UK Indexes Gain; BP $30 B in Asset Sale

Arthi Gupta
27 Jul, 2010
New York City

The UK indexes climb after European banks report positive earnings. BP Plc appointed Robert Dudley as its chief executive officer but posts $17 billion loss in the second quarter and plans to sell $30 billion of assets. Onex and Canada Pension Plan to buy Tomkins for $4.5 billion.

[R]4:30 PM London – The UK indexes climb after European banks report positive earnings. BP Plc appointed Robert Dudley as its chief executive officer but posts $17 billion loss in the second quarter and plans to sell $30 billion of assets. Onex and Canada Pension Plan to buy Tomkins for $4.5 billion.[/R]

The Confederation of British Industry noted retail sales surpass expectations. Ireland announced a €40 billion stimulus plan for economic recovery.

In London, FTSE 100 Index traded higher 14.55 or 0.27% to 5,365.67 and the pound edged higher to close at $1.5537.

A committee of global central bankers and regulators came to an agreement on Monday over a series of new rules to improve resilience during future financial shocks.

The Basel Committee said the new measures, including a mandatory capital buffer for banks, must be implemented over a period of five years from 2013 to 2018.

Those measures include increasing the quality and quantity of capital at banks, strengthening liquidity standards, discouraging excessive risk taking, and reducing procyclicality.

However, the committee watered down some of the draft proposals after Germany, France and Japan lobbied. The committee noted in its statement that stricter rules could have ""potentially adverse consequences for particular business models and provisioning practices.""

""Many banks have already made substantial strides in strengthening their capital and liquidity base. The phase-in arrangements will enable the banking sector to meet the new standards through reasonable earnings retention and capital raising,"" said Nout Wellink, Chairman of the Basel Committee.

BP Plc announced today that Tony Hayward is to step down as group chief executive from October 1. He will be succeeded by executive director Robert Dudley. However, the company stated Hayward will remain on the BP board until November 30, 2010 and plans to nominate him as a non-executive director of TNK-BP.

The planned asset sale includes the recently announced $7 billion worth asset disposals in the U.S., Canada and Egypt to oil and gas producer Apache Corp.

BP Plc reported total revenue and other income for the second quarter increased to $75.87 billion from $56.56 billion in the comparable period. Net loss in the period was $17.15 billion or 91.29 cents per diluted share versus a profit of $4.38 billion or 23.16 cents last year hurt by a hefty charge on the costs of the massive oil spill in the Gulf of Mexico.

The oil giant said it is taking a charge of $32.2 billion in the second quarter to reflect the impact of the Gulf of Mexico oil spill, including costs to date of $2.9 billion for the response and a charge of $29.3 billion for future costs, including the funding of the $20 billion escrow fund.

The UK retail sales rose more than expected in July and retailers'' expect the strong growth to continue in the coming months, according to the Confederation of British Industry.

The CBI said that while 18% of retailers said that sales were lower than a year ago, 51% said they rose, giving a balance of +33%. The July Distributive Trades Survey was conducted between 23 June and 14 July, and covered 131 companies.

Sales on the high street increased in July compared with a year ago, and surpassed expectations, according to the latest CBI Distributive Trades Survey.

Annual summer discounts, the World Cup and warm weather appear to have encouraged high-street sales, the leading business group said.

Looking to August, a balance of +45% expect a higher volume of sales next month - the most positive figure since June 2004 when the measure was recorded at +46%.

Irish factory gate prices slackened in June. The producer price index rose 1.2% year-on-year in June, slower than a 2% growth in May, according to a report by the Central Statistics Office released today.

On a monthly basis, manufacturing output prices dipped 0.4% in June compared to a 1.1% rise in the previous month.

In building and construction, all material prices increased 3.2% annually in June, while the price of capital goods grew 0.9%. The price index of energy products rose 5.4% and for petroleum fuels increased 17.6%. Factory gate prices for mining and quarrying decreased 29.5%.

The Republic of Ireland on Monday announced a €40 billion stimulus plan over seven years to support the country''s economic recovery.

The Infrastructure Investment Priorities for 2010 - 2016 will target education, enterprise, environmental services and public transport. The plan also covers housing, agriculture, flood relief, community development, energy, broadband, and tourism.

The head of the Irish government, Brian Cowen, said: ""Proportionately this is one of the highest spends in the European Union and a major stimulus to the economy as we return to growth. We are focusing on investments which will help create sustainable jobs - by shifting resources to areas which will help Irish companies grow, and attract more foreign investment.""

Tomkins plc, the engineering and manufacturing company agreed to be acquired by a consortium comprising Canadian investment firm Onex Corp. and the Canada Pension Plan Investment Board for about £2.89 billion or $4.5 billion.

The consortium expects the proposed acquisition represents an attractive investment opportunity in the industrial, automotive and building products markets.

Under the terms of the deal, each Tomkins shareholder would get 325 pence in cash, which results in 1,300 pence in cash for each Tomkins ADR. The deal value represents a premium of around 41% to Tomkins'' closing price of 230.30 pence per share on July 16.

Gainers & Losers

Croda International Plc soared 8.4% to 1,272 pence after the manufacturer of specialty chemicals reported pre-tax profit from continuing operations of £96.2 million, up from £46.3 million in the comparable period a year earlier.

InterContinental Hotels Group Plc, the international hotel business slumped 7.4% to 1,110 pence after Barclays brothers plan to sell 10% stake it controls.

Provident Financial plc tumbled 6.97% to 821 pence after the financial services provider reported a 1.8% rise in profit for the six months ended June 30 on 10% growth in revenues.

Tomkins plc gained 5.5% to 20 pence after the global and engineering company is to be acquired by a consortium comprising Canadian investment firm Onex Corp. and the Canada Pension Plan Investment Board for about £2.89 billion or $4.5 billion.

Tullow Oil plc rose 2.8% to 1,274 pence after the oil and gas explorer acquired Heritage Oil’s Ugandan assets for $1.35 billion.