U.K. Stocks Are Little Changed Amid Valuation ConcernsNamitha Jagadeesh
U.K. stocks were little changed as investors weighed better-than-forecast U.S. retail sales and earnings by American banks amid concern over valuations and Federal Reserve stimulus cuts.
Ashmore Group Plc tumbled the most in almost five years after reporting a decline in assets under management. Aberdeen Asset Management Plc and Schroders Plc followed European financial-services companies lower. AstraZeneca gained 2.5 percent as it forecast that revenue will rebound sooner than analysts predict.
The FTSE 100 Index added 9.71 points, or 0.1 percent, to 6,766.86 at the close of trading in London, after earlier falling as much as 0.9 percent. The broader FTSE All-Share Index also advanced 0.1 percent today, while Ireland’s ISEQ Index dropped 0.1 percent.
“We’re going into the U.S. earnings season with depressed expectations for the quarter, which I imagine will be beaten,” said Gerard Lane, a strategist at Shore Capital Group Plc in Liverpool, England. “The earnings and the outlook statements will drive market sentiment for the next couple of weeks. The retail sales figure was better than expected. If the economic data continues to be O.K., the Fed will continue to taper. The challenge to markets will be that stocks aren’t cheap anymore.”
The FTSE 100 climbed 14 percent in 2013, pushing its valuation at the end of the year to 14.1 times estimated earnings. That compares with a three-year average of 11.1 times projected profit, data compiled by Bloomberg show.
In the U.S., retail sales rose more in December than forecast, Commerce Department figures showed today in Washington. Purchases increased 0.2 percent after a 0.4 percent advance in November that was smaller than previously reported. The median forecast of 86 economists surveyed by Bloomberg called for a 0.1 percent gain.
Some 29 companies in the Standard & Poor’s 500 Index are reporting earnings this week, including Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc., according to data compiled by Bloomberg. Per-share earnings for S&P 500 companies will climb 4.9 percent in the fourth quarter, according to analyst estimates compiled by Bloomberg.
JPMorgan Chase & Co. today said fourth-quarter earnings excluding $2.6 billion of settlements tied to Bernard Madoff’s Ponzi scheme and other items were $1.40 a share. Twenty-two analysts surveyed by Bloomberg estimated $1.37 on average. Wells Fargo & Co., the largest U.S. home lender, posted record fourth quarter and full-year profit that beat Wall Street estimates.
Ashmore Group, which specializes in emerging-market investments, tumbled 12 percent to 358 pence, the biggest drop since February 2009. The company said assets under management fell 4.1 percent to $75.3 billion in the quarter to Dec. 31.
“Market performance and, to some extent, investor behaviour during the quarter continued to be influenced by uncertainty surrounding U.S. monetary policy and the heightened market volatility experienced since early May last year,” Ashmore said in a statement.
A gauge of financial-services stocks posted the second-worst performance of the 19 industry groups in the Stoxx Europe 600 Index. Aberdeen Asset Management slipped 1.5 percent to 453.1 pence and Schroders lost 1.7 percent to 2,547 pence.
Asos Plc declined 3.1 percent to 6,650 pence, paring earlier losses of as much as 7.4 percent, after the U.K.’s biggest online-only clothing retailer said sales rose 38 percent in the four months through December, slower than the 47 percent growth in the previous three months.
Intertek Group Plc retreated 2.5 percent to 2,993 pence after Natixis SA downgraded the shares to reduce from neutral. The brokerage predicted the product-inspection company will report “disappointing” annual results on March 3 because of a slowdown in sales.
AstraZeneca climbed 2.5 percent to 3,755.5 pence after saying revenue in 2017 will be broadly in line with last year’s sales. Analysts estimate that the U.K.’s second-biggest drugmaker will report 2013 sales of $25.7 billion, and revenue will drop to $22.6 billion in 2017, according to data compiled by Bloomberg. Bristol-Myers agreed Dec. 19 to sell its stake in the diabetes venture to AstraZeneca for as much as $4.3 billion.
Hargreaves Lansdown Plc gained 1.6 percent to 1,508 pence after Morgan Stanley raised its recommendation on the shares to overweight, similar to buy, from equal weight, citing the potential for higher earnings in 2014 and 2015.