UK Retail Sales Rise; BP in Focus

Arthi Gupta, Mayank Mehta and Sanjay Barot
17 Jun, 2010
New York City

The UK indexes traded sideways on disappointing U.S. economic data. BP Plc announces the suspension of its 2010 dividend and set up a $20 billion compensation fund for liabilities attributed to the Gulf oil spill. The company faces additional liabilities from criminal charges and repairs.

[R]5:00 PM London - The UK indexes traded sideways on disappointing U.S. economic data. BP Plc announces the suspension of its 2010 dividend and set up a $20 billion compensation fund for liabilities attributed to the Gulf oil spill. The company faces additional liabilities from criminal charges and repairs.[/R]

UK manufacturing demand drops slightly in June and retail sales rise 0.6% in May. Chancellor of Exchequer George Osborne confirms the Bank of England will be given a key regulatory role.

In London FTSE 100 Index traded higher 6.27 or 0.12% to 5,244.19 and the pound edged higher to close at $1.480 and edged lower to close at €1.197.

Overall demand for UK manufactured goods dropped slightly in June, after a significant improvement in May, according to a survey by the Confederation of British Industry today. Further, the survey found that export order books were a little weaker than in May.

Manufacturers still expect to raise production firmly during the coming three months, with a net 15% expecting output to increase. The survey was conducted between May 25 and June 9.

UK retail sales recorded a bigger than expected growth in May driven by higher electronic goods sales lifted by the soccer World Cup.

UK retail sales volume, including automobile fuel, grew 0.6% in May from April, according to data released from the Office for National Statistics today.

The volume of retail sales in May 2010 was 2.2% higher than in May 2009, following a revised 1.3% rise in April.

The seasonally adjusted value of retail sales for May grew 4.4% on an annual basis, the largest rise since August 2008 when it was 4.8%. For the three months to May, it grew 4.1% from the previous year.

Chancellor of Exchequer George Osborne confirmed that he will give the Bank of England a more central role in regulating the financial sector.

Osborne said the current regulatory authority, the Financial Services Authority, would be effectively abolished.

He said the FSA ""will cease to exist in its current form"" and its regulatory powers will be transferred to a new ""prudential regulator,"" which will operate as a subsidiary of the Bank of England. ""Only independent central banks have the broad macroeconomic understanding, the authority and the knowledge required to make the kind of macroprudential judgments that are required now and in the future,"" the Chancellor said.

The Bank of England will now take the day-to-day lead in financial regulation, with the Treasury remaining as a broader regulatory body.

BP executives announced the suspension of shareholder dividend payments for 2010 and creation of a $20 billion claim fund after meeting President Barack Obama, who was displeased over the environmental disaster in the Gulf of Mexico.

Instead of the dividend payment, the company will place $5 billion or £3.4 billion in an independently administered fund this year to help offset environmental and economical damage.

From 2011 onwards, BP will deposit $1.25 billion per quarter into the fund until it reaches a total of $20 billion or £13.5 billion.

Gainers & Losers

Ashtead Group plc rose 0.9% to 114.80 pence. The equipment rental company said fourth quarter revenues fell 20% to £210.1 million from £262.6 million a year ago. Net profit for the quarter was £1.3 million or 0.3 pence per diluted share compared to net loss of £16.7 million or 3.3 pence per share a year ago.

Balfour Beatty plc fell 0.1% to 252.70 pence. The international infrastructure group announced today that it has been selected as part of the Denver Transit Partners team to construct the Eagle P3 commuter rail project in the Denver metropolitan area of the United States.

BP Plc, the oil and gas company rose 71% to 361.10 pence.

Consort Medical plc traded unchanged at 363.0 pence after the healthcare company said revenues for the fiscal year 2010 fell 4% to £125.1 million from £129.9 million a year ago. Net profit for the year rose 6.6% to £8.1 million or 27.3 pence per diluted share compared to net profit of £7.6 million or 26.0 pence per share a year ago.

The Game Group plc, the computer gaming retailer fell 6.4% to 82.65 pence.

Hammerson PLC rose 0.1% to 368.00 pence after the real estate investment trust announced today the acquisition of a 75% stake in Espace Saint Quentin.

Land Securities Group plc, the real estate investment trust fell 0.4% to 626.00 pence.

Mulberry Group plc rose 7.1% to 225.00 pence after the luxury handbag maker said revenues for the fiscal year 2010 rose 23% to £72.1 million from £58.6 million a year ago. Net profit for the year rose 15% to £3 million or 5.2 pence per diluted share compared to net profit of £2.6 million or 4.5 pence per share a year ago.

Prudential plc, the international financial services company rose 0.4% to 572.50 pence.

Stagecoach Group plc, the public transportation services provider rose 2.6% to 191.20 pence.

WS Atkins plc fell 4.0% to 696.50 pence after the engineering and design consultancy said revenues for the fiscal year 2010 fell 7% to £1.4 billion from £1.5 billion a year ago. Net profit for the year rose 21.5% to £102.3 million or 103.1 pence a diluted share compared to net profit of £84.2 million or 84.8 pence per share a year ago.