proposed acquisition.

Hays, Rexam Advance

Hays (HAS) surged 7.9 percent to 87.4 pence after reporting its earnings and proposing a dividend. Shore Capital upgraded the shares to “buy” from “hold,” saying the company has removed uncertainty about its payout to shareholders.

Rexam Plc (REX) climbed 7.4 percent to 413 pence after posting profit before taxes of 431 million pounds. Investment opportunities noted in the results show that Rexam is “back on the front foot,” Jefferies Group Inc. analysts wrote in a report.

Barratt Developments Plc (BDEV) jumped 7.8 percent to 139.8 pence, its highest price since January 2010, after the U.K.’s largest housebuilder by volume reported a profit for the first half after selling properties at a wider margin.

Thomas Cook Group Plc (TCG) surged 31 percent to 17 pence. The company will survive, Investec Plc analyst Paul Leyland wrote in a report today as he rated the shares “buy” in new coverage with a 30 pence price estimate.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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

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