By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- U.K. shares closed lower Wednesday as a
possible rating downgrade for Spain weighed on banking stocks,
though shares of BP PLC and heavyweight pharmaceutical firms
rose.
The benchmark FTSE 100 index ended 0.2% lower at 5,882.18. Other
European stock markets declined after Moody's Investors Service
announced it may downgrade Spain's Aa1 credit rating. Read more on
Europe Markets.
"Jumpy investors will not be pleased at the return of euro-zone
fiscal difficulties to headlines, and it remains to be seen whether
this news will cut short the Santa rally," said Ben Critchley,
sales trader at IG Index.
Bank stocks suffered once again. Barclays PLC (BCS), which is
particularly heavily exposed to Spain, fell 3.7%, and Lloyds
Banking Group PLC (LYG) dropped 1.2%.
Royal Bank of Scotland Group (RBS) declined 1.4% after it
announced a deal to transfer certain staff and customers of its
retail- and commercial-banking operations in China to Singapore's
DBS Group as part of the lender's long-term plan to reduce its
assets.
The pound was also weaker, dropping 0.9% against the dollar to
$1.5625.
Mining stocks recovered from early losses to trade mixed, and
oil heavyweight BP PLC rose 0.7%, adding to gains from Tuesday,
when it was named Credit Suisse's top long-term pick in the oil
sector.
The biggest advancer on the main index was Capital Shopping
Centres Group PLC , which rallied 4.9% to 416 pence after U.S.
real-estate firm Simon Property Group (SPG) said it had made an
indicative proposal to buy the company.
Simon Property, which already holds a 5% stake in CSC Group, had
previously said it was interested in a deal, but that any offer
would be conditional on CSC scrapping its planned acquisition of
the Trafford Centre shopping mall in Manchester, England.
CSC's share price, however, remained below the 425 pence that
Simon Property said it would be prepared to offer, as analysts said
a deal would face a number of hurdles.
"The price of 425 pence is higher than we anticipated Simon
Property would be prepared to pay, but still may not be sufficient
to gain enough acceptances," said Sue Munden, an analyst at Seymour
Pierce.
CSC again rejected the approach, but said it would delay
Monday's planned shareholder vote on the Trafford Centre deal to
ensure that CSC shareholders can make an informed decision. CSC
shares extended their gains after the decision to postpone the
meeting.
Pharmaceutical stocks were mostly higher. AstraZeneca PLC (AZN)
rose 1.4% and GlaxoSmithKline PLC (GSK) climbed 0.9%. The gains
followed a big rally for Swiss rival Novartis AG after it said it
would buy the remainder of eye-care firm Alcon Inc. (ACL). Read
more about the Novartis-Alcon deal.
Novartis also said it would restart its share-buyback program as
drug companies increasingly move to return cash to shareholders.
GlaxoSmithKline is approaching the point where it will resume share
buybacks, Reuters reported Monday, citing an interview with the
group's chief executive officer.