U.K. stocks declined as an increase in the cost of insuring the debt of Iberian countries and a slump in Spanish and Italian bonds outweighed an 85 billion-euro ($113 billion) aid package for Ireland.
Old Mutual Plc sank 4.3 percent as the U.K.’s third-largest insurer by market value may delay the initial public offering of its U.S. asset-management unit. Resolution Ltd. dropped 2.4 percent as JPMorgan Chase & Co. initiated coverage of the stock with an “underweight” rating. Ferrexpo Plc fell 3.5 percent as Goldman Sachs Group Inc. downgraded the iron-ore producer focusing on Ukraine. Allied Irish Banks Plc and Bank of Ireland Plc surged in Ireland.
The benchmark FTSE 100 Index declined 2.1 percent to 5,550.95, the lowest since September, at the 4:30 p.m. close in London. The broader FTSE All-Share Index slid 1.9 percent today, while Ireland’s ISEQ Index fell 0.4 percent.
“The initial sigh of relief from the Irish aid package faded - as it did with the announcement of aid seeking last week - when looking at the details,” said Christian Weber, a senior credit strategist at UniCredit SpA in Munich. He added that “equities have done better than credit over the past weeks” and “we are also nearing the year-end and people look to lock profits in a low activity environment.”
European finance chiefs ended crisis talks on Ireland yesterday by endorsing a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers as German Chancellor Angela Merkel initially proposed, to the consternation of bond traders.
The cost of insuring debt of Spain and Portugal soared to record high levels, according to CMA prices for credit-default swaps.
Spanish 10-year bonds fell for a 10th consecutive day, while Italian government bonds dropped relative to German bunds, sending the difference in yield between the two securities to a euro-era record.
The FTSE 100 is down 5.5 percent since reaching the highest level in more than two-years on Nov. 5 amid concern the sovereign-debt crisis will spread from Ireland to southern Europe and speculation China will raise interest rates to tame inflation.
Old Mutual dropped 4.3 percent to 121.5 pence as the insurer may delay the initial public offering of its U.S. asset-management unit amid fluctuating markets.
Old Mutual may list the unit’s shares in New York by 2012, spokesman Patrick Bowes said in an interview in Johannesburg today. The London and Johannesburg-based insurer had planned to complete the IPO in the middle of 2011, Chief Executive Officer Julian Roberts said in August.
Resolution slid 2.4 percent to 219.6 pence. JPMorgan Chase initiated coverage of the buyout firm founded by Clive Cowdery with an “underweight” rating. The brokerage said in a note that “the corporate structure of Resolution (the value share, the management fees and the other incentive fees) means that the shares deserve a structural discount versus peers in our opinion.”
Shire Plc ended a three day gain, falling 2.9 percent to 1,522 pence. Jefferies Group Inc. downgraded the Dublin-based drug company to “hold” from “buy.”
Ferrexpo retreated for a second day, dropping 3.5 percent to 356.2 pence. Goldman Sachs cut its recommendation to “neutral” from “buy,” saying in a note that while “we maintain a constructive view on the company, reflecting its attractive growth opportunities, its exposure to the highly concentrated iron ore market and its high returns, the share price already largely reflects these factors and we see limited potential upside.”
Petrofac Ltd., an oilfield services and engineering company, was the worst performer on the FTSE 100 Index, dropping 5.8 percent to 1,392 pence. Cairn Energy Plc, an Edinburgh-based oil explorer, lost 4.4 percent to 377.6 pence.
Allied Irish Banks increased 3.8 percent to 35.5 euro cents, extending a 14 percent gain on Nov. 26, while Bank of Ireland jumped 16 percent to 30.5 euro cents, the steepest increase since May, after the government said the country’s two biggest lenders will receive money to boost their core capital ratios, which gauge financial strength.
Gartmore Group Ltd., the U.K. fund manager that slumped earlier this month after losing star money manager Roger Guy, rose 2.2 percent to 105.3 pence. Henderson Global Investors has asked advisers to examine the possibility of Henderson buying a portion or all of rival Gartmore, the Financial Times reported on its website on Nov. 26, citing unidentified people familiar with the situation.
Norkom Group Plc surged 15 percent to 1.25 euros, advancing for a third day. The Irish maker of anti-fraud banking software said it is in talks with a number of parties which may or may not lead to an offer for the company. The talks are at a “preliminary stage,” it said Nov. 26.