U.K. stocks retreated, ending a four-day rally, as a decline in financial shares after U.S. lawmakers failed to agree on raising the nation’s debt ceiling outweighed gains in energy and drugs companies.
Barclays Plc, the U.K.’s second-largest bank, and Royal Bank of Scotland Group Plc fell as the lack of a deal between President Barack Obama and Congress increased concern that the world’s largest economy may default. BP Plc and GlaxoSmithKline Plc rose before releasing earnings tomorrow.
The benchmark FTSE 100 Index slipped 9.76, or 0.2 percent, to 5,925.26 at the 4:30 p.m. close in London. The gauge has dropped 2.7 percent since this year’s high on Feb. 8 amid speculation that Europe’s debt crisis will spread. The broader FTSE All-Share Index fell 0.2 percent today, while Ireland’s ISEQ Index lost 0.4 percent.
The FTSE 100 rose 1.6 percent last week after euro-area leaders redoubled efforts to end the sovereign-debt crisis by easing debt terms on Greece and enhancing a rescue fund.
“What has the markets spooked now is that the Republicans and Democrats appear to have abandoned the idea of a bi-partisan deal and decided to try and forge ahead with their own plans, making any proposal even less attractive to their political opponents,” said Jonathan Sudaria, a trader at Capital Spreads in London.
The U.S. Congress failed to agree on a plan for raising the debt ceiling before a default threatened for Aug. 2, risking a cut to the nation’s AAA credit rating. Republicans and Democrats prepared dueling plans for raising the U.S. debt ceiling, unable to break a partisan stalemate over how to tackle the nation’s $14.3 trillion debt.
Barclays fell 4.4 percent to 228.95 pence and RBS retreated 1.6 percent to 36.28 pence. Aviva Plc, Britain’s second-biggest insurer by market value, dropped 3 percent to 412.6 pence after four days of gains. Legal & General Group Plc decreased 1 percent to 115.4 pence.
Payments to shareholders of U.K. companies have risen even as governments in Europe and the U.S. struggle with their finances. Dividends in the U.K. grew 27 percent in the second quarter as BP, the nation’s second-biggest oil company, resumed payments and the mining industry increased theirs almost fourfold, Capita Registrars said today.
BP climbed 1.1 percent to 475.4 pence today. Chief Executive Officer Robert Dudley could unlock $100 billion for BP investors by following ConocoPhillips and splitting up the company, analysts said.
BP, which is trying to recover from last year’s Gulf of Mexico disaster, has lagged behind its three larger rivals this year, rising 2.1 percent even as oil peaked at $127 a barrel. Conoco’s decision to split its refinery arm from its exploration and production business led analysts at banks including UBS AG, Bank of America and JPMorgan Cazenove to recommend BP look at a similar move.
“We believe BP should pursue a shrink-to-grow strategy by disposing of mature assets,” analysts at HSBC Holdings Plc including Paul Spedding in London wrote in a report today. “The proceeds should be returned to shareholders via a buyback programme.”
Glaxo, the U.K.’s biggest drugmaker, rose 1.7 percent to 1,363.5 pence ahead of results scheduled for tomorrow.
“We believe GSK’s sales and earnings trends will move to a sustainably positive trend from the second half of 2011,” Evolution Securities wrote in a report to investors. “Confidence in the base of where this trend starts from will be the key object of our results analysis.”
Ryanair Holdings Plc declined 1.8 percent to 3.40 euros in Dublin. Europe’s biggest discount airline said first-quarter earnings were little changed after higher fuel costs eroded gains from rising passenger numbers.
Bank of Ireland Plc added 1 percent to 10.2 euro cents. Ireland’s government will sell as much as 37 percent of the country’s largest lender to a group of investors for 1.12 billion euros ($1.61 billion) in an attempt to help the company avoid majority state control.
Wolfson Microelectronics Plc tumbled 11 percent to 155 pence, the lowest since April 2010, after the maker of integrated circuits for the data and video industries lowered its 2011 revenue growth forecast.
Dixons Retail Plc, Europe’s second-largest electronics retailer, lost 6.1 percent to 15.2 pence. The shares were cut to “sell” from “neutral” at UBS AG, which said the company will likely report “weak” first-quarter earnings and the second half of this year will “remain tough.”
Halfords Group Plc, a U.K. seller of car parts and bicycles, declined 3.9 percent to 337 pence, the lowest since September 2009. JPMorgan Chase & Co. analysts cut their recommendation on the shares to “underweight” from “neutral,” citing “considerable risk around Christmas trading.”