Tesco Plc (TSCO) dropped 2 percent to the lowest price in five months after Panmure Gordon & Co. lowered its recommendation on the largest U.K. retailer. AZ Electronic Materials SA surged by the most ever after Merck KGaA (MRK) agreed to buy the Luxembourg-based, London-listed specialty-chemicals maker.
The FTSE 100 (UKX) lost 11.64 points, or 0.2 percent, to 6,498.33 at the close in London. The gauge has retreated 2.4 percent in the last five days as investors weighed U.S. economic data to gauge the outlook for Federal Reserve stimulus. The broader FTSE All-Share Index fell 0.1 percent, while Ireland’s ISEQ Index slid 0.5 percent.
“It’s a big day in terms of central-bank decisions,” David Wartenweiler, chief investment officer at Habib Bank AG, said by telephone from Zurich. “The BOE had become more hawkish recently, but it’s doesn’t mean they’re going to start raising interest rates soon. I don’t think any of the major central banks will move next year, and certainly not the ECB.”
BOE policy makers today kept the benchmark rate at 0.5 percent, where it has stayed since March 2009. The decision was forecast by all 48 economists in a Bloomberg News survey. The ECB also left its interest rates unchanged.
Chancellor of the Exchequer George Osborne said the British economy will expand 1.4 percent in 2013, up from the 0.6 predicted in March. This is the first upgrade in growth forecasts upgrade since 2010.
The Office for Budget Responsibility raised its growth estimate as Osborne used his autumn statement to tell the House of Commons that his strategy for trimming the budget deficit while driving growth is working.
In the U.S., tomorrow’s payrolls report may help investors gauge the outlook for stimulus. The Federal Open Market Committee meets on Dec. 17-18 to consider changes to its $85 billion of monthly bond buying.
“The latest U.S. data points to a decision that will come sooner rather than later when it comes to reducing asset purchases,” Wartenweiler said.
Tesco fell 2 percent to 333.15 pence. The largest U.K. retailer was lowered to hold from buy at Panmure, which cited a decline in domestic sales.
“In a zero-volume-growth market, continued share losses coupled with strong growth online must, we believe, inevitably put pressure on core store profits,” Panmure analyst Graham Jones wrote.
Phoenix Group Holdings (PHNX) tumbled 6 percent to 661.5 pence, its lowest price since July 11. Private-equity investor TDR Capital LLP sold 22 million shares, or about 10 percent, of the insurer at 660 pence each.
AZ surged 50 percent to 395 pence, its biggest gain since it listed its shares in London in 2010. Merck agreed to buy the company for about 1.6 billion pounds ($2.6 billion). AZ stockholders will receive 403.5 pence for each share, or 53 percent above the close yesterday.
Drax Group Plc (DRX) climbed 1.6 percent to 755 pence, its highest price since September 2008. JPMorgan Chase & Co. raised the power producer to overweight, a rating similar to buy, from neutral. UBS AG added Drax to its most-preferred list.
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