FTSE Soars 1.5%; Ireland Austerity Measures

Arthi Gupta
24 Nov, 2010
New York City

The UK indexes traded sideways after Ireland announced stringent austerity measures and S&P downgraded its credit rating. The UK GDP expanded but business investment fell in the third quarter. Rolls-Royce announced deals worth $1.2 billion with Emirates.

[R]4:00 PM London – The UK indexes traded sideways after Ireland announced stringent austerity measures and S&P downgraded its credit rating. The UK GDP expanded but business investment fell in the third quarter. Rolls-Royce announced deals worth $1.2 billion with Emirates.[/R]

BP Egypt discovered gas in West Nile Delta.

In London, FTSE 100 Index surges 85.18 or 1.53% to 5,666.27 and the pound edged higher to close at $1.5785.

Ireland Announces Austerity Measures

Irish Finance Minister Brian Lenihan on Wednesday announced the government''s four-year plan to reduce the country''s budget deficit and public debt.

The plan is expected to save €15 billion from the government spending over the next few years, wherein €10 billion will be saved by cutting public expenditure and a €5 billion will be raised from higher taxes.

Other measures over the four-year period included cutting more than 24,000 jobs in the public sector and lowering pay bill by €1.2 billion. Also, pay for new appointments would be reduced by 10%.

The government proposes to raise VAT from 21% to 22% in 2013, with a further increase to 23% in 2014. These changes would yield €620 million, Lenihan said.

S&P Downgrades Ireland Credit Rating

Standard & Poor''s cut the Irish Republic''s sovereign credit rating by two notches to A from AA- and the short-term rating was lowered by one notch to A-1 from A-1+. Both were placed on CreditWatch with negative implications, meaning more downgrades are likely.

""The lower ratings reflect our view that the Irish government will have to shoulder additional costs associated with further capital injections into Ireland''s troubled banking system,"" S&P analyst Frank Gill said.

UK GDP Expands; Business Investment Falls in Q3

The British economy expanded 0.8% sequentially in the third quarter, as against 1.2% recorded in the second quarter, according to figures released by the Office for National Statistics today. On an annual basis, gross domestic product climbed 2.8% during July to September.

In another report, the Office for National Statistics said that business investment in the UK fell 0.2% on a quarterly basis in the third quarter to £29.2 billion.

Manufacturing investment was £2.6 billion, which was 2.1% less than in the second quarter and 1.1% higher than a year earlier.

UK Services Growth Slackens

The Office for National Statistics said the UK''s index of services rose 2.5% in September, following the 2.6% increase in August. The largest contribution to the increase was business services and finance, which rose 3.4%.

Rolls-Royce Announces Deal with Emirates

Rolls-Royce Group plc said it entered into new agreements to provide engine services for 50 of Emirates'' existing fleet of 152 wide-bodied aircraft.

As per the terms of the deal, Rolls-Royce will provide TotalCare long term services support for Trent 700 engines powering 29 Airbus A330 aircraft and Trent 800 engines powering 21 Boeing 777 aircraft.

Capital Shopping in Talks to Buy Trafford Centre

Confirming media reports, UK-based real estate investment trust Capital Shopping Centres Group Plc said that it is in advanced talks with Peel Group to buy the £1.6 billion Trafford Centre, a large indoor shopping centre and leisure complex in Manchester.

CSC said the acquisition would involve an equity purchase price of around £750 million for the Trafford Centre and a further amount of around £75 million in respect of a cash contribution by Peel, in return for the issue of new ordinary shares and convertible bonds by CSC to Peel.

BP Egypt Discovers Gas in West Nile Delta

BP Egypt, a subsidiary of BP Plc said it has made a significant gas discovery in the Egyptian Nile Delta, at a depth of around 6,500 meters. Located in the North El Burg Offshore, 50 kilometers north of Damietta in the Nile Delta concession, the current discovery is indicated as the first significant high-pressure, high-temperature, offshore Oligocene discovery of BP

Gainers & Losers

Compass Group plc surged 5.88% to 558.50 pence after the food and support services company reported fiscal year 2010 revenues grew 7.6% to £14.47 billion from £13.44 billion in the preceding year. Profit in the period increased 15.2% to £675 million or 35.8 pence per share from £586 or 31.6 pence per share a year earlier.

FFastFill plc gained 0.24% to 8.40 pence after the global provider of software and services to the financial community, reported first-half revenues grew 4% to £7.31 million from £7.04 million in the same period last year. Profit in the period climbed 17.4% to £540,000 or 0.13 pence per share, from £460,000 or 0.11 pence per share in the prior-year period.

Hampson Industries PLC slumped 6.72% to 27.75 pence after the aerospace components maker reported first-half revenue improved 4% to £96.14 million from £92.81 million last year.

Johnson Matthey Plc rose 1.52% to 1,868.00 pence after the specialty chemical company reported first-half revenue improved 28% to £4.56 billion from £3.58 billion last year, boosted by increased levels of activity in all of its major markets and higher precious metal prices. Profit in the period rose 33% to £104.7 million or 48.9 pence per share, compared to £79 million or 37.3 pence per share a year ago.

Superglass Holdings PLC soared 4.17% to 25.00 pence after the company engaged in the manufacture and sale of glassfibre insulation said fiscal year 2010 revenue dropped 17.6% to £31.4 million from £38.1 million in the prior year, due to a significant decrease in carbon reduction activity partly offset by a growth in sales in the new-build housing and repair, maintenance and improvement markets. For the full year, the company incurred a loss of £317,000 or 0.5 pence per share, compared to a profit of £442,000 or 0.8 pence per share in 2009.