UK Indexes Advance; GlaxoSmithKline, Seagate Net Falls

Arthi Gupta
21 Oct, 2010
New York City

The UK indexes climbed a day after government announced sharp spending cuts and retail sales fell unexpectedly in September. Decline in Irish home prices eased in the third quarter. GlaxoSmithKline profit declined 3.7% and Seagate net fell 17% in the quarter.

[R]4:15 PM London – The UK indexes climbed a day after government announced sharp spending cuts and retail sales fell unexpectedly in September. Decline in Irish home prices eased in the third quarter. GlaxoSmithKline profit declined 3.7% and Seagate net fell 17% in the quarter.[/R]

The UK bank levy estimated to generate £2.5 billion of annual revenues. Irish trade surplus shrank in August and average weekly earnings slid in the second quarter.

In London, FTSE 100 Index traded higher 48.35 or 0.84% to 5,778.21 and the pound edged lower to close at $1.5764.

British Chancellor of the Exchequer George Osborne reportedly told in an interview with BBC Radio 4 that he will stick to the spending cut plans announced in yesterday's revised budget. Osborne said his plan to reduce the government spending by £81 billion is cautious but decisive.

The latest trends in lending report from the Bank of England showed that lending to businesses and mortgage lending rose in August, but consumer credit was slightly negative.

The stock of lending to businesses increased £0.3 billion in August, the first positive increase since February. In July, it dropped by £2.5 billion.

The flow of net mortgage lending by all UK-resident mortgage lenders increased £1.7 billion in August.

The UK government on Thursday published draft legislation on the bank levy that was announced as part of the Emergency Budget in June.

The Bank levy is expected to generate around £2.5 billion of annual revenues by 2012-13. The permanent bank levy has been designed to encourage less risky funding and complements the wider agenda to improve regulatory standards and enhance financial stability.

The UK retail sales fell for a second month in September suggesting that consumers started to restrain their spending amid government's massive fiscal squeeze.

The UK retail sales volume including automotive fuel decreased 0.2% in September from August, according to data from the Office for National Statistics released today. Food and non-food stores both increased 0.1% in September.

Annually, the volume of retail sales in September grew 0.5% Food stores was 2.3% lower than a year ago, while non-food stores grew 3.8% in September.

The UK government on Thursday managed to raise around £3 billion selling bonds in an auction that saw strong demand from investors, according to reports. Today's bond auction was the first held by the UK Debt Management Office after Chancellor George Osborne unveiled spending cuts.

Auto production in the UK increased 5.8% annually to 126,548 units in September, according to a report by the Society of Motor Manufacturers and Traders released today.

For the year to date period, car production increased 35% compared to the same period of the previous year. Auto output totaled 937,891 units. Total vehicle production climbed 35.3% during the period.

The rate of decline in Irish home prices continued to ease for the third straight quarter during the July to September period, according to the latest Permanent TSB/Economic and Social Research Institute House Price Review published on Wednesday.

The average price for an Irish home fell to €198,689, compared to €233,137 during the same period last year.

Irish trade surplus declined in August as exports recorded a monthly decline while imports rose, data from the Central Statistics Office showed today.

Irish trade surplus declined 9% on a monthly basis to €3.8 billion in August from €4.2 billion in July, the Central Statistics Office said today. During August, exports decreased 4% on a monthly basis after adjusting for seasonally variations. At the same time, imports grew 3% in August.

Exports value increased 13% annually to €6.7 billion in August, while the value of imports grew 12% to €3.5 billion.

Ireland's average weekly earnings dropped 1.6% on an annual basis to €690.48 in the second quarter, compared to a revised 3.7% fall in the previous quarter, the Central Statistics Office said on Thursday.

The weekly earnings in the private sector decreased 0.7% annually in the second quarter, while earnings in the public sector slipped 4.4%.

The statistics office said, overall average labor costs decreased 3.3% to €24.82 per hour in the second quarter from €25.66 per hour last year. At the same time, other labor costs decreased 17% to €3.03 per hour.

The Economic & Social Research Institute said today that Ireland needs savings of up to €15 billion to achieve a budget deficit target of 3% of gross domestic product by 2014. In its quarterly economic commentary, the Dublin-based think tank said the required savings is twice the sum that was under discussion at the time Ireland and the European Commission agreed to the 2014 deadline.

The think tank estimates Ireland's budget deficit to be 31% of GDP this year.

Gainers & Losers

Arbuthnot Banking Group Plc tumbled 3.61% to 400.00 pence after the banking and financial service provider said Secure Trust Bank performed well during the third quarter, with good progress in motor finance and prepaid current account operations.

In a trading update for the three months from July 1 to September 30, Arbuthnot Latham is trading strongly and is taking advantage of the opportunities created by market conditions to improve both its assets and client base.

Artilium plc gained 2.70% to 9.50 pence after the developer of mobile software for telecommunication networks reported fiscal year 2010 revenue dropped 52% to €3.2 million from €6.6 million in the previous year. Loss for the year from continuing operations narrowed 74% to €3.5 million or 3.88 euro cents from €13.42 million or 16.19 euro cents a year-ago.

BAE Systems Plc rose 2.97% to 360.30 pence after the defense products maker said its trading for the period from July 1 to October 20 has been consistent with management expectations with improvement across key businesses. The company noted that changes from the UK Strategic Defense and Security Review are expected to result in reduction in growth for 2010.

GlaxoSmithKline plc fell 1.16% to 1,277.00 pence after the healthcare group reported a decline in profit for the third quarter, despite an increase in turnover.

Total Group turnover rose 0.7% to £6.81 billion, from £6.76 billion recorded last year. Profit attributable to shareholders declined 3.7% to £1.29 billion or 25.1 pence per share, from £1.34 billion or 26.1 pence per share in the previous year.

Kedco plc soared 16.67% to €0.07 after the bioscience energy company said fiscal year 2010 revenue increased 53% to €9.02 million from €5.91 million last year. Loss for the year narrowed 48% to €3.24 million or €0.01 per diluted share, compared to a loss of €6.24 million or €0.03 per share last year

OMG plc surged 19.27% to 32.50 pence after the image development company said it anticipates full-year turnover to be in excess of £30.5 million.

The board is reviewing the £1.9 million carrying value of associated goodwill and intangibles which may impact reported profits.

Seagate Technology PLC dipped 0.23% to $15.21 pence after the hard disk drive maker reported first quarter revenues increased 1.1% to $2.69 billion from $2.66 billion in the prior-year quarter. Net income in the quarter declined 17% to $149 million or 31 cents per diluted share, compared to net income of $179 million or 35 cents per share in the year-ago quarter.