LONDON MARKETS: U.K. Stocks Choppy As Burberry Drops
07/11/2012| 10:12am US/Eastern
By Sara Sjolin and Preeti Upadhyaya, MarketWatch
LONDON (MarketWatch) -- U.K. stocks swung between small gains and losses on Wednesday, as luxury retailer Burberry Group PLC felt pressure after reporting slowed growth in first quarter, while energy shares climbed along with rising oil prices.
The FTSE 100 index lately dropped 0.4% to 5,653.66. Continued concern over the euro-zone crisis applied pressure to the market as European finance ministers have yet to announce any concrete solutions such as a banking or fiscal union, said Richard Hunter, head of U.K. equities at Hargreaves Lansdown.
Burberry shares (>> BURY GROU ADR) posted the biggest loss in the U.K. index, off 8.4%. The company reported that first-quarter sales rose but that growth lagged the year-earlier rate. At constant currencies, revenue jumped 11%, but that rate slowed from 34% in the year-ago quarter.
For the broader U.K. markets, stocks tracked a volatile trading session in Europe, where investors cheered additional austerity in Spain, but remained cautious about growth in the global economy.
Hunter cited a slowdown in growth in the Chinese economy as affecting demand "during this difficult time," and further mentioned that upcoming quarterly reports coming out of the U.S. might be weaker than expected.
U.S. stocks opened to a slightly lower start on Wall Street, but trimmed losses in early trade.
Among notable gainers in the U.K., ICAP PLC traded up 1.6% after announcing that the company expects to save 50 million pounds ($77.8 million) per year by the end of the current financial year, substantially cutting costs.
Weighing on the U.K. index, utility firm SSE PLC dropped 1.1%, after Morgan Stanley cut its rating to underweight from equal-weight. In addition, the bank downgraded Centrica PLC , down 1.3%, to equal-weight from overweight, citing tougher competition and the weak economy.
Rolls-Royce Holdings PLC shed 2.8%. The company announced it had won an order for its Trent engines worth $280 million Wednesday.
"I would assume that the $280 million Trent engines contract does not have a really significant size compared to Rolls Royce's order book value - which was Â£62.2 billion in 2011 - and company profit, being Â£11,277 million in 2011, to have a strong positive impact on the stock," said Henrik Heidenkamp, research fellow at Royal United Services Institute for Defence and Security Studies.
Outside of the main index, shares of U.K. soft drinks maker Britvic PLC lost 14.4%, citing tough trading following a recall of Robinsons Fruit Shoot and Fruit Shoot Hydro juice drinks.