U.K. stocks retreated, erasing yesterday’s advance, as the European Commission lowered its forecast for economic growth in the euro area next year.
Banks posted the biggest drag on the FTSE 100 Index. (UKX) RSA Insurance Group Plc (RSA) slid 6.4 percent after lowering its profitability forecast for the full year because of severe weather in Europe and Canada. Shire Plc (SHP) added 1.5 percent after saying it will seek U.S. regulatory approval in 2014 for a treatment for compulsive overeating. Marks & Spencer Group Plc (MKS) rose 3.5 percent after posting a smaller drop in clothing sales.
The FTSE 100 declined 39.36 points, or 0.6 percent, to 6,724.26 at 11:46 a.m. in London. The equity benchmark climbed 0.4 percent yesterday as HSBC Holdings Plc, its single largest stock, posted 30 percent growth in quarterly profit. The broader FTSE All-Share Index also slipped 0.6 percent today, while Ireland’s ISEQ Index gained 0.4 percent.
“The recovery that is taking place in Europe is quite fragile and you need to be very careful,” Ashok Shah, director of investment at London & Capital Group Ltd., told Francine Lacqua on Bloomberg Television. “All the banks need to be recapitalized and the government debt levels continue to increase. We’ve had a bounce from very low levels. From here on, the recovery is going to be much slower.”
The commission predicted the 17-nation euro-area economy will grow 1.1 percent in 2014, less than the 1.2 percent forecast in May. The European Union’s executive arm projected unemployment of 12.2 percent in 2014, higher than the 12.1 percent rate that it had estimated.
The commission will present proposals to regulate the structure of European banks in a bid to manage lenders that have become too big to fail, according to Olivier Guersent, an aide to Financial Services Commissioner Michel Barnier. The European Parliament would only approve the measure after elections next year, Guersent said at a conference in Brussels.
A gauge of London-listed lenders dropped 1.9 percent as state-owned Royal Bank of Scotland Group Plc (RBS) fell 3.1 percent to 321.5 pence, its lowest price since Aug. 9. Barclays Plc (BARC) slipped 3 percent to 247.5 pence, while Lloyds Banking Group Plc (LLOY) declined 2.1 percent to 75.5 pence.
RSA Insurance slid 6.4 percent to 120.9 pence after saying it will miss its previous target of 10 percent to 12 percent return on equity. A windstorm in Europe last week, called the St. Jude’s Day storm in the U.K., battered properties and severed electricity cables from England to Scandinavia.
CSR Plc (CSR) plunged 7 percent to 508 pence after the mobile-chip designer forecast fourth-quarter sales of $195 million to $215 million. The average analyst estimate compiled by Bloomberg had called for revenue of $216 million.
Shire rose 1.5 percent to 2,861 pence, extending its rally this year to 52 percent. Late-stage tests for Vyvanse showed that the company’s best-selling drug produced better results than a placebo in treating binge-eating disorder in adults, according to a statement today. Shire already markets Vyvanse as a treatment for attention deficit hyperactivity disorder.
Marks & Spencer added 3.5 percent to 504 pence. The retailer said general-merchandise sales at stores open at least a year fell 1.3 percent in the quarter ended Sept. 28, its smallest decline in more than two years. That beat the median analyst estimate of a 1.5 percent drop.
Blinkx Plc (BLNX), the developer of video-search technology spun off from Autonomy Corp., jumped 11 percent to 186.3 pence, its biggest rally in two months. Pretax profit more than quadrupled to $10.8 million in the six months through Sept. 30 from the same period last year, according to a statement.
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