UK Stocks Struggle; BoE Outlook Uncertain

Nigel Thomas
10 Nov, 2010
New York City

UK indexes closed lower sharply after resource stocks fell. Weak commodities prices after China tightened the bank capital reserve ratio and let the yuan strengthen. Sainsbury

[R]5:00 PM London – UK indexes closed lower sharply after resource stocks fell. Weak commodities prices after China tightened the bank capital reserve ratio and let the yuan strengthen. Sainsbury’s reported better than expected adjusted earnings. SuperGroup reported latest quarterly sales surge 68%.[/R]

Markets in UK traded lower tracking losses in the European region and lower resource stocks. The Bank of England in its latest inflation report indicated uncertain outlook.

FTSE 100 index declined 58.25 or 1% to 5,816.94 and the UK pound closed at $1.602 and at 1.17 euros.

The central bank said in its latest statement said that the outlook for growth is “highly uncertain” and said private consumption demand “could grow rapidly” if business “reinstate” the previously planned projects that are now on hold.

The central bank did not give a clear indication for the inflation direction and said that the chances of inflation above or below 2% target “are equally likely.” The uncertain outlook by the central bank has been largely factor by investors but expectations of higher inflation are factored by the consumers.

Investors also focused on the outcome of the G20 nations meeting in Seoul, South Korea.

World investors are increasingly convinced that nations will diverge in their approach to the rising imbalances in global financial flows. China and Germany are increasingly united in criticizing the latest $600 billion stimulus from the U.S. Federal Reserve and emerging markets are worried that the new supply will stock inflation.

Stock Movers

Resource stocks and banks declined in trading in the region. Earnings surprise also affected the sentiment after Holcim Ltd, UniCredit SpA and Natixis SA reported lower than expected.

BHP Billiton Limited declined 2.3% to 4,341 pence and Vedanta Resources Plc and Rio Tinto Plc dropped more than 2%. Lonmin Plc dropped 4.7% and Kazakhmys Plc declined 3.8%.

Aveva Group Plc dropped 3.2% to 1,461 pence after it reported first half profit of 23.1 million.

Fenner Plc increased 4.2% to 278 pence said full year ended August net income rose to £26.3 million. Revenues increased 10% to £552.5 million.

InterContinental Hotels Group Plc declined 2% to 1,116 pence after the hotel manager reported earnings that were lower than expected.

Sainsbury’s reported net income adjusted for one time charges increased 8% to £332 million for the 28 week period ending on Oct 2.

Scottish & Southern Energy Plc rose more than 3% after power generator reported better than expected first half results. The company also increased its interim dividend to 24.50 pence form 21 pence.

SuperGroup declined 0.9% after it reported latest quarterly sales increased 68% to £57.5 million and sales in the first six months increased 65% to £90.3 million.