UK Indexes Decline; Home Prices Up 9.9%

Arthi Gupta
10 Aug, 2010
New York City

The UK indexes decline after worries that imports fell in China. Commodities declined and resource stocks followed. The UK trade deficit narrowed and home prices surged in June. Irish manufacturing output growth slows in June. BP Plc makes initial deposit of $3 billion in oil spill escrow trust.

[R]4:30 PM London – The UK indexes decline after worries that imports fell in China. Commodities declined and resource stocks followed. The UK trade deficit narrowed and home prices surged in June. Irish manufacturing output growth slows in June. BP Plc makes initial deposit of $3 billion in oil spill escrow trust.[/R]

In London, FTSE 100 Index traded lower 44.14 or 0.82% to 5,366.38 and the pound edged lower to close at $1.5737.

British trade deficit narrowed to a four-month low in June as export growth exceeded the increase in imports. The seasonally adjusted deficit on trade in goods narrowed more than expected to £7.4 billion in June from £8 billion in May, according to a report released by the Office for National Statistics today.

Total exports grew 4.3% month-on-month to £22.4 billion in June, thus reaching the highest value since the middle of 2008. Total imports rose 1% to £29.8 billion.

Home prices in the UK rose in June, although the pace of inflation slowed, according to fresh data released today.

Home prices in the UK soared 9.9% in June compared to the same month a year ago, according to the Department of Communities and Local Government.

The UK home prices rose 0.8% in the three months ended June period compared with the prior quarter. This compares with a rise of 2.8% for the three months ended March period. London had the highest average house price at £338,508.

The Conference Board leading economic index for the UK rose 0.5% in June from the 0.2% increase in May, according to a report released by the Conference Board today. This marks the 15th straight month in which the leading index has risen.

Irish manufacturing output growth eased in June from the previous year. Manufacturing production rose 5.9% year-on-year in June as against a 10% growth in the previous month, according to a report published by the Central Statistics Office today.

On a monthly basis, manufacturing output rose a seasonally adjusted 1.2% in June, but slower than a 9.8% rise in the previous month.

Industrial production rose 5.8% on an annual basis in June, following a 9.6% growth in the preceding month. Month-on-month, the seasonally adjusted industrial output growth eased to 1.3% in June from 8.8% in May.

BP plc established a trust and made a $3 billion initial deposit of the previously-announced $20 billion escrow account to pay legitimate claims arising from the Deepwater Horizon incident and the resulting oil and gas spill.

“The purpose of the escrow account was to assure those adversely affected by the spill that we indeed intend to stand behind our commitment to them and to the American taxpayers,” said Bob Dudley, CEO of BP’s Gulf Coast Restoration Organization. “Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast.”

Two individual trustees have been named to the newly-established trust that will administer the account, John S. Martin, a former U.S. District Judge for the Southern District of New York, and Kent Syverud, Dean of the Washington University School of Law. The company further stated Citigroup will serve as corporate trustee and paying agent for the account.

BP said on June 16 that it would create a $20 billion escrow account and make initial payments of $3 billion in the third quarter of 2010 and $2 billion in the fourth quarter of 2010 to the escrow fund. It also agreed to follow up these with payments of $1.25 billion per quarter until a total of $20 billion has been paid in.

GDF Suez SP, the French utility firm signed a Memorandum of Understanding with International Power on the proposed combination of International Power and GDF Suez''s Energy International Business areas outside Europe and certain assets in the UK and Turkey, collectively called GDF Suez Energy International.

Upon completion, International Power shareholders will own 30% of the new company while GDF Suez will own 70%. International Power shareholders will also be entitled to receive a cash payment of 92 pence per share through a special dividend.

GDF Suez Energy International will be transferred to International Power with €4.4 billion of net financial debt as at June 30.

The combined entities are expected to generate £165 million of synergies a year, with three-quarters of the projected annualized synergies expected to be realized in the second year after completion of the deal.

Gainers & Losers

BP plc fell 3.13% to 39.56 pence after the oil and gas explorer made an initial $3 billion deposit into the oil spill escrow trust.

Greggs plc edged lower 3.28% to 419.30 pence after the bakery retailer reported revenue for the 26 weeks ended July 3 edged higher 2.9% to £321.33 million versus £312.36 million in the previous year. Net profit increased 14% to £13.00 million or 12.7 pence per share from £11.40 million or 11.3 pence per share a year earlier. The board has declared an increased interim dividend of 5.5 pence per share.

InterContinental Hotels Group Plc plunged 5.76% to $17.03 after the international hotel business said second-quarter revenue grew 9.3% to $410 million from $375 million in the comparable period. Net profit in the quarter was $87 million or 29.3 cents as against a loss of $56 million or 19.2 cents a year ago.

Pre-tax profit for the quarter was $126 million, compared to a loss of $82 million last year and revenue per available room or RevPAR increased 7.4%.

International Power plc dropped 2.34% to 371.10 pence after the power generation company stated revenue for the first half declined 15.6% to £1.62 billion from £1.92 billion in the comparable period. Net profit slumped 49.5% to £199 million from £394 million in the prior-year period.

Interserve plc rose 0.48% to 210.00 pence after the support services and construction company reported revenues for the first half decreased 0.7%% to £944.5 million from £951.2 million a year before. Pre-tax profit for the first-half plummeted 31.75% to £27.3 million from £40 million in the comparable period a year ago.

Mondi Plc declined 2.31% to 468.60 pence after the international paper and packaging company announced first half-group revenue gained 16.1% to €3.03 billion compared to €2.61 billion in the prior year. Net profit for the period was €109 million or 21.2 euro cents compared to a loss of €36 million or 7.1 euro cents per share a year ago.

Trikona Trinity Capital Plc dipped 0.27% to 67.32 pence after the closed-end investment company reported fiscal 2010 pre-tax profit of £24.57 million versus a loss of £61.44 million last year. Earnings per share for the full year were 11.2 pence, as against a loss of 23.6 pence in the comparable period. Net investment income for the year was £45.20 million compared with a loss of £73.81 million in the comparable period.

TUI Travel PLC plummeted 9.75% to 203.60 pence after the international leisure travel group reported third quarter revenue declined 4% to £3.42 billion from £3.57 billion in the prior year period. The company further stated its pro forma underlying operating profit increased 1% to £103 million from £102 million a year earlier.

The company estimated the total impact of the volcanic ash disruption, including the impact of further airspace closures in May to be £105 million.