U.K. Stocks Drop as BOE Lacks Unanimity on Guidance

U.K. stocks fell as minutes showed the Bank of England’s Monetary Policy Committee lacked unanimity on Governor Mark Carney’s guidance linking interest rates to unemployment at the last meeting.

African Minerals Ltd. (AMI) slumped 10 percent after saying that Keith Calder has resigned as chief executive officer. Rentokil Initial Plc rallied the most in 2 1/2 years after the pest-control company reported that profit and revenue climbed.

The FTSE 100 Index (UKX) declined 0.4 percent to 6,587.43 at the close in London. The gauge swung between gains and losses at least 20 times today as a report showed that jobless claims fell last month. The equity benchmark has still gained 9.3 percent since its low on June 24 as the Bank of England gave forward guidance on interest rates for the first time. The broader FTSE All-Share Index slipped 0.3 percent today, while Ireland’s ISEQ Index added 0.1 percent.

“Yet again, the 6,600 level has proved to be too much for London’s leading index, even with news that U.K. unemployment fell in July,” Ben Critchley, a trader at IG in London, wrote in a note. “Instead, traders focused on minutes from the Bank of England that showed the universal dovish sentiment on the MPC had not lasted beyond the first meeting chaired by Mark Carney, raising fears that others may be tempted into a more hawkish frame of mind.”

BOE Minutes

The Bank of England’s new governor, Mark Carney, failed to convince every member of the MPC to endorse the central bank’s new policy on forward guidance, according to the minutes of the meeting on August 1. Martin Weale voted against linking interest rates to unemployment. The BOE said it could raise interest rates if it forecast inflation of 2.5 percent or more in 18 to 24 months’ time.

A report from the Office for National Statistics today showed that the U.K.’s unemployment rate remained at 7.8 percent in the second quarter. Europe’s third-largest economy has shown signs of gaining traction, with measures of manufacturing, construction and services all strengthening in July.

In Luxembourg, Eurostat reported that the gross domestic product of the 17-nation euro area expanded 0.3 percent in the three months through June. That exceeded the 0.2 percent pace that economists had called for in a Bloomberg News survey. The combined economy of the countries using the single currency contracted 0.3 percent in the three months through March.

African Minerals slumped 10 percent to 219 pence, its biggest decline since November. The company said in a statement that Bernard Pryor will replace Calder with immediate effect.

Countrywide, Rentokil

Countrywide Plc (CWD), a property developer based in London, fell 4.5 percent to 570 pence. Shareholders Oaktree Capital Management LLC and Apollo Management LP put a 30 million-share stake for sale after markets closed yesterday.

Rentokil rallied 6.1 percent to 103 pence, the highest price since February 2011. The company said adjusted operating profit rose 5.2 percent in the first half to 113 million pounds ($175 million). Sales gained 3.7 percent to 1.2 billion pounds.

Royal Bank of Scotland Group Plc (RBS) advanced 3.5 percent to 344.7 pence after Fitch Ratings said in a statement that the state-owned lender will probably not break up because the costs would outweigh the benefits.

Schroders Plc (SDR) rose 1.7 percent to 2,450 pence. Morgan Stanley analysts reiterated an overweight, or buy, recommendation on the the U.K.’s biggest fund manager by assets, citing “above-peer growth” in a note to investors, and saying the company may beat profit estimates.

To contact the reporters on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net

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

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