U.K. stocks retreated for the first time in three days as minutes from the Bank of England showed policy maker Adam Posen ended his support for more stimulus to drive the economy.
Banks declined as bad loans surged in Spain. Man Group Plc, Tesco Plc and CRH Plc paced the selloff, all falling more than 2 percent. Fresnillo Plc and Severn Trent Plc led advancing shares on the FTSE 100 Index. Borders & Southern Petroleum Plc jumped by a record.
The FTSE 100 slipped 21.66, or 0.4 percent to 5,745.29 at the close in London after gaining 2 percent over the previous two days. Stocks rallied yesterday after Spain sold more debt than it had targeted at an auction and the International Monetary Fund boosted its growth outlook for the world economy. The FTSE All-Share Index fell 0.3 percent today, while Ireland’s ISEQ Index rose 0.1 percent.
“The minutes were less dovish than the previous one,” Mauro Giorgio Marrano, an economist at UniCredit SpA, wrote in a report. This suggests “the monetary-policy committee is likely to remain on hold on the stock of asset purchases at its May meeting.”
Minutes from the April 4-5 Bank of England meeting showed Posen ended his push for further stimulus, joining the majority of the nine-member MPC in seeking no change to the 325 billion-pound ($521 billion) asset-purchase target.
While officials noted the U.K. may face a recession in the first half of this year, they said inflation might pose more of a danger than they had predicted.
Royal Bank of Scotland Group Plc declined 3.1 percent to 24.43 pence, Barclays Plc dropped 2.9 percent to 214.25 pence and Lloyds Banking Group Plc lost 3.2 percent to 29.97 pence.
U.K. banks fell as data showed that non-performing loans for Spanish banks as a proportion of total lending jumped to 8.16 percent in February, the highest level since 1994. That compared with less than 1 percent in 2007, according to the Bank of Spain. The total credit in the economy that the regulator lists as “doubtful” reached 143.8 billion euros ($189 billion).
Man Group Plc, the world’s largest publicly traded hedge fund manager, dropped 7.4 percent to 99.6 pence, its lowest price since 2000, as assets at its flagship AHL Diversified fund slipped last week.
Citigroup Inc. yesterday cut its earnings per share for the the company by 15 percent in 2012 and 43 percent in 2013, citing “lower performance fee and negative re-balancing forecasts.” Analysts said the shares were “fair value, but sentiment risk is high.” The stock has tumbled 21 percent so far this year.
Tesco Shares Slip
Tesco declined 2.2 percent to 321.05 pence after earlier rallying as much as 2.3 percent. Britain’s largest retailer posted a 1.3 percent increase in annual profit to 3.76 billion pounds, in line with analyst estimates, and said it will invest 1 billion pounds to revive ailing U.K. stores.
“Like for like in stores with the new service trials are only 1 percent better than the chain, and a continued focus on price is not what is required,” wrote Jonathan Pritchard, an analyst at Oriel Securities, in a report to clients. “The U.S. won’t break even until later than expected, so more here for the bears than bulls.”
CRH, the world’s second-biggest building-materials maker, dropped 2.4 percent to 1,249 pence in London, after climbing 3.7 percent yesterday. European Union data today showed the region’s construction output dropped for a third month in February, led by declines in Germany and Italy.
Fresnillo, Severn Trent
Fresnillo gained 3.2 percent to 1,624 pence after the precious metal producer reported that first-quarter gold production climbed 26 percent to 121,792 ounces. The company said it made “good progress” in its exploration program at San Julian, Orisyvo and Centauro Deep.
Severn Trent Plc increased 3.1 percent to 1,656 pence as analysts recommended the shares. Credit Suisse Group AG named the utility the most preferred regulated long stock among U.K. long-only funds as its balance sheet and dividend is under the least pressure.
Borders & Southern surged 55 percent to 108 pence, the biggest rally since the shares first started trading in May 2005, amid speculation that the energy explorer active off the Falkland Islands has discovered oil. The company said March 16 that it expected another four or five weeks of activity on its Darwin well, a period that expires this week.
“It’s the market expecting a result from Borders,” said Tracey Mackenzie, an analyst at broker Brewin Dolphin Ltd. in Edinburgh. “There’s obviously some speculation and people are taking a bet. They’re chasing large prospects, and if they’re commercially viable, this could run a lot further on the back of successful results.”
Falkland Oil & Gas Ltd. jumped 35 percent to 93 pence, its largest gain since July 2007, and Rockhopper Exploration Plc gained 6.6 percent to 377.5 pence.
Ten members of the FTSE 100, including Legal & General Group Plc, Smith & Nephew Plc, and BAE Systems Plc, are trading without the right to the latest dividend payment today, wiping 5.3 points off the index, according to data compiled by Bloomberg.