U.K. stocks dropped for a second day as investors weighed U.S. data to gauge the health of the world’s largest economy and the outlook for Federal Reserve policy on stimulus.
Smiths Group Plc slipped 1.3 percent as HSBC Holdings Plc recommended investors sell shares in the security-scanner maker. Aberdeen Asset Management Plc gained 3.5 percent after Bank of America Corp.’s Merrill Lynch unit upgraded the stock. Telecom Plus Plc rallied the most in at least 12 years after saying it will buy two energy companies from RWE AG’s U.K. unit.
The FTSE 100 Index fell 16.93 points, or 0.3 percent, to 6,681.08 at the close of trading in London. The benchmark gauge has climbed 13 percent this year, reaching a valuation of 13.7 times the estimated earnings of its members, according to data compiled by Bloomberg. The broader FTSE All-Share Index slid 0.3 percent today, while Ireland’s ISEQ Index added 0.4 percent.
“We need to have that clear understanding that monetary stimulus will remain in place for the foreseeable future,” said Lucy Macdonald, London-based chief investment officer for equities at Allianz Global Investors Europe. “The messages coming from the Fed have been very supportive and pro-growth, but these messages keep needing to be reinforced as we go into new leadership at the Fed.”
U.S. data today showed retail sales rose 0.4 percent last month after stalling in September, exceeding the median economist estimate for October expansion of 0.1 percent. A separate release show sales of previously owned homes slowed to a 5.12 million annual pace last month, from a 5.29 million rate in September. Economists had predicted a rate of 5.14 million.
The Fed will publish minutes of its October policy meeting after the close of European markets. The document will reveal more details behind the decision to press on with $85 billion in monthly asset purchases. Fed policy makers will probably pare that pace to $70 billion at their March 18-19 meeting, according to the median estimate in a Bloomberg survey.
In the U.K., Bank of England officials voted unanimously to keep monetary policy unchanged, according to minutes of its Monetary Policy Committee’s Nov. 6-7 meeting published today. The group, which will next meet on Dec. 4-5, kept the benchmark interest rate at a record low of 0.5 percent and maintained the stock of bond purchases at 375 billion pounds ($606 billion).
Smiths Group slipped 1.3 percent to 1,382 pence, its lowest price in more than five weeks. HSBC downgraded the company to underweight, a rating similar to sell, from neutral, citing high valuations and a lack of factors to drive the price higher. The stock trades at 14.3 times projected earnings, higher than its five-year average of 12.4 times, data compiled by Bloomberg showed.
Telecom Plus surged 20 percent to 1,805 pence, its highest price since at least July 2000. The company will buy Electricity Plus Supply Ltd. and Gas Plus Supply Ltd. from RWE’s Npower Ltd. for 218 million pounds, according to a statement. Following completion, the deal will add 4.25 percent to the company’s energy gross margins, Telecom Plus said.
Aberdeen Asset Management gained 3.5 percent to 492 pence as Bank of America raised the stock to neutral from underperform after the fund manager agreed to buy Scottish Widows Investment Partnership from Lloyds Banking Group Plc. The deal could add about 11 percent to Bank of America’s profit forecasts for the company, according to a note.
UK Mail Group Plc rallied 5.1 percent to 615 pence. Sales rose 7.9 percent to 243 million pounds in the six months ending Sept. 30, according to a statement today. The logistics company increased its interim dividend 11 percent to 7.1 pence.