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U.K. Stocks Drop as Euro-Area Growth Forecast Lowered

Nov. 5 (Bloomberg) -- U.K. stocks retreated, paring yesterday’s advance, as the European Commission lowered its forecast for economic growth in the euro area next year.

Banks had the biggest drag on the FTSE 100 Index. RSA Insurance Group Plc slid the most in eight months after lowering its profitability forecast for the full year because of severe weather in Europe and Canada. Shire Plc added 1.4 percent after saying it will seek U.S. regulatory approval in 2014 for a treatment for compulsive overeating. Marks & Spencer Group Plc rose 4.5 percent after posting a smaller drop in clothing sales.

The FTSE 100 declined 16.78 points, or 0.3 percent, to 6,746.84 at the close of trading in London. The equity benchmark climbed 0.4 percent yesterday as HSBC Holdings Plc, its single largest stock, posted 30 percent growth in quarterly profit. The broader FTSE All-Share Index also slipped 0.3 percent today, while Ireland’s ISEQ Index gained 0.5 percent.

“The recovery that is taking place in Europe is quite fragile and you need to be very careful,” Ashok Shah, director of investment at London & Capital Group Ltd., told Francine Lacqua on Bloomberg Television. “All the banks need to be recapitalized and the government debt levels continue to increase. We’ve had a bounce from very low levels. From here on, the recovery is going to be much slower.”

The commission predicted the 17-nation euro-area economy will grow 1.1 percent in 2014, less than the 1.2 percent forecast in May. The European Union’s executive arm projected unemployment of 12.2 percent in 2014, higher than the 12.1 percent rate that it had estimated.

Bank Structure

The commission will present proposals to regulate the structure of European banks in a bid to manage lenders that have become too big to fail, according to Olivier Guersent, an aide to Financial Services Commissioner Michel Barnier. The European Parliament would only approve the measure after elections next year, Guersent said at a conference in Brussels.

A gauge of London-listed lenders dropped 1.4 percent as Lloyds Banking Group Plc declined 2.4 percent to 75.2 pence. State-owned Royal Bank of Scotland Group Plc fell 1.7 percent to 326 pence, completing its biggest three-day retreat since June. Barclays Plc slipped 2.4 percent to 249 pence.

RSA Insurance slid 6.3 percent to 121 pence after saying it will miss its previous target of 10 percent to 12 percent return on equity. A storm in Europe last week battered properties and severed electricity cables from England to Scandinavia.

CSR Slides

CSR Plc dropped 5.1 percent to 518 pence after the mobile-chip designer forecast fourth-quarter sales of $195 million to $215 million. The average analyst estimate compiled by Bloomberg had called for revenue of $216 million.

Shire rose 1.4 percent to 2,858 pence, extending its rally this year to 51 percent. Late-stage tests for Vyvanse showed that the company’s best-selling drug produced better results than a placebo in treating binge-eating disorder in adults, according to a statement today. Shire already markets Vyvanse as a treatment for attention deficit hyperactivity disorder.

Marks & Spencer added 4.5 percent to 509 pence. The retailer said general-merchandise sales at stores open at least a year fell 1.3 percent in the quarter ended Sept. 28, its smallest decline in more than two years. That beat the median analyst estimate of a 1.5 percent drop.

Imperial Tobacco Group Plc rose 3.1 percent to 2,382 pence after the maker of Davidoff cigarettes said it will increase its dividend by at least 10 percent in its 2014 financial year. The company will also introduce two e-cigarette products next year, according to Chief Executive Officer Alison Cooper.

Blinkx Plc, the developer of video-search technology spun off from Autonomy Corp., jumped 18 percent to 197.8 pence, its biggest rally since April. Pretax profit more than quadrupled to $10.8 million in the six months through Sept. 30 from the same period last year, according to a statement.

The number of shares trading hands today in FTSE 100-listed stocks was 21 percent greater than the average of the past 30 trading days, data compiled by Bloomberg showed.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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