FTSE Falls 2%; Inflation Soars; Home Prices Rise

Arthi Gupta
16 Nov, 2010
New York City

The UK indexes dropped after inflation accelerated in October and home prices rose in September. RBS agreed to sell

[R]4:15 PM London – The UK indexes dropped after inflation accelerated in October and home prices rose in September. RBS agreed to sell £3.8 billion worth of finance assets to Bank of Tokyo-Mitsubishi. Cable&Wireless first-half net surges 71%.[/R]

Vallar agreed to buy stakes in Indonesian coal producers for $3 billion. BP agreed to sell Southern African fuels marketing businesses for $296 million.

In London, FTSE 100 Index plunged 118.91 or 2.04% to 5,701.50 and the pound edged lower to close at $1.5990.

Irish Prime Minister Brian Cowen insisted that his government has no intentions of asking for external aid from the European Union amid speculation that the Republic could be forced to accept a bailout to prevent uncertainty from spreading to other euro-zone countries.

In an interview with state broadcaster RTE, Cowen dismissed ""pejorative"" speculation of an imminent bailout, as finance ministers from the euro area convene for a crucial meeting in Brussels later today.

The Prime Minister reiterated that Ireland has enough cash to last until next summer and has no need to borrow money until then.

Ireland has not yet requested for an emergency funding from the European Union to resolve the country''s debt issues, Europgroup Chairman Jean-Claude Juncker said reporters in Frankfurt on Monday.

The ECB Governing Council member Miguel Angel Fernandez Ordonez urged Ireland to take appropriate actions.

The Bank of England Governor Mervyn King said in his open letter to the Chancellor that the current elevated rate of inflation in the UK largely reflects a number of temporary influences, including the restoration of the value added tax in January and past rises in oil prices.

King said inflation is likely to remain elevated throughout 2011 with the increase in the VAT in January to 20%.

The UK consumer price inflation accelerated in October, according to official figures released today. The consumer price index rose 3.2% annually in October compared to 3.1% in September, the Office for National Statistics said.

Excluding volatile food and energy prices, the core annual inflation was at 2.7%, unchanged from September.

The UK home prices grew 6.1% on a yearly basis in September compared to an 8.1% increase in August, the Department of Communities and Local Government said on Tuesday. On a monthly basis, home prices fell 0.8% in September after adjusting to seasonal variations. This followed a 0.7% increase in August. The mix-adjusted average home price in the UK was £211,815 in September.

Royal Bank of Scotland Group plc signed a non-binding Memorandum of Understanding with Japan''s Bank of Tokyo-Mitsubishi UFJ, Ltd. for the proposed sale of a non-core Project Finance assets. The sale price is not revealed.

According to RBS, the portfolio to be acquired comprises loans worth about £3.8 billion or $6.1 billion in aggregate and mainly consists of natural resources, power and other infrastructure assets in the UK, Europe, the Middle East and Africa or EMEA, Asia Pacific or APAC and the Middle East.

Vallar plc, the mining investment company said on Tuesday it intends to buy a 25% stake in Bumi and 75% stake in Berau for a combined consideration of about $3 billion, in a cash and new Vallar shares deal. As part of the transaction, Vallar will be renamed to Bumi plc.

Bumi is an Indonesia-based natural resources group, focusing primarily on the coal mining business. Berau Coal Energy is a holding company that indirectly owns 90% of PT Berau Coal, the coal producer in Indonesia. The proposed acquisition is expected to complete on or around April 8, 2011.

BP plc agreed to sell its interest in several Southern African fuels marketing businesses to Switzerland-based Puma Energy for $296 million in cash to pay for the costs of the Gulf of Mexico oil spill.

The oil giant intends to sell its 100% stake in Namibia and Botswana operations, 50% in BP Malawi and Tanzania and 75% in BP Zambia. BP said the decision to divest these businesses followed a strategic review of its southern African refining and marketing businesses. The sales do not include its refining and marketing businesses in Mozambique or South Africa.

Rolls-Royce Group plc asked Airbus maker European Aeronautic Defence and Space Co. to return some Airbus A380 engines from production lines, according to reports released on Tuesday.

Rolls-Royce said last week that its investigations revealed that the issue was specific to the Trent 900 and that the failure was restricted to a specific component in the turbine area of the engine that caused an oil fire, which led to the release of the intermediate pressure turbine disc. The company also added that it would replace the relevant module.

Accenture Plc completed its acquisition of the sourcing services and business process outsourcing services assets of Ariba, Inc.

The acquisition of these assets, which include Ariba''s direct and indirect category expertise, sourcing process expertise and strategic sourcing execution resources, will enable Accenture to provide clients with deeper category expertise, enhanced highly scalable global sourcing service delivery operations and proprietary sourcing databases, benchmarks and technologies.

AstraZeneca Plc is seeking to sell its Astra Tech business, a unit that makes dental implants and medical devices, for $2 billion, according to media reports on Monday. JPMorgan has reportedly been appointed to help AstraZeneca manage the sale of the Swedish unit, and has started contacting prospective buyers.

In addition, AstraZeneca is seeking to sell a chain of outpatient centers it owns in the U.S., called Aptium Oncology. The division is said to likely sell for less than $500 million.

Gainers & Losers

Burberry Group plc dropped 0.98% to 1,010.00 pence after the British luxury company reported first-half total revenues grew 18% to £673 million from £572 million a year ago. Profit in the period increased 46.3% to £83.1 million or 18.7 pence per share from £56.8 million or 12.9 pence per share in the prior-year period, driven mainly by better margin and strong growth in retail and wholesale businesses.

The company also announced a 43% rise in interim dividend, and said it continues to expect second-half wholesale revenue, excluding China, to increase by around 10% at constant currency.

Cable&Wireless Worldwide plc dipped 0.22% to 68.95 pence after the telecommunications company reported first-half group revenues decreased 1.6% to £1.12 billion from £1.14 billion, primarily as a result of a reduction in voice and legacy products, reflecting regulatory changes, reduced volumes and increased pricing pressure. Profit in the period surged 71% to £87 million or 3.3 pence per share, from £51 million or 2.0 pence per share last year.

easyJet Plc slumped 4.36% to 451.50 pence after the low-cost airline reported fiscal year 2010 total revenue grew 11.5% to £2.97 billion from £2.67 billion in the preceding year. Profit in the period soared 70.3% to £121.3 million or 28 pence per share, from £71.2 million or 16.6 pence per share last year. The company also said it intends to pay its first dividend in 2012.

Pearson Plc declined 1.58% to 934.00 pence after the media and education firm announced the acquisition of Burlington, Ontario-based student information systems provider The Administrative Assistants Ltd., or aal with a view to expand its reach in K-12 school market. The terms of the deal were not disclosed.

Shire plc edged lower 0.33% to 1,515.00 pence after the drugmaker said it received FDA approval for its Attention Deficit Hyperactivity Disorder or ADHD drug Vyvanse Capsules CII, in treating adolescents of 13 to 17 age range.

Taylor Wimpey plc gained 1.76% to 25.39 pence after the homebuilder said it is now fully sold for 2010 and expects full year pre-tax profit to be at the upper end of its expectations. Further, the company has appointed its Financial Controller Ryan Mangold as Finance Director, replacing Chris Rickard, who is stepping down today to pursue other opportunities.