U.K.’s FTSE 100 Posts Weekly Drop; Xstrata Shares Tumble
The U.K.’s FTSE 100 Index (UKX) closed little changed, capping the benchmark gauge’s first weekly decline this month.
Xstrata Plc and Glencore International Plc (GLEN) fell as the companies requested a one-week extension for directors to decide on the commodity trader’s $35 billion takeover offer. Vedanta Resources Plc (VED) and Evraz Plc (EVR) paced advancing shares as metal prices climbed. Pearson Plc rose the most in five months after Exane BNP Paribas upgraded the publisher.
The FTSE 100 slipped 2.02 points, or less than 0.1 percent, to 5,852.62 at the close of trading in London. The gauge erased an earlier advance of as much as 0.6 percent as options on the index expired in a process known as witching. The broader FTSE All-Share Index was also little changed, while Ireland’s ISEQ Index climbed 0.6 percent.
“Options expiry day has produced a burst of volatility,” said David Jones, chief market strategist at IG in London. “This is a small hiccup when compared to the general strength we have seen in equities markets of late.”
The FTSE 100 climbed to the highest level since March on Sept. 14 after unprecedented economic stimulus from the European Central Bank and the Federal Reserve boosted investor confidence. The gauge has slipped 1.1 percent this week as data on Chinese factory output, U.S. jobless claims and euro-area services and manufacturing heightened concern about the strength of the global economy.
“We remain bullish on European equities into the year end,” Graham Bishop, an equity strategist at Exane in London, wrote in a report today. “Valuations remain attractive, policy easing should underpin growth and participation should rise as investors move on from the ‘wait-and-see’ approach.”
Stocks climbed earlier today after the Financial Times reported that Spanish Economy Minister Luis de Guindos is in talks with European Commission authorities to facilitate a new bailout program that will be presented Sept. 27.
The plan is said to focus on structural measures sought by the European Union, not new taxes or spending cuts, according to the newspaper which cited unidentified officials involved in the discussions.
The volume of shares changing hands in FTSE 100 companies was 59 percent greater than the 30-day average today, according to data compiled by Bloomberg.
Xstrata Plc (XTA) dropped 4.2 percent to 1,005 pence with the number of shares changing hands five times more than the three- month average. Glencore fell 1.7 percent to 362 pence.
The companies were granted a one-week extension from the U.K. takeover panel to rally support for Glencore’s takeover offer. Xstrata said it made the request to enable directors to take account of feedback from key shareholders. The largest exporter of thermal coal is now due to respond to Glencore’s revised all-share proposal by 7 a.m. London time on Oct. 1.
“They are clearly struggling,” Charles Newsome, investment director at Investec Plc, said in an interview with Bloomberg Television. “It’s a difficult deal for them to pull off because of the way it is structured. I’ve been quite uncomfortable with this all the way along.”
National Grid Plc (NG/) fell 1.1 percent to 686.5 pence as JPMorgan Chase & Co. lowered its recommendation for the utility to underweight from neutral, citing regulatory hurdles in the next six months.
HMV Group Plc (HMV) sank 8.9 percent to 2.78 pence after the music and video-games retailer reported a 12 percent drop in same-store sales in the first half. The company said its core markets experienced “significant” declines.
CPP Group Plc (CPP), a U.K. company that provides protection against credit-card and identity theft, plunged 20 percent to 19.5 pence, the lowest since its initial public offering in March 2010.
CPP is seeking to reorganize itself through a “scheme of arrangement” process to enable it to meet probable compensation claims of tens of millions of pounds from customers who may have been mis-sold products, Sky news reported on its website. The company declined to comment, Sky said.
Among advancing shares, Vedanta, the metals and mining company controlled by billionaire Anil Agarwal, rallied 3 percent to 1,086 pence. Evraz gained 4.3 percent to 271.9 pence after falling 11 percent the previous four days. Randgold Resources Ltd. (RRS) gained 1.1 percent to 7,520 pence.
Pearson (PSON) jumped 3 percent to 1,217 pence, the biggest gain since April. Exane upgraded the publisher to outperform, the equivalent of a buy recommendation, from neutral and raised its price estimate for the shares by 21 percent to 1,450 pence, citing growth opportunities at the company’s international education business.
Vodafone Group Plc (VOD) climbed 2 percent to 178.45 pence as Barclays Plc reiterated its overweight recommendation on the mobile-phone company and raised its share-price estimate by 2.6 percent to 200 pence.
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