U.K. Stocks Decline, Halting Longest Rally in Five Months

U.K. stocks dropped from their highest level since May, following a nine-day winning streak, as banks followed European peers lower and investors speculated shares will halt their rally.

Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) declined at least 1.5 percent each. GlaxoSmithKline Plc (GSK) fell 1.9 percent after saying sales in China slumped amid a probe into bribery allegations. De La Rue Plc (DLAR) slumped to an 18-month low after the bank-note printer said it will miss its profit target for the financial year. Premier Oil Plc (PMO) fell the most in five months after the explorer lowered its production forecast.

The FTSE 100 Index (UKX) slid 21.18 points, or 0.3 percent, to 6,674.48 at the close of trading in London. The gauge gained 5.6 percent in the nine days through yesterday as companies from BHP Billiton Ltd. to British Sky Broadcasting Group Plc posted results that beat estimates and investors bet the Federal Reserve will maintain stimulus. The broader FTSE All-Share Index slipped 0.3 percent and Ireland’s ISEQ Index fell 0.5 percent.

“The market is a bit expensive after a good run this month,” said Andy Lynch, a portfolio manager at Schroder Investment Management Ltd. in London. “A near-term pullback is likely and would be good news for the mid-term to take some froth out of the market.”

The FTSE 100 trades at 13.4 times projected earnings, higher than the five-year average of 11.2 times. U.K.-listed banks tracked losses in a gauge of euro-area lenders that fell the most this month after the European Central Bank said it will adopt a stricter definition of capital for carrying out stress tests on them.

Monetary Policy

Bank of England officials this month unanimously concluded that economic conditions have not improved enough to warrant an overriding of the central bank’s forward guidance made in August, according to the minutes of its Monetary Policy Committee meeting held on Oct. 8-9. In that guidance, the BOE said it won’t raise the bank rate from a historic low of 0.5 percent at least until the unemployment rate falls to 7 percent.

RBS fell 2.7 percent to 352.1 pence after Keefe, Bruyette & Woods Inc. cut its rating on the stock to underperform, similar to sell, from market perform, the equivalent of hold. Barclays slipped 1.6 percent to 268.2 pence, its fifth day of losses, while Standard Chartered Plc lost 1.5 percent to 1,500 pence.

Glaxo fell 1.9 percent to 1,570.5 pence. Sales of pharmaceuticals and vaccines in China fell 61 percent in the third quarter, according to a statement today. The Chinese government began an investigation in July into allegations that that Glaxo bribed hospitals, doctors and officials.

De La Rue slumped 9.7 percent to 885.5 pence, its biggest decrease since January 2011. The company said operating profit will be about 90 million pounds ($146 million) in the 12 months ending March 2014, below its 100 million-pound target.

ARM Holdings

ARM Holdings Plc fell 5 percent to 953.5 pence, its biggest drop in four months, as UBS AG (ARM) downgraded the stock to neutral from buy, saying that the share price already reflects potential short-term opportunities.

Premier Oil declined 3.4 percent to 328.5 pence. The explorer predicted it will produce 57,000 to 59,000 barrels of oil equivalent a day this year, down from an earlier prediction of 63,000 barrels. The company cited disruptions to gas pipelines in the U.K. and Vietnam.

RM Plc (RM/), which provides U.K. schools with teaching equipment, tumbled 6.5 percent to 116 pence after saying its education-technology division will book a one-time charge of 10 million pounds for the fiscal year ending Nov. 30. The company also projected sales at the business will drop 50 percent over the next two years.

Home Retail Group Plc (HOME) rose 4.2 percent to 192.1 pence, extending a two-year high. The company reported benchmark profit before tax that rose to 27.4 million pounds, exceeding the 23.1 million pounds projected by analysts in a Bloomberg News survey.

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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