UK Indexes Slide; Vedanta Rebuffed

Arthi Gupta
24 Aug, 2010
New York City

The UK indexes fell on the momentum of global economic recovery. The UK mortgage approvals dropped in July. Xstrata agreed to acquire Sphere Minerals for $383 million. India rejected permission for a bauxite mining project by Vedanta.

[R]4:30 PM London – The UK indexes fell on the momentum of global economic recovery. The UK mortgage approvals dropped in July. Xstrata agreed to acquire Sphere Minerals for $383 million. India rejected permission for a bauxite mining project by Vedanta.[/R]

The BoE member Martin Weale warned of double-dip recession for the UK economy. BP paid nearly $400 million in claims payments to date.

In London, FTSE 100 Index traded lower 102.80 or 1.98% to 5,133.34 and the pound edged lower to close at $1.5412.

Martin Weale, the member of the Bank of England''s Monetary Policy Committee, reportedly told the Times newspaper that rising unemployment, falling house prices and a banking crisis could push the UK economy into a double-dip. ""I think it would be foolish to say that there''s no risk of [a double-dip],"" he was quoted as saying.

Weale reportedly told the paper that the bank''s growth forecast for around 3.2% in 2012 may be too optimistic.

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

The number of loans approved for house purchases fell to a 5-month low of 33,698 in July from June''s revised 34,575. The average value of house purchase approvals edged moderately in July to £148,500.

Sphere Minerals Ltd. announced an all-cash offer from Sidero Pty Ltd., a wholly-owned subsidiary of Xstrata plc to acquire all of its issued and outstanding shares for A$2.50 per share. Sphere noted that the off-market takeover offer by Xstrata values the company at approximately A$428 million or $383 million.

This offer represents a 61% premium over Sphere''s closing price of A$1.55 per Sphere share on the Australian Securities Exchange on August 23, 2010 and a 73% premium over the volume weighted average price of Sphere shares over the last 30 trading days on the ASX.

The Indian government rejected permission for a bauxite mining project by the London-based Vedanta Resources Plc in the eastern state of Orissa, saying it would violate tribals'' rights over their land.

The $1.7-billion project put forward jointly by Vedanta Alumina -- a subsidiary of Vedanta Resources - and the Orissa Mining Corporation to mine bauxite, or aluminum ore, in the Niyamgiri Hills of the backward state caused concerns among the 8,000 tribal residents that they will be displaced.

BP engineers and U.S. government scientists are determining the best way to remove the damaged blowout preventer from the site of the now-plugged oil leak in the Gulf of Mexico.

Retired Coast Guard Admiral Thad Allen told reporters on Monday that BP has also acknowledged his order to ensure that federal investigators have unfettered access for their observations and that the next stages would be operated with continuous surveillance by television cameras on remotely operated vehicles.

The company said it made claim payments of nearly $400 million during the 16 weeks it managed claims related to the oil spill in the Gulf of Mexico.

Gainers & Losers

Antofagasta Plc dropped 3.31% to 993.00 pence after the mining company announced first half group revenue surged 49.2% to $1.76 billion from $1.18 billion in the same period last year. Net profit for the period rose 91.4% to $451.2 million from net profit of $235.7 million a year ago. Basic earnings per share rose to 45.8 cents from 23.9 cents a year ago.

Cairn Energy Plc slumped 5.04% to 441.20 pence after the oil and gas exploration and production company said first half revenues surged 1845% to $332.6 million from $17.1 million in the same period last year. Net loss attributable to equity holders narrowed 79.5% to $12.6 million or 0.93 cents per share from net loss of $61.6 million or 4.61 cents per share in the year-ago period.

CRH plc plunged 17.19% to €14.93 after the Irish building materials provider reported first half revenues dropped 8% to €7.66 billion from €8.29 billion in the prior-year period. Net profit plummeted 77% to €18 million or 2.6 euro cents per share from €79 million or 12.2 euro cents per share in the same period of last year.

Punch Taverns plc soared 8.31% to 84.70 pence after the pub company reported in its year end trading statement for the 52 weeks to August 21, 2010 that it now sees full-year earnings before tax and exceptional items marginally ahead of its prior forecast.

Wood Group (John) Plc gained 0.49% to 347.70 pence after the international energy services company said revenue for the first half fell 0.1% to $2.409 billion from $2.411 billion in the same period last year. Net profit for the period declined 24.1% to $81.1 million or 15.3 cents per diluted share, compared to net profit of $106.8 million or 20.5 cents a share last year.