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U.K. Stocks Retreat; Vodafone Declines After Verizon Deal

Sept. 3 (Bloomberg) -- U.K. stocks fell, after the benchmark FTSE 100 Index yesterday rose the most in more than eight weeks, as Vodafone Group Plc fell the most in two months.

Vodafone contributed the most to a decline in the FTSE 100 as Macquarie Bank Ltd. downgraded the mobile-phone operator that agreed to sell its stake in a joint venture to Verizon Communications Inc. Carnival Corp. followed a gauge of European travel and leisure companies lower. Associated British Foods Plc added 1.2 percent as Exane BNP Paribas raised its recommendation for the shares.

The FTSE 100 Index slid 37.78 points, or 0.6 percent, to 6,468.41 at the close in London. The gauge fell 3.1 percent in August as concern grew the Federal Reserve will start reducing stimulus measures this year and that the U.S. and its allies will take military action against Syria. The broader FTSE All-Share Index retreated 0.5 percent today, while Ireland’s ISEQ Index lost 0.4 percent.

“Investors are happy to see an increase in mergers-and-acquisition activity, but there are some uncertainties spoiling the party,” said Jacques Porta, who helps oversee $780 million as a fund manager at Ofi Gestion Privee in Paris. “Investors are still nervous about Syria and tapering of U.S. stimulus.”

In the U.S., Republican House Speaker John Boehner said he will support President Barack Obama’s call for action against Syria for its alleged use of chemical weapons against its own citizens. Obama today met congressional leaders and top lawmakers from committees dealing with national security to discuss U.S. intervention in the Middle Eastern country.

ISM Manufacturing

U.S. manufacturing grew at a faster-than-forecast pace in August, a report showed. The Institute of Supply Managers’ index rose to 55.7 from 55.4 in July. The median forecast of economists in a Bloomberg survey had called for 54. Readings above 50 indicate expansion. Reports later this week may show employers in the world’s largest economy added more workers last month than in July, while the country’s services industry expanded at a slower pace.

Vodafone slid 5 percent to 202.5 pence, the biggest drop since June 12. Macquarie lowered its rating to neutral from outperform, saying a clause in its deal with Verizon exposed Vodafone’s shareholders to the risk of stock-price fluctuations. Vodafone gained 13 percent in the past three days, before it agreed to sell its 45 percent stake in Verizon Wireless for $130 billion.

“There is limited upside outside further consolidation,” Macquarie analysts Guy Peddy and Alex Grant wrote in a note. “We therefore suggest investors look to take profits and re-visit the investment case in six to 12 months.”

Separately, Oriel Securities Ltd. also downgraded Vodafone to hold from buy.

Carnival Slides

Carnival slid 1.6 percent to 2,385 pence and William Hill Plc lost 1.5 percent to 414.9 pence, following a gauge of European travel and leisure companies lower.

Debenhams Plc retreated 4.2 percent to 104 pence, the biggest drop in almost six months, as Exane BNP downgraded the shares to underperform from neutral.

“Debenhams is not a broken business but does face challenges to move the U.K. business back towards sustainable profit growth,” analysts led by Ben Spruntulis wrote in a note. “We see better value elsewhere within retail.”

AB Foods advanced 1.2 percent to 1,901 pence after Exane BNP raised its recommendation on the shares to outperform, the equivalent of buy, from underperform, citing the growth potential of its Primark discount-clothing unit.

Punch Taverns Plc rose 4.1 percent to 12.75 pence after saying full-year average net income per pub increased 1.5 percent, returning to growth as comparable profit improved for a third consecutive quarter.

The volume of shares traded in FTSE 100-listed companies was 21 percent higher than the 30-day average, according to data compiled by Bloomberg.

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

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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