U.K. Stocks Fall on ECB Comments; RBS, Aviva Drop
Royal Bank of Scotland Group Plc (RBS) and Aviva Plc (AV/) led banks and insurers lower, both tumbling more than 4 percent. Antofagasta Plc (ANTO) and Kazakhmys Plc also lost more than 4 percent as copper retreated in London.
The benchmark FTSE 100 Index slid 50.52 points, or 0.9 percent, to 5,662.3 at the close in London after earlier rising as much 0.9 percent. The broader FTSE All-Share Index also slid 0.9 percent, while Ireland’s ISEQ Index added 0.2 percent.
Stocks rallied on July 26 after Draghi told an audience in London that he would do anything to protect the euro. Today, he said that policy makers may undertake open-market operations and that high yields are unacceptable.
“It’s not Draghi’s comment, but the lack of action” that has hurt markets, said James Ferguson, chief strategist at Westhouse Securities Ltd. in London. “Talk is cheap. Draghi fully understands what the issues are. He says all the right things, but he still has got to get everyone else on board.”
Draghi signaled that the ECB intends to join forces with governments to buy bonds in sufficient quantities to ease the region’s debt crisis, but did not give details on how such a program would work. He also that Germany’s Bundesbank had reservations about the plan.
The Bank of England earlier today left its existing bond- buying program unchanged at 375 billion pounds ($581 billion) as forecast by economists. The Monetary Policy Committee also held its key interest rate at a record low of 0.5 percent.
RBS, which will report its earnings tomorrow, tumbled 5.1 percent to 204.5 pence. Lloyds Banking Group Plc (LLOY) retreated 4.3 percent to 29.39 pence, while Barclays Plc (BARC) declined 3.6 percent to 162.3 pence.
Aviva slid 4.7 percent to 285.2 pence, leading a gauge of British insurers lower. Prudential Plc (PRU), the U.K.’s biggest insurance company by market value, sank 3.6 percent to 746 pence and Legal & General Group Plc (LGEN) lost 2.2 percent to 126.6 pence.
Mining shares fell as base metals slipped on the London Metal Exchange. Antofagasta lost 5.2 percent to 1,041 pence, Kazakhmys Plc retreated 4.5 percent to 679 pence and Xstrata Plc dropped 1.7 percent to 846.7 pence.
BAE Systems Plc (BA/) lost 1.1 percent to 309 pence as Europe’s largest defense company reported a 9.8 percent drop in first- half sales to 8.3 billion pounds, missing the median analyst estimate of 9.1 billion pounds. The company also said the U.S. may further reduce its defense budget.
Smith & Nephew Plc (SN/) posted the biggest gain on the FTSE 100, climbing 2.4 percent to 675 pence. Europe’s largest maker of artificial hips and knees raised its interim dividend 50 percent to 9.9 cents and said it plans to increase the payout in line with earnings growth.
The company also reported second-quarter trading profit, which excludes some costs, of $234 million, in line with the average analyst estimate compiled by Bloomberg.
Schroders Plc (SDR) gained 0.8 percent to 1,302 pence. The shares rallied as much as 4.6 percent after the fund manager reported net inflows of 2.7 billion pounds for the first half. Analysts had predicted the company would report outflows.
Trinity Mirror Plc surged 19 percent to 37 pence for its biggest rally in two years. The publisher of the Daily Mirror and Sunday Mirror said that job cuts and falling prices for newsprint will help its business this year.
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