U.K. Stocks Little Changed as BOE Holds Benchmark Rate

U.K. stocks closed little changed, with the benchmark FTSE 100 Index (UKX) trading at the highest level since May 2008, as the Bank of England and European Central Bank kept their benchmark interest rates at record lows.

Marks & Spencer Group Plc (MKS) dropped after missing quarterly sales estimates. Tesco Plc (TSCO) advanced 1.8 percent after the company said sales growth was the strongest since 2010. Bunzl Plc (BNZL) rose 3.4 percent after announcing three acquisitions.

The FTSE 100 Index added 2.86 points, less than 0.1 percent, to 6,101.51 in London, erasing an earlier gain of as much as 0.3 percent. The equity benchmark rallied 2.8 percent last week, reaching its highest level since February 2011, as the U.S. Congress agreed on a compromise budget, avoiding automatic deficit-reduction measures. The broader FTSE All-Share Index also climbed less than 0.1 percent today, while Ireland’s ISEQ Index decreased 0.2 percent.

“What the central banks are doing or will do is going to be significant,” Daniel Morris, global strategist at JPMorgan Asset Management in London, said in a Bloomberg Television interview. “It’s actually somewhat a bit comforting that the ECB and even the Bank of England are stepping back a bit, and letting the medicine hopefully have its effect and see how things respond before trying to look for other unorthodox measures.”

Stimulus Target

Economic risks remain “on the downside” and inflation risks are broadly balanced, Draghi said in Frankfurt after the first ECB meeting this year.

Earlier, ECB policy makers kept the benchmark interest rate at a record low of 0.75 percent. The decision was unanimous and there was no request to have a rate cut, Draghi said. Fifty of the 55 economists in a Bloomberg survey had predicted the decision.

Bank of England policy makers refrained from adding further stimulus to the U.K. economy, as Governor Mervyn King and the Monetary Policy Committee kept the target for quantitative easing at 375 billion pounds ($604 billion). The central bank also held its interest rate at a record-low 0.5 percent, in line with economists’ predictions.

The BOE halted bond purchases in November and is relying on its so-called Funding for Lending program to aid the recovery.

In China, exports rose more than forecast last month. Overseas shipments increased 14.1 percent in December from a year earlier, customs administration data showed. That surpassed the 5 percent median forecast in a Bloomberg News survey of 40 economists.

Stock Valuations

FTSE 100 companies are trading at 15.6 times reported earnings, the highest since December 2010, according to data compiled by Bloomberg. The number of shares changing hands in FTSE 100 companies today was 40 percent more than the average of the last 30 days.

Marks and Spencer dropped 0.6 percent to 368.8 pence, the lowest since Nov. 16. The U.K.’s largest clothing retailer said late yesterday that same-store general-merchandise revenue in Britain fell 3.8 percent in the 13 weeks ended Dec. 29. That was worse than the median estimate for a 1.5 percent decline. Food sales at stores open at least a year also missed projections.

Associated British Foods Plc (ABF), which owns the clothing chain Primark, declined 1.7 percent to 1,520 pence. The shares have retreated 4.6 percent from a record high on Jan. 02. The company will report second-quarter sales in February.

Tesco, Bunzl

Tesco added 1.8 percent to 355.4 pence after beating sales forecasts for the six weeks ending Jan. 5. U.K. sales at stores open at least a year rose 1.8 percent, beating the 1 percent median analyst prediction.

Bunzl rose 3.4 percent to 1,049 pence, the most since February 2012. The company, which provides supply services for grocery and health-care companies, said it acquired Vicsa Safety SA in Chile, and Schwarz Paper Co. and Destiny Packaging Inc. in the U.S. The stock was raised to buy from hold at Numis Securities Ltd. as the deals offer growth opportunities for the company, analyst Mike Murphy wrote in a report.

John Wood Group Plc (WG/) rose 2.7 percent to 794.5 pence as Deutsche Bank AG recommended investors buy the stock. The oil- services provider’s recent underperformance in the sector and growth prospects means valuations are attractive, analyst Sebastian Yoshida wrote in a note.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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