UK Investors Worry Greek Fallout

Mayank Mehta
28 Apr, 2010
New York City

UK stocks closed lower despite positive earnings. The situation in euro zone took another negative turn after the rating agency S&P lowered Spain debt rating a day after Greece and Portugal debts were downgraded. Investors are worried that without a speedy political solution Greece may default.

[R]4:00 PM London, 11:00 AM New York – UK stocks closed lower despite positive earnings. The situation in euro zone took another negative turn after the rating agency S&P lowered Spain debt rating a day after Greece and Portugal debts were downgraded. Investors are increasingly worried that without a speedy political solution, Greece may default on its debt. Shell, GlaxoSmithKline profits beat market expectations.[/R]

U.K. stocks traded sideways on the mounting concern that the fast deteriorating situation in the euro zone will need to be addressed European Union politicians and central bank.

Greek bond yields surged to record high and Spain debt was downgraded today, a day after Greece and Portugal debt was lowered.

Positive earnings by Royal Dutch Shell Plc and GlaxoSmithKline Plc supported investor sentiment in the trading sessions but investors are voicing increasing concern on the size of the bailout needed in the euro zone.

The 2-year Greek bond yield soared to 23% and Capital Markets Commission in Greece banned short selling for the next two months.

According to Koen De Leus, economist at KBC Securities, ""The chances of a default by the Greek government are increasing not by the day but by the hour.""

Investors are jittery with the latest developments and the Greek crisis is overshadowing other economic concerns. Investors are increasingly worried that Greece may need as much as 85 billion euros in emergency loans and Portugal may need additional 40 billion euros.

The pound declined to 1.5209 against the dollar. The pound fell after former Bank of England policy maker Timothy Besley said the U.K. economy remained in a “fragile state” and inflation is likely to stay under control this year.

British power stations may be forced to close early under proposed changes to European Union emissions laws, threatening the nation’s energy security, according to an industry lobby group.

As many as 14 electricity plants, representing as much as a quarter of the country’s generating capacity, may need to install new equipment to curb emissions by 2016 or face closure, the Confederation of British Industry said in a statement.



In London FTSE 100 Index closed higher 20.25 or 0.36% to 5,623.77 and the pound edged lower to close at $1.520 and to close at €1.148.

Earnings Review

Royal Dutch Shell plc, an independent oil and gas company said first quarter revenues rose 48% to $86.1 billion to $58.2 billion a year ago. Net profit for the quarter rose 57% to $5.48 billion or $0.89 per diluted share compared to net profit of $3.49 billion or $0.57 per share a year ago.

GlaxoSmithKline plc, the healthcare group said first quarter revenues rose 9% to £7.4 billion to £6.8 billion a year ago. Net profit for the quarter rose 18.6% to £1.34 billion or 26.1 pence per diluted share compared to net profit of £1.13 billion or 22.2 pence per share a year ago.

Gainers & Losers

888 Holdings plc, the online gambling portal operator plunged 10.4% to 84.00 pence.

Admiral Group plc, the insurer slipped 1.7% to 1,292.00 pence.

AstraZeneca PLC fell 1.0% to 2,810.00 pence and the company has finalized a previously announced agreement in principle with federal and state authorities in the United States to resolve civil allegations relating to the company’s past marketing and promotion of its atypical antipsychotic, SEROQUEL.

British American Tobacco plc decreased 0.9% to 2,122.00 pence. The company today reported group revenue for the three months grew in constant currency terms driven by continued “strong pricing momentum” and the acquisition of PT Bentoel Internasional Investama Tbk in Indonesia on June 17 2009.

Carpetright plc, the floor coverings retailer fell 5.5% to 839.00 pence but 12-week group sales rose 4.9%.

DS Smith plc fell 0.2% to 132.20 pence after the packaging manufacturer and office products wholesaler said the group’s profits have been underpinned by the steps taken to reduce costs, raise productivity and generate cash.

Fenner PLC declined 6.3% to 211.50 pence after the conveyor belt maker said first half revenues fell 4.4% to £246.3 million from £257.6 million a year ago. Net profit for the first half rose 2,000% to £8.4 million or 4.8 pence per diluted share compared to net profit of £0.4 million or 0.2 pence per share a year ago.

F&C Asset Management plc fell 4.9% to 62.05 pence and the company plans to buy Thames River Capital in a deal which could be worth up to £53.6 million.

Fortune Oil PLC gained 3.3% to 7.75 pence. The oil and gas supplier said 2009 revenues rose 45% to £192.0 million from £132.1 million a year ago. Net profit for the year fell 2% to £8.8 million or 0.47 pence per diluted share compared to net profit of £9 million or 0.49 pence per share a year ago.

GlaxoSmithKline plc added 1.0% to 1,226.00 pence after the healthcare group said first quarter revenues rose 9% to £7.4 billion from £6.8 billion a year ago. Net profit for the quarter rose 18.6% to £1.34 billion or 26.1 pence per diluted share compared to net profit of £1.13 billion or 22.2 pence per share a year ago.

Greene King plc fell 3.8% to 445.10 pence but the brewer and pub operator like-for-like sales rose 3.6% with continued strong food sales growth.

Home Retail Group plc fell 1.4% to 276.80 pence after the home and general merchandise retailer said 2009 revenues rose 2% to £6.02 billion from £5.9 billion a year ago. Net profit for the year was £209.8 million or 24.1 pence per diluted share compared to net loss of £413.1 million or 47.7 pence per share a year ago.

IG Group Holdings plc dropped 3.6% to 398.00 pence.

Informa plc declined 4.5% to 397.20 pence.

M. P. Evans Group PLC declined 3.3% to 350.00 pence. The oil palm and rubber plantations manager said 2009 revenues fell 6.6% to $28.4 million from $30.4 million a year ago. Net profit for the year fell 63% to $18.3 million or 33.94 cents per diluted share compared to net profit of $49.8 million or 93.16 cents per share a year ago.

Royal Dutch Shell plc added 1.2% to 2,022.50 pence after the oil and gas explorer reported first quarter earnings were $4.9 billion compared to $3.3 billion a year ago. Basic core earnings per share increased 48% versus the same quarter a year ago.

Rolls-Royce Group plc fell 2.3% to 576.00 pence.

Stagecoach Group plc rose 0.9% to 196.00 pence after the bus and rail maker estimates better full-year results.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 29 increased, 71 declined and 2 were unchanged.

Centrica Plc decliners in the FTSE 100 index with a loss of 3.89% followed by losses in Reed Elsevier Plc of 3.77%, in WPP Plc of 3.48%, in Tesco Plc of 3.13%, and in Thomas Cook Group Plc of 2.72%.

BG Group Plc led gainers in the FTSE 100 index with a rise of 4.40% followed by increase in Old Mutual Plc of 4.17%, in Randgold Resources Ltd. of 3.78%, in Royal Dutch Shell Plc of 3.17%, and in Royal Dutch Shell Plc of 3.13%.