UK Indexes Down; Next Plummets

Arthi Gupta
04 Aug, 2010
New York City

The UK indexes dropped after mixed earnings. The UK shop price inflation remained flat at 1.5%, government net reserves fell $24 million, services growth decelerated, and home prices rose in July. RBS agrees to sell 318 branches to Banco Santander for $2.63 billion.

[R]4:30 PM London – The UK indexes dropped after mixed earnings. The UK shop price inflation remained flat at 1.5%, government net reserves fell $24 million, services growth decelerated, and home prices rose in July. RBS agrees to sell 318 branches to Banco Santander for $2.63 billion.[/R]

Standard Chartered PLC said profit in the first half of the year improved from last year, as the company''s provision for bad loans declined nearly 60% year-over-year.

In London, FTSE 100 Index traded lower 13.80 or 0.26% to 5,381.91 and the pound edged lower to close at $1.5931.

The British Retail Consortium said shop prices were 1.5% higher in July than a year ago, the same rate of increase as in June. Food inflation increased to 2.5% in July from 1.7% in June, while non-food inflation slowed to 1% from 1.4%.

The Recruitment and Employment Confederation / KPMG survey data suggested that the UK job market continued to slow down in July, with overall demand for staff rising at the slowest pace in eight months. The report on jobs signaled further increases in permanent and temporary staff appointments during July.

The UK government''s net reserves fell $24 million in July bringing the end-July total to $34.77 billion compared with $34.79 billion at end-June, according to a report released by the Treasury today. Gross reserves increased to $72.7 billion in July from 71.16 billion in June.

The Bank of England’s net holdings of foreign currency and gold dipped by $2 million to negative $6 million at the end of July.

The UK service sector growth weakened at the beginning of the third quarter after a slowdown in activity as well as business rates.

The headline seasonally adjusted Markit/CIPS Purchasing Managers'' Index slipped unexpectedly to 53.1 in July to its lowest level since June 2009, according to survey data from Markit Economics published today.

The UK home prices bounced back in July after having fallen in the preceding three months, according to Halifax. Additionally, Halifax said home prices rose 0.6% in July compared to a 0.6% fall in June. The rise means an average home in the UK costs £167,425. This is almost £8,000 higher than a year ago.

BP plc, the British oil giant said that the ruptured MC252 well appears to have reached a static condition and the well pressure was now controlled by the hydrostatic pressure of the drilling mud. The pumping of heavy drilling mud into the well from vessels was stopped after about eight hours.

The start of the static kill was based on the results of an injectivity test, which immediately preceded the static kill and lasted about two hours.

The company said the well is monitored per the agreed procedure to ensure it remains static, and depending on results observed during monitoring, further pumping of mud may or may not be required.

Furthermore, the company will continue to work with the National Incident Commander and other government officials to determine the next course of action, which involves assessing whether to inject cement in the well via the same route.

The aim of these procedures is to assist with the strategy to kill and isolate the well, and will complement the upcoming relief well operation, which will continue as per plan, the company stated.

The Royal Bank of Scotland Group plc agreed to sell 318 branches and associated assets and liabilities to the UK arm of Spanish bank Banco Santander SA for about £1.65 billion or about $2.63 billion. The deal is expected to be completed by December 2011.

Banco Santander agreed to pay a premium of £350 million to the net assets at closing, thereby valuing the deal at £1.65 billion.

The proposed sale is part of a series of disposals by RBS relating to a deal with the European Commission to secure approval for the aid provided to the bank as part of the government''s multi-billion pound rescue package.

The sale comprises 311 RBS branded branches in England and Wales, seven NatWest branded branches in Scotland, the retail and SME customer accounts attached to these branches, the Direct SME business, and certain mid-corporate businesses.

The deal will give Santander more than 1,600 branches, making it the fourth biggest network in the country after Lloyds Banking Group, Barclays and RBS and is also expected to boost Santander''s share of small business banking.

Gainers & Losers

Allied Irish Banks, plc fell 7.81% to €2.48 after the bank reported half-yearly loss widened 120% to €1.731 billion compared to a loss of €786 million a year ago. Net interest income for the half-year period fell 34% to €851 million from €1.29 billion last year.

Lloyds Banking Group PLC surged 3.39% to 74.31 pence after the financial services provider reported half-year statutory pre-tax profit plummeted 78.2% to £1.30 billion from £5.95 billion in the prior-year period. On a combined business basis, the company reported a pre-tax profit of £1.60 billion, as against a loss of £3.96 billion in the comparable period. On a per share basis, earnings plummeted to 0.9 pence from 22.0 pence a year ago.

Next plc slumped 7.91% to 2,025.00 pence after the retailer said that the group profit before tax for the full year would be in the range of £535 million to £560 million.

Standard Chartered PLC plummeted 4.70% to 1,813.00 pence after the holding company stated six-month pre-tax profit increased 10% to $3.12 billion from $2.84 billion last year. Net profit attributable to parent-company shareholders rose 11% to $2.14 billion from $1.93 billion in the same period last year. On a per share basis, earnings advanced to 101.9 cents from 98.0 cents. Loan impairment losses plunged 60% to $437 million from $1.09 billion.