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U.K. Stocks Decline After Climbing to Two-Month High

Jan. 8 (Bloomberg) -- U.K. stocks slipped after a three-day gain that sent the benchmark FTSE 100 Index to its highest level since November.

J Sainsbury Plc lost 2.4 percent after it lowered its full-year sales forecast. Mothercare Plc plunged 31 percent after the retailer said profit will probably miss analysts’ estimates. Tate & Lyle Plc dropped 3.4 percent after an industry magazine reported that corn-sweetener prices declined. RSA Insurance Group Plc rose 3 percent, the biggest gain in the FTSE 100, after saying it is confident its Irish accounting irregularities are isolated.

The FTSE 100 lost 33.67 points, or 0.5 percent, to 6,721.78 at the close of trading in London. The benchmark gauge, which posted the second-smallest rally among developed European markets tracked by Bloomberg in 2013, reached the highest level since Nov. 4 yesterday. The broader FTSE All-Share Index declined 0.5 percent today, and Ireland’s ISEQ Index advanced 0.4 percent.

“Equities are fully valued and the market seems to have gotten ahead of itself,” said Gerard Lane, a strategist at Shore Capital Group Ltd. in Liverpool, England. “Food retailers are struggling. The recovery is sustainable, but it’s not a feel-good recovery.”

The U.K. stocks gauge climbed 14 percent last year, the smallest annual gain in western-European markets after Austria. The FTSE 100 trades at 12.9 times estimated earnings, compared with 11.6 times at the beginning of last year, data compiled by Bloomberg show.

Sainsbury Falls

Sainsbury slid 2.4 percent to 360 pence. The U.K.’s third-largest supermarket chain said full-year same-store sales will rise less than 1 percent. Sainsbury had forecast growth of 1 percent to 1.5 percent. Tesco Plc, which posts its Christmas revenue tomorrow, dropped 1 percent to 328.3 pence.

Mothercare plunged 31 percent, the most since October 2011, to 291.5 pence. The babywear retailer said sales dropped 6.1 percent in the three months through Jan. 4, as revenue in the U.K., its largest market, fell 9.9 percent. The company said it remains cautious about the outlook for consumer spending for the rest of the year. JPMorgan Chase & Co. cut the stock to neutral from overweight, meaning that investors shouldn’t buy more of the shares.

Tate & Lyle

Tate & Lyle slipped 3.4 percent to 773 pence. Milling & Baking News said corn sweetener prices collapsed immediately after Christmas.

Imperial Tobacco Group Plc retreated 2.9 percent to 2,247 pence after a South China Morning Post report said the National Health & Family Planning Commission is working with the Sate Council on rules barring smoking in public places. Canaccord Genuity Corp. cut the stock to sell from hold.

RSA rose 3 percent to 100.7 pence. The company will release further details at 7 a.m. tomorrow, it said in a statement. An accounting probe at its Irish unit prompted the insurer to bolster reserves by 130 million pounds ($214 million) and forecast a further reduction in 2013 earnings last year.

International Consolidated Airlines Group Plc gained 1.4 percent to 434.1 pence. The parent of British Airways said it boosted passenger traffic 5.8 percent in 2013 after buying Spanish discount carrier Vueling SA. EasyJet Plc rose 1.3 percent to 1,626 pence.

Royal Bank of Scotland Group Plc gained 2.1 percent to 357.9 pence and Lloyds Banking Group Plc rose 1.6 percent to 83.8 pence. A gauge of bank shares in the Stoxx Europe 600 Index climbed 1.3 percent, the most among 19 industry groups.

To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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