FTSE Falls 2%; Tate Sells EU Operations

Arthi Gupta, Mayank Mehta and Sanjay Barot
01 Jul, 2010
New York City

The UK indexes tumble after weaker-than-expected manufacturing data from China and ongoing concerns about Spain. ABB plans not to match Emerson Electric''s offer for Chloride Group. Tate & Lyle decides to sell EU sugar refining operations for

[R]4:30 PM London – The UK indexes tumble after weaker-than-expected manufacturing data from China and ongoing concerns about Spain. ABB plans not to match Emerson Electric''s offer for Chloride Group. Tate & Lyle decides to sell EU sugar refining operations for £211 million.[/R]

UK household, corporate credit availability improves in the second quarter and manufacturing employment rises to a record fifteen-year level in June. Public sector job losses in UK set to exceed 600,000.

In London FTSE 100 Index traded lower 103.43 or 2.10% and the pound edged higher to close at $1.499 and edged lower to close at €1.216.

Although UK inflation is running at ""uncomfortably"" high levels the time is not yet right to raise interest rates, according to the Bank of England policy maker David Miles.

""My own judgment is that we haven''t yet got to the point at which a tightening in monetary policy is the right thing to do,"" Miles told the Daily Mail newspaper. ""The latest inflation data suggest we are slightly moving back towards the target level.""

Availability of secured credit to UK households increased in the second quarter, but it is expected to fall back in the next three months, partly reflecting some lenders'' expectations that wholesale funding market conditions might tighten, the Bank of England''s second quarter credit conditions survey revealed today.

Unsecured credit availability to households was reported to have remained broadly unchanged for a second consecutive quarter. The availability of credit to corporations rose in the second quarter, although less than expected.

Employment in Britain''s manufacturing sector rose to its highest level since 1995 in June on the back of robust output growth. Markit Economics said that the CIPS manufacturing purchasing managers'' index stood at a seasonally adjusted 57.5 in June, down from 58.0 in May.

Job losses in the UK public sector is set to exceed 600,000 in the coming six years due to the spending reduction plan, according to data released by the Office for Budget Responsibility on Wednesday.

General government employment level in 2015-16 will be 4.92 million, down from 5.53 million in 2010-11. This represents a total decrease of 610,000.

ABB Ltd.''s board reviewed the offer announced by Emerson Electric Co. on June 29, 2010 of 375 pence per Chloride share and has decided not to exercise its right to match Emerson''s offer.

Joe Hogan, ABB''s chief executive commented, ""While we still see considerable value in the combination of ABB and Chloride and have a high regard for the Chloride management team, we must take a disciplined approach when assessing potential acquisitions.""

Tate & Lyle plc announced today that it would sell its EU sugar refining operations to American Sugar Refining, Inc. for £211 million in cash, with the proceeds used to reduce Tate & Lyle''s net debt.

According to the company, the sale excludes historic UK pension assets and liabilities and is expected to give rise to a book loss on disposal, before costs, of around £55 million, subject to exchange rate movements and the timing of completion.

The transaction is expected to be neutral to the group''s adjusted earnings per share on total operations in the 2011 fiscal year.

Gainers & Losers

Aquarius Platinum Limited fell 3.8% to 315.80 pence after the primary platinum producer has undertaken a review of the mine plan and safety procedures and practices at the Blue Ridge Platinum Mine in Mpumalanga Province following two fatal accidents.

Barclays Plc fell 2.6% to 264.00 pence after the global financial services provider signed a joint venture agreement with Sumitomo Mitsui Banking Corporation and Nikko Cordial Securities Inc. as well as a wholly-owned subsidiary of SMBC, to provide wealth management services to high net worth individuals in Japan.

BT Group plc fell 1.8% to 127.70 pence.

Cairn Energy PLC fell 1.4% to 409.10 after the independent oil and gas explorer commenced drilling operations on the Alpha prospect in the Sigguk Block, approximately 175 kilometers offshore Disko Island, West Greenland.

Chloride Group PLC fell 4.2% to 369.50 pence after the electrical plugs and peripherals maker announced this morning that the board of Chloride intends to enter into discussions with Emerson Electric Co. with respect to its offer for Chloride announced on 29 June, 2010.

CPP Group Plc fell 0.8% to 248.00 pence after the provider of life assistance products and services said that group revenue will have grown year on year in line with management expectations.

Diageo plc fell 0.6% to 1,053.00 after the brewer and spirits distiller announced that agreement has been reached with the Trustee of the UK Diageo pension scheme on a 10 year funding plan.

Debenhams plc rose 1.7% to 53.95 pence after the department store said comparable sales decreased 0.4% over the 42 weeks and remain cautious about the strength of the overall retail market and consumer confidence.

Forth Ports PLC fell 1.7% to 1,159.00 pence after the provider of high levels of handling and logistic-related services said the business has performed well in the first half of 2010.

Greene King plc fell 0.9% to 388.40 pence after the pub operator said fiscal year 2010 revenues rose 3% to £984.1 million from £954.6 million a year ago. Net profit for the year rose 102% to £79.9 million or 37.7 pence per diluted share compared to net profit £39.5 million or 23.6 pence per share a year ago.

Salamander Energy Plc fell 0.3% to 233.10 pence after the oil and gas explorer announced the spud of the Tom Hum Xanh-1X exploration well in Block 31, in the Vinh Chau Graben system, offshore southern Vietnam.

Tate & Lyle PLC, the food and industrial ingredient company rose 1.5% to 456.70 pence.

Wellstream Holdings PLC plunged 13.0% to 437.30 pence after the oil services group reported first half trading in line with management expectations.

Wood Group (John) Plc fell 1.4% to 308.60 pence after the international energy services company reported that overall performance for the group for the year to date is in line with expectations.