UK Confidence at 20-Month Low; Ireland Rating Cut

Arthi Gupta
17 Dec, 2010
New York City

The UK indexes declined after Moody

[R]4:00 PM London – The UK indexes declined after Moody’s slashed Ireland’s credit rating and UK consumer confidence deteriorated in November. The IMF sanctioned €22.5 billion loan for Ireland. RBS agreed to sell project finance assets worth £3.9 billion to Japan''s BTMU.[/R]

The Bank of England warned that sovereign debt woes of the euro-zone pose risks to the UK banking system. The central bank said in its bi-annual Financial Stability Report that the banks faced credit risks from the possibility of losses on lending to euro-zone households and companies due to weaker than expected growth in the euro area.

The bank also called for a ""comprehensive"" solution to the euro-zone crisis, rather than a country-by-country approach and said the next European Union''s stress tests should have greater transparency.

The Bank of England and European Central Bank on Friday announced a temporary reciprocal swap agreement, which will enable the BoE to provide up to £10 billion to the ECB in exchange of euros.

""This precautionary measure would enable the ECB to provide sterling liquidity to its counterparties,"" the BoE said in a statement.

The agreement will expire on September 30, 2011.

The International Monetary Fund is launching a new multi-donor trust fund next year to finance technical assistance for strengthening tax systems in low and lower-middle income countries.

The fund, that will start operations in May 2011, will provide about $30 million financial assistance over a five-year period. The major donors contributing to the trust fund are Germany and Switzerland.

In London, FTSE 100 Index declined 2.28 or 0.03% to 5,878.80 and the pound edged lower to close at $1.5523. For the week, the FTSE 100 index gained 1.13%.

Moody’s Lowers Ireland Credit Rating

Ireland''s credit rating has been cut by five notches to Baa1 from Aa2 by Moody''s, which blamed the Republic''s deteriorating fiscal position for the move. The outlook on the rating is ‘negative,’ Moody’s said.

IMF Approves Loan for Ireland

The International Monetary Fund approved €22.5 billion financial assistance program for Ireland, of which approximately €5.8 billion will be immediately available to Ireland.

UK Consumer Confidence Deteriorates

UK consumer confidence plunged to its lowest level since March 2009 in November as the government''s spending cuts eroded morale, a new survey showed.

The Nationwide Consumer Confidence Index fell to 45 in November from 52 in October.

The spending index slumped 13 points to 79 in November, the lowest level in two years.

RBS Sells Assets to Bank of Tokyo-Mitsubishi UFJ

Royal Bank of Scotland Group plc reached final legal agreement for the sale of a Non-Core portfolio of approximately £3.9 billion Project Finance assets and associated derivatives to Japan''s Bank of Tokyo-Mitsubishi UFJ, Ltd. and other subsidiaries of Mitsubishi UFJ Financial Group.

The portfolio is made up of global power, global oil & gas and infrastructure assets in the UK, EMEA, APAC and the Middle East.

Gainers & Losers

GlaxoSmithkline Plc dipped 0.16% to 1,269.50 pence after the drug maker inked an agreement with Impax Pharmaceuticals, a division of Impax Laboratories, Inc. for developing and marketing the latter''s Parkinsons disease investigational drug IPXO66, outside the U.S. and Taiwan.

Hunting PLC dropped 0.99% to 703.00 pence after the energy services group announced the appointment of David Barr as a non-executive director with effect from January 1, 2011.

Intandem Films Plc surged 20.71% to 5.13 pence after the film maker reported fiscal year 2010 revenue decreased 31% to £425,153 from £616,410 in the comparable period. Pre-tax profit generated in the period was £3.31 million compared with a loss of £1.91 million last year.

Melrose Resources plc declined 0.55% to 218.00 pence after the oil and gas company said it expects a 24% rise in average daily production rate in 2011 compared with its estimated production level for 2010. The company also announced its capital spending plan for 2011.

The company currently forecasts the 2011 average daily production rate to be 21.7 Mboepd (thousand barrels of oil equivalents per day) on a net entitlement basis compared to 2010 average production rate of approximately 17.5 Mboepd.

PartyGaming Plc climbed 1.47% to 221.20 pence after the online gaming company issued a pre-close trading update. The company said revenue overall had been in-line with expectations with a strong performance in casino mitigated by a softer seasonal performance in poker and bingo.

Petrofac Ltd. advanced 1.14% to 1,507.00 pence after the provider of services to oil and gas companies, in its pre-close trading update ahead of the full year ending December 31, said it expects full year adjusted net profit to grow 20% over the previous year.