UK Indexes Fall; GDP Expands 1.1%

Arthi Gupta
23 Jul, 2010
New York City

The UK indexes decline ahead of the European bank stress test. The UK GDP expands 1.1% in the second quarter, mortgage approvals drop in June, and service output sector rises in May. Irish trade surplus expanded in May. BP stalls relief well activities at well site due to adverse weather conditions.

[R]4:30 PM London – The UK indexes decline ahead of the European bank stress test. The UK GDP expands 1.1% in the second quarter, mortgage approvals drop in June, and service output sector rises in May. Irish trade surplus expanded in May. BP stalls relief well activities at well site due to adverse weather conditions.[/R]

European financial markets await the verdict of banking stress tests are released by the Commission of European Banking Supervisors. Regulators hope to reassure investors over the health of Europe''s financial sector and ease the continent''s sovereign debt woes.

A total of 91 banks, representing two-thirds of the region''s banking sector, are tested to assess whether they will be able to withstand future adversities in the financial sector. Banks from 20 countries across the European Union with nearly half of them from Spain and Germany are being scrutinized.

In London, FTSE 100 Index traded lower 9.21 or 0.17% to 5,304.60 and the pound edged higher to close at $1.5502.

The British economy expanded at its fastest pace in four years and at almost double the expected rate in the second quarter of this year.

The economy expanded at a pace of 1.1% sequentially in the second quarter, following an increase of 0.3% in the previous quarter, according to preliminary data from the Office for National Statistics published today.

Preliminary data showed that gross domestic product rose 1.6% in the second quarter from the same period of last year.

Output of the service industries rose 0.9% quarter-on-quarter compared with a rise of 0.3% in the previous quarter. The largest contribution to the growth in this quarter was from business services and finance.

The number of mortgage approvals for house purchases by the UK banks declined in June, according to latest data from the British Bankers'' Association released today.

The number of mortgages approved for home-buyers fell to 34,813 in June from 36,418 in May, the BBA said. Total mortgage approvals also dropped with only 75,195 mortgages sanctioned in June compared to 76,910 in May. The annual growth in the banks'' net mortgage lending was 4.1% in June.

British service sector output rose 2.1% annually in May, according to data released by the Office for National Statistics released today. On a monthly basis, output rose 1%.

In the three months to May, services output rose 0.8% compared to the previous three-month period. On an annual basis, output increased 1.3% in the three months to May.

The distribution sector reported a 4.5% increase in output and hotels and restaurants rose 0.8%. Transport, storage and communication output rose 0.9% and business services and finance output grew 2.5%. Government and other services output gained 1%.

Irish trade surplus widened in May from the previous month. The trade surplus edged higher to €4.06 billion in May compared to a €2.89 billion surplus in the previous month, according to data published by the Central Statistics Office today. A year earlier, the trade surplus was €3.04 billion.

Exports value increased 6% on an annual basis to €7.68 billion in May from €7.09 billion in the preceding month. At the same time, the value of imports slipped 9% to €3.62 billion. Month-on-month, exports grew a seasonally adjusted 8% in May, while imports decreased 14%.

BP Plc today provided an update on developments in the response to the oil well leak in the Gulf of Mexico.

The company stated relief well activities at the MC252 well site have been temporarily suspended because of potentially adverse weather associated with Tropical Storm Bonnie projected to track into the Gulf of Mexico. BP sought the approval for the temporary suspension from the National Incident Commander and direction of federal government.

The company further stated the well has been shut-in for integrity testing the past seven days. However, BP will continue to monitor the MC252 well as long as weather permits and duration of the suspension of relief well activities will be dependent on the weather.

Gainers & Losers

Britvic Plc declined nearly 2% to 507 pence after it issued a cautious outlook. The branded and generic beverage maker said in a statement that consumer sentiment is still weak.

Close Brothers declined 3.2% to 689 pence after it reported assets under management were unchanged at 7.3 billion as of June 30.

Metals mining stocks increased after copper and other base metals prices gained in London and Shanghai trading. Anglo American increased more than 1.1% to 2,505 pence and Kazakhmys Plc increased more than 2.5% to 1,192 pence

Standard Chartered Plc declined 2.4% to 1,802 pence after UBS AG lowered its rating on the stock to “hold” from “buy.”

Vodafone Group Plc increased 0.5% to 149 pence after it reported 1% increase in underlying revenues and 4% increase in revenues compared to a year ago. The telecom group also settled the UK tax liabilities and said it agreed to renegotiate its contract with the minority partner Essar Group in its India unit.