UK Deficit Soars; Essar Energy IPO

Mayank Mehta
22 Apr, 2010
New York City

Stocks in London closed lower after the government budget soared to record level in six decades. U.K. volume of retail sales in March rose 2.2% from a year ago month. Financial services employment may not meet pre-crisis level for a decade. Essar Energy Ltd IPO to raise $2.5 billion.

[R]4:00 PM London, 11:00 AM New York – Stocks in London trading closed lower after the government budget soared to record level in six decades. U.K. volume of retail sales in March rose 2.2% from a year ago month. Financial services employment may not meet pre-crisis level for a decade. Essar Energy Ltd. plans to raise $2.5 billion in public offering.[/R]

Stocks in U.K declined with the country facing one of its worst budget deficits since World War II. The £152.8 billion shortfall in the fiscal year through March was 76% higher than a year earlier, according to the Office for National Statistics.

The total budget shortfall in the euro region too widened to 6.3% percent of gross domestic product last year, the European Union said.

Retail Sales Rise

U.K. volume of retail sales in March rose 2.2% from a year ago month. Predominantly food stores sales fell 1.8%. The largest increase was textile, clothing & footwear at 4.0%. Total sales volume from December 2009 to February 2010 increased 1.4%.

U.K. Financial Services Employment

The Centre for Economics & Business Research Ltd. said today that employment in London’s financial services industry may not return to its pre-credit crisis level for at least 11 years as taxes and regulation become increasingly onerous.

The CEBR said firms may add 14,000 jobs in 2010, compared with its October estimate of 9,000, as earnings rebound from the credit crisis.

European Market Indexes Decline

The European budget deficit has widened due to Greece’s deepening government debt crisis. The Greek government is under tremendous pressure to accept the European bailout package as stocks fell and the euro dropped notwithstanding a strike by the country’s civil servants.

Investors are increasingly worried that rising interest rates will make it difficult for the nation to trim its budget deficit from 12.7% to below 9% in the current year and meet the EU guideline of 3% deficit by 2014.

Greece’s ASE Index declined 2.7%.

In London FTSE 100 Index closed lower 56.18 or 0.98% to 5,667.25 and the pound edged higher to close at $1.539 and to close at €1.150.

The U.K. bus and train operator Arriva Plc is to be acquired for about 1.6 billion pounds by Deutsche Bahn AG, Germany’s state-owned railway.

The biggest initial public offering of Essar Energy Ltd. is seeking to raise $2.5 billion in London. The company hopes to expand its power generation, oil refining and energy exploration activities through this public offering.

Gainers & Losers

AMEC plc fell 0.06% to 868.00 pence after the engineering and project management company has signed a major contract with EDF Group for the proposed delivery of four new EPR nuclear reactors at Hinkley Point and Sizewell in the UK.

Anglo American plc added 1.8% to 2,864.50 pence after the mining company reported first quarter iron ore production increased by 23% to 12.3 million tons as Sishen’s jig plant continues to ramp up to full production.

Arriva Plc, the bus and train operator is to be acquired for £1.6 billion by Deutsche Bahn AG, Germany’s state-owned railway. The deal is estimated to generate 16 billion euros in sales with Arriva investors receiving 775 pence in cash for each share held.

Balfour Beatty plc fell 1.1% to 287.90 pence after the Gammon Construction Limited has been awarded by Cathay Pacific Services Ltd, a HK$4.2 billion (£353 million) air cargo terminal construction contract in a joint venture with Hip Hing Construction Co Ltd.

BlueBay Asset Management plc added 1.9% to 375.10 pence after the company estimated assets under management were $37.0 billion at the end of March.

Elementis plc gained 5.2% to 70.00 pence after the specialty chemicals supplier on Thursday anticipated full-year earnings ahead of market expectations on significantly improved demand and restocking trends in the first quarter.

Filtrona plc added 5.4% to 226.90 pence after the supplier of specialty plastic and fiber products said first quarter revenues rose 2%.

IMI plc increased 6.9% to 688.00 pence.

Persimmon PLC gained 3.5% to 482.20 pence.

Punch Taverns plc fell 1.9% to 96.05 pence after the pub company said first half revenues fell 12% to £676.6 million from £767.9 million a year ago. Net profit for the first half was £59.2 million or 9.2 pence per diluted share compared to net loss of £122.4 million or 45.9 pence per share a year ago.

Sports Direct International plc added 1.0% to 109.10 pence.

Smiths News PLC rose 0.8% to 119.00 pence after the magazine and newspaper distributor said first half revenue rose 51% to £919.8 million from £609.5 million a year ago. Net profit for the first half rose 0.8% to £12.3 million or 6.8 pence per diluted share compared to net profit of £12.2 million or 6.8 pence per share a year ago.

Vodafone Group Plc announces the launch of a new service to enable regulated financial firms to record all incoming and outgoing mobile calls and texts.

WH Smith PLC slipped 0.2% to 513.00 pence after the retail company said first half revenue fell 2% to £716 million from £731 million a year ago. Net profit for the first half was flat at £48 million or 31.6 pence per diluted share compared to net profit of £48 million or 31.2 pence per share a year ago.