U.K. Stocks Little Changed as Pound Gains After ECB Cuts

U.K. stocks were little changed, having swung between gains and losses, as the pound strengthened after European Central Bank President Mario Draghi announced new long-term refinancing operations and lowered interest and deposit rates for the euro area.

Smith & Nephew Plc (SN/) gained 2.3 percent after people familiar with the matter said Medtronic Inc. is preparing an offer for the maker of medical implants. Asos Plc (ASC) sank 31 percent, prompting a rout of online retailers, after the clothing company cut its annual-profitability forecast.

The FTSE 100 Index (UKX) dropped 5.14 points, or less than 0.1 percent, to 6,813.49 at the close in London, after gaining as much as 0.4 percent and losing as much as 0.3 percent. The benchmark has rallied 5.7 percent from this year’s low on Feb. 4. The broader FTSE All-Share Index was also little changed, while Ireland’s ISEQ Index gained 0.3 percent today.

“Investors are not selling off U.K. equities, they’re just buying euro-zone stocks more,” Stewart Richardson, who helps oversee about $100 million as chief investment officer at RMG Wealth Management LLP in London, said by phone. “With the move into negative rates, there’s even more desire for yields in euro-zone assets. The ECB is clearly dangling the carrot of quantitative easing in front of markets. The rationale is clearly to weaken the euro.”

Strengthening Pound

The pound earlier strengthened to its highest level against the euro since December 2012 as Draghi said the ECB will conduct a series of LTROs, which will mature in September 2018. The initial size of its refinancing operation will be 400 billion euros ($545 billion), he said at a press conference in Frankfurt following the central bank’s meeting. Draghi also said the ECB would consider buying asset-backed securities.

The central bank’s Governing Council earlier decided to lower the euro area’s benchmark interest rate to 0.15 percent from 0.25 percent. The central bank also cut the deposit rate to minus 0.1 percent from zero, taking it negative for the first time. That matched the median forecast of economists.

The Bank of England left its key interest rate at a record low of 0.5 percent and held its asset-purchase target at 375 billion pounds ($629 billion), matching the predictions of economists surveyed by Bloomberg News. Better-than-forecast data from house prices to manufacturing has fueled speculation that members of the Monetary Policy Committee will begin debating higher interest rates.

Smith & Nephew

Smith & Nephew gained 2.3 percent to 1,088 pence. The British company is aware of U.S. medical-device maker Medtronic’s interest, people familiar with the matter said. Medtronic could move its tax domicile outside the U.S. if it acquires Smith & Nephew, the people said.

Kevin Lobo, chief executive officer of Stryker Corp., said last week that his company was in the early stages of evaluating a bid for Smith & Nephew.

Wincanton Plc jumped 10 percent to 131 pence after saying pretax profit rose to 34.9 million pounds in the 12 months through March from 14 million pounds a year earlier. The company, which manages deliveries and orders for corporate customers, also said net debt fell to 64.9 million pounds from 107.6 million pounds.

Asos tumbled 31 percent to 3,120 pence, the biggest drop since its initial public offering in 2001. The U.K.’s biggest online fashion retailer said earnings before interest and taxes in the year ending August will amount to 4.5 percent of sales. It had forecast a margin of 6.5 percent. Asos said the strengthening pound slowed international-sales growth and increased its reliance on U.K. and European markets, which have lower margins.

Boohoo.com Plc led losses by other online retailers, sliding 9.1 percent to 45 pence. AO World Plc, which sells white goods over the Internet, slipped 5.1 percent to 248 pence, extending the slide since its IPO at the end of February to 34 percent. (AO/) Just Eat Plc, which enables people to order takeaway meals from an app, retreated 2.2 percent to 237 pence, taking its decline since becoming a public company to 16 percent.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Will Hadfield, Srinivasan Sivabalan

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