UK Indexes Rally on BP Hopes

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

The UK indexes rise on optimistic earnings data from the U.S. and encouraging news from BP. Inflation slips to 3.2% but retail sales rise in June. British home price growth in June records lowest level in eleven months. The BoE policy maker Andrew Sentance urges

[R]4:00 PM London – The UK indexes rise on optimistic earnings data from the U.S. and encouraging news from BP. Inflation slips to 3.2% but retail sales rise in June. British home price growth in June records lowest level in eleven months. The BoE policy maker Andrew Sentance urges “forward looking” monetary policy.[/R]

In London FTSE 100 Index traded higher 88.47 or 1.71% to 5,255.66 and the pound edged higher to close at $1.5141.

Monetary policy needs to be forward looking to avoid a compelling case for a change, the Bank of England policy maker Andrew Sentance said today.

Sentance stated that the Monetary Policy Committee needs to maintain confidence in the economy that inflation will be anchored around the 2% target, even though it is not possible always.

On the economy, the policy maker said economic conditions have changed significantly from a year earlier, although there are still many uncertainties about future prospects. He noted that the UK economy is recovering in line with the global recovery.

The UK''s Office for Budget Responsibility Chairman Alan Budd said today the release of data on jobs in the public sector at the end of last month was not caused by any political interference.

There was no pressure from ministers to bring forward the release, Budd told parliament''s Treasury Committee. ""The decision was completely ours,"" he said. The OBR had released the report just before the appearance of Prime Minister David Cameron in parliament on June 30.

UK''s Financial Services Authority today proposed new measures aimed to reduce excessive mortgage lending, which would, in effect, ban self-certification mortgages.

The financial watchdog proposed to impose affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer''s ability to pay. It wants lenders to verify borrowers'' income in every case to prevent over inflation of income and mortgage fraud. The FSA also proposed extra protection for vulnerable customers with a credit-impaired history.

UK annual inflation slowed to 3.2% in June from 3.4% in May, according to data released from the Office for National Statistics today. The inflation figure is above the central bank''s 2% target.

Falling petrol and diesel prices are by far the main drivers to the downward pressure to CPI annual inflation between May and June, the ONS said. On a monthly comparison, the consumer price index edged up 0.1%, down from 0.2% in May and 0.6% in April.

Home prices in UK climbed 11% year-on-year in May, faster than the 10.1% increase in April, the Department of Communities and Local Government said today.

Home prices rose a seasonally adjusted 1.7% in the second quarter. This compares with a rise of 2.9% for the quarter ending February.

Annual average home prices paid for new properties in May increased 6.5% year-on-year and average home prices paid for pre-owned dwellings rose 11.3%. The mix-adjusted average home price in the UK stood at £209,505 during the month.

Sluggish demand and increasing supply took British home price growth in June to the lowest level in eleven months, latest housing market survey from the Royal Institution of Chartered Surveyors, or RICS, revealed today.

The number of real-estate agents who said home prices rose versus those who saw decline in the United Kingdom declined by 9 percentage points in June, the Royal Institution of Chartered Surveyors said today, marking an 11-month low.

The British Retail Consortium said in its monthly monitor that retail prices rose 1.2% in June after surging 3.0% in May.

The trade association for the UK retail industry said food sales growth was about the same as in May, mainly due to the hot weather and the World Cup.

Europe Markets Review

In London FTSE 100 Index traded higher 80.51 or 1.56% to 5,247.53, in Paris CAC 40 Index increased 57.31 or 1.61% to 3,624.97 and in Frankfurt DAX index traded higher 89.92 or 1.48% to 6,167.11. In Zurich trading SMI increased 58.91 or 0.95% to 6,287.22.