U.K. Stocks Drop as ECB, BOE Keep Policy on Hold

U.K. stocks fell for the first time in three days as the Bank of England refrained from adding more stimulus for economic recovery and the European Central Bank left its benchmark interest rate unchanged.

Burberry Group Plc, the U.K.’s largest luxury-goods company, dropped the most in almost five months after replacing its chief financial officer. Vodafone Group Plc, which accounts for 5.4 percent of the benchmark FTSE 100 Index, advanced after confirming its previous forecast for full-year profit.

The FTSE 100 fell 66.92 points, or 1.1 percent, to 6,228.42 at the close in London. The equity benchmark has dropped 1.9 percent so far this week, heading for the first weekly loss in 2013. The gauge has still gained 5.6 percent this year. The broader FTSE All-Share Index declined 0.9 percent today, while Ireland’s ISEQ Index added 1.2 percent.

“With monetary policies more or less exhausted, it doesn’t seem likely that the U.K. economy will get any boost,” said Espen Furnes, who helps oversee $75 billion as fund manager at Storebrand Asset Management in Oslo. “So the growth outlook in the U.K. is still very meager, and today’s announcement doesn’t change anything.”

The Bank of England kept its interest rate unchanged at 0.5 percent, as forecast by economists in a Bloomberg survey.

The Monetary Policy Committee led by Governor Mervyn King said the target for its bond purchases will remain at 375 billion pounds ($589 billion). All 43 economists in a Bloomberg News survey forecast no change.

Carney’s Comments

The central bank’s governor-Designate Mark Carney didn’t indicate any plans to change the current policy in his first testimony to lawmakers since his appointment was announced.

The Bank of England “will need to design, implement and ultimately exit from unconventional monetary policy measures,” Carney said in written testimony to U.K. lawmakers at a hearing of Parliament’s Treasury Committee in London. Carney, who will replace King in July, said central banks need to be flexible on inflation targets.

The ECB left interest rates unchanged at a record low of 0.75 percent even as a stronger currency threatens the euro area’s recovery from recession.

ECB President Mario Draghi said the central bank will monitor the euro’s level for inflation risks. The currency has strengthened 6.9 percent over the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

“Later in 2013, economic activity should gradually recover, supported by our accommodative policy stance,” Draghi said at a press conference in Frankfurt.

U.K. Manufacturing

U.K. manufacturing production had its biggest monthly increase since July last year, a report showed.

Factory output rose 1.6 percent in December from November, when it fell 0.3 percent, the Office for National Statistics said. The median forecast of 28 economists in a Bloomberg News survey was for a 0.8 percent increase. Total industrial production rose 1.1 percent, helped by a 3.2 percent increase in oil and gas production.

Burberry tumbled 6.5 percent to 1,337 pence, the most since Sept. 11, after saying its chief financial officer will step down. Stacey Cartwright, who has been in the post for more than nine years, will be succeeded by Carol Fairweather, senior vice-president of group finance, the company said.

Ophir Stake

Ophir Energy Plc plunged 8.6 percent to 475 pence, the biggest drop in six months. Institutional investors sold 36 million shares, or a 9 percent stake, of the oil and gas explorer. Credit Suisse Group AG, the bookrunner for sellers Och-Ziff Capital Management Group LLC and Mittal Investments Sarl, said the stock was priced at 475 pence, the lower end of guidance.

Vodafone advanced 0.9 percent to 171.85 pence after reiterating its forecast that adjusted operating profit for the year through March will be in the upper half of the range of 11.1 billion pounds to 11.9 billion pounds. Analysts estimated 11.6 billion pounds.

Compass Group Plc climbed 1.8 percent to 779.5 pence after the world’s largest catering group said revenue rose almost 6 percent in the fiscal first quarter, beating the average analyst estimate of 5 percent.

The volume of shares changing hands on FTSE 100-listed companies was 21 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

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