UK Indexes Rise; BP CEO Replacement

Arthi Gupta
26 Jul, 2010
New York City

The UK indexes advance tracking gains in the U.S. indexes. The UK home prices fall 0.1% in July and the Bank of England noted that corporate debt markets deteriorated slightly. The UK Treasury awards more regulatory powers to the central bank.

[R]4:30 PM London – The UK indexes advance tracking gains in the U.S. indexes. The UK home prices fall 0.1% in July and the Bank of England noted that corporate debt markets deteriorated slightly. The UK Treasury awards more regulatory powers to the central bank.[/R]

BP provided an update on the Gulf of Mexico oil spill and reaffirmed there were no potential changes to management. However, media reports suggested that the board is preparing to replace the current chief executive Tony Hayward with Robert Dudley.

In London, FTSE 100 Index traded higher 28.34 or 0.53% to 5,341.23 and the pound edged higher to close at $1.5473.

Quarterly report released by the Bank of England today for the second quarter of 2010 noted increased concerns about the fiscal adjustment of some euro-area member states and banks’ exposure to sovereign debt fed through into other risky asset prices, such as corporate bonds.

The resulting increase in uncertainty and volatility saw conditions in the UK corporate debt markets deteriorate marginally during May and early June, the BoE said.

The BoE further stated in its report that conditions recovered somewhat towards the end of the second quarter of 2010 but remained slightly worse than those in the first quarter of 2010.

The Bank of England will be given more regulatory powers, the Treasury said today.

The government will create a new Financial Policy Committee within the central bank and with primary statutory responsibility for maintaining financial stability, the Financial Secretary Mark Hoban said. The interim FPC will be established in the autumn and the Financial Services Authority will have current responsibilities throughout the transition period.

The UK home prices decreased slightly in July as the supply of property exceeded demand, according to reports released today.

The average asking price for a home in the United Kingdom edged lower 0.1% in July compared to a 0.1% rise in June, according to data published by the property Web site Hometrack today. This marked the first decline in house prices in 15 months according to Hometrack''s indicator.

On an annual basis, house prices were 2% higher in July but reflected a marked slowdown from the 2.1% increase in the previous month.

The fiscal tightening implemented by the new coalition will slow the UK economic growth over the next two years, according to the latest Ernst & Young ITEM Club forecast released today.

The British economy will grow 1% this year, followed by 2.2% in 2011, the Ernst & Young ITEM Club said today. The think tank downgraded its estimate for 2011 from 2.7%. For 2012, growth is seen at 2.8%, down sharply from the previous estimate of 3.4%. The growth rate is set to approach 3% in 2013 and 2014, the ITEM Club said in its latest summer forecast.

According to ITEM Club, moving into 2012 and the later years of the forecast, public spending cuts will maintain the pressure on the labor market and disposable income. The two-year pay freeze should help protect the public payroll, but even so, the group assessed that 150,000 jobs will be lost in the sector in the next five years. Unemployment is likely to fall back gradually to 6% by 2014 from a peak of 8% this spring.

BP Plc issued a press release today amidst speculation over the weekend regarding potential changes to management and the charge for the costs of the Gulf of Mexico oil spill. The company confirmed that a final decision is yet to be made on these matters and a board meeting would be held on Monday evening ahead of the announcement of the second quarter results on July 27.

BP provided an update on developments to the MC252 oil well incident in the Gulf of Mexico.

The company stated that relief well activities at the MC252 well site were temporarily suspended because of potentially adverse weather associated with Tropical Storm Bonnie. Following improvements in the weather conditions, the DDIII drilling rig returned to the relief well site on July 24 and is taking steps necessary to reconnect with the well and resume drilling operations which are expected to take a number of days.

Further, the company noted the DDII drilling rig is moving back into position, and will take steps necessary to reconnect to the second relief well. However, work on the second relief well has been suspended so as not to interfere with the first. Moreover, the MC252 well has been successfully shut-in for integrity testing since July 15.

BP continues to closely monitor the MC252 well and well-capping structure, under the guidance of the Unified Command.

Gainers & Losers

BP Plc increased more than 4.2% to 415.65 pence after several UK media reported that the board is preparing to replace Tony Hayward and with Robert Dudley as its chief executive.

Pearson Plc added 5.7% to 1,029 pence after the text book publisher and media conglomerate reported first half profit tripled.

The first half revenues rose 9% to £2.34 billion from £21.5 billion a year ago. Net profit for the first half rose 229% to £92 million or 11.4 pence per diluted share compared to net profit of £28 million or 3.5 pence per share a year ago.

Reckitt Benckiser Group Plc, the consumer products maker declined 2 pence to 3,334 pence after it reported first half revenues rose 7% to £4.06 billion from £3.8 billion a year ago. Net profit for the first half rose 19% to £728 million or 99.2 pence per diluted share compared to net profit of £613 million or 85.1 pence per share a year ago.