UK Rates on Hold; Trade Deficit Widens

Arthi Gupta
09 Sep, 2010
New York City

The UK indexes gained after the BoE retained key rate and

[R]4:00 PM London – The UK indexes gained after the BoE retained key rate and £200 billion bond purchase. The UK trade deficit widened to record high in July. Ireland CPI rose in August. Dana rebuffed KNOC 1,800 per share offer.[/R]

In London, FTSE 100 Index traded higher 57.64 or 1.07% to 5,488.15 and the pound edged higher to close at $1.5447.

The Bank of England left its key interest rate unchanged at a record low and maintained the size of the quantitative easing at £200 billion.

At the end of two-day rate setting meeting, the Monetary Policy Committee decided to retain the interest rate at 0.5%. The current rate is the lowest since the central bank was established in 1694.

Policy makers also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion. The minutes of the meeting will be released on September 22.

The UK trade in goods deficit widened to a record of £8.7 billion in July from a revised shortfall of £7.5 billion in June, according to data released from the Office for National Statistics today.

Exports fell £0.2 billion or 0.9% to £22.3 billion, but imports rose £0.9 billion or 3.1% to £30.9 billion. The overall trade deficit in goods and services was £4.9 billion in July compared with a shortfall of £3.9 billion in June. The surplus on trade in services rose to £3.8 billion from £3.6 billion.

The ONS data showed that the deficit with EU nations increased to £3.9 billion in July as exports decreased from June by £0.2 billion, while imports grew by £0.5 billion.

The deficit with non-EU countries was £4.8 billion in July compared to the £4.3 billion deficit recorded in June.

Ireland''s consumer price index grew 0.2% year-on-year in August, compared to a 0.1% fall in July, according to a report released by the Central Statistics Office today.

Food and non-alcoholic beverages prices fell 3.2% annually in August, while clothing and footwear prices dropped 8.2%.

CPI rose 0.7% from the previous month in August, compared to flat reading in July. Food and non-alcoholic beverages prices fell 0.3%, while clothing and footwear prices grew 3.5%.

Korea National Oil Corp. said its 1,800 pence per share for UK-based Dana Petroleum plc is full and final and will not be increased, except if a competitive situation arises including if a third party announces an offer or possible offer for Dana.

KNOC said it believes its 1,800 pence per Dana share offer representing a premium of 59% to Dana''s pre-bid speculation share price, provides compelling value in cash for Dana shareholders and incorporates full and fair value for its entire portfolio of production, development and exploration assets.

However, Dana Petroleum plc reiterated its recommendation that its shareholders should reject the offer and take no action.

Eros International plc, the media and entertainment company said its wholly-owned subsidiary, Eros International Media Ltd. filed a initial public offering in Mumbai, India. Eros International noted that the issue will open on September 17 and close on September 21. Eros International Media will be raising an amount aggregating $75 million.

Education Development International plc said it purchased 400,000 shares in the company at a price of 100 pence per share. These shares will be held as Treasury shares.

The company noted that excluding these shares, it has a total of 5.36 million shares in issue.

Gainers & Losers

Advanced Computer Software plc surged 6.25% to 34.00 pence after the provider of technology solutions to the healthcare and commercial markets expects first-half revenues in line with market expectations at £47.3 million, compared to £11 million last year. Adjusted operating earnings are estimated to be ahead of market expectations at £12 million, versus £3 million in the comparable period a year ago.

Home Retail Group plc slumped 3.34% to 214.00 pence after the home and general merchandise retailer said its second quarter total sales at Argos decreased 2.8% to £924 million, with net new space contributing 2.2%. Like-for-like sales declined 5% in the quarter. Four new stores opened and two closed in the quarter, taking the portfolio to 749.

Total sales at Homebase dipped 1.1% to £396 million and like-for-like sales were flat in the quarter.

IG Group Holdings plc fell 0.60% to 497.50 pence after the company trading in financial derivatives and sports betting said first quarter group revenue rose 16% to about £79 million from £68 million in the corresponding quarter of the prior year.

Innovation Group plc gained 1.01% to 10.00 pence after the provider of business process outsourcing and technology solutions to the insurance, fleet and automotive industries, said it obtained a five-year contract with car rental specialist Enterprise Rent-A-Car. The new deal is anticipated to generate revenue of around £25 million for the company over the five year term.

The group''s UK and Australian offices reported revenues of £42.3 million and £11.2 million respectively, representing growth of 8.5% and 12%. Revenue in the U.S. rose 20% to £0.6 million primarily driven by OTC forex offering.

Vodafone Group Plc edged higher 0.03% to 159.85 pence after the telecommunications company announced a new organizational structure effective October 1.

William Morrison Supermarkets plc dropped 0.75% to 290.30 pence after the food retailer stated first-half turnover rose 9.1% to £8.14 billion from £7.46 billion a year ago. Net profit in the period declined 9% to £286 million or 10.65 pence per share compared to net profit of £309 million or 11.76 pence per share last year.

Xchanging plc rose 0.48% to 126.00 pence after the business processor signed a deal with Aon Australia to support the creation of an expanded servicing capability for Aon Australia.