UK Service Sector Contracts; National Commission Blames BP, Contractors

Arthi Gupta
06 Jan, 2011
New York City

The UK indexes climbed after service sector contracted in December. The Bank of England estimated decline in mortgage demand in the first quarter. Rolls-Royce completed contract with British Airways worth $5 billion. British Land agreed to acquire Drake Circus for

[R]4:00 PM London – The UK indexes climbed after service sector contracted in December. The Bank of England estimated decline in mortgage demand in the first quarter. Rolls-Royce completed contract with British Airways worth $5 billion. British Land agreed to acquire Drake Circus for £240 million.[/R]

In London, FTSE 100 Index gained 17.25 or 0.29% to 6,061.03 and the pound edged lower to close at $1.5499.

UK Service Sector Contracts, Foreign Currency Reserves Rise

The UK service sector contracted unexpectedly in December, Markit Economics said today. Poor weather and snow impacted heavily on the service sector at the end of 2010.

The seasonally adjusted Markit/Chartered Institute of Purchasing & Supply Purchasing Managers'' Index for the service sector fell more than expected to 49.7 in December from 53 in November.

The UK government''s net holdings of international reserves rose by $976 million to $38.4 billion in December, the Treasury said on Thursday.

The country''s gross foreign currency reserves increased $2.8 billion in December to $78.8 billion.

The Bank of England''s net holdings of foreign currency and gold rose by $18 million to $2 million, while gross holdings climbed $2.9 billion to $27.5 billion in December.

Demand for home loans is expected to fall in the first quarter of this year, survey results from the Bank of England showed today.

According to fourth quarter credit conditions survey, demand for secured lending for house purchase dropped in the final three months of 2010.

Rolls-Royce Finalizes Deal with British Airways

Rolls-Royce completed contracts worth $5 billion with British Airways Plc for Trent 900 and Trent 1000 engines to power up to 61 new wide-body aircraft.

The order is for Trent 900 engines to power 12 Airbus A380 aircraft, with a potential additional seven options, and Trent 1000 engines to power 24 Boeing 787 Dreamliners, with 18 options. The contracts include TotalCare long-term support agreements.

British Land Acquires Drake Circus

British Land, one of the UK’s largest retail property managers announced the acquisition of Drake Circus in Plymouth for £240 million.

The acquisition of Drake Circus further adds to British Land’s prime retail portfolio in the UK and is in line with the Group’s strategy of focusing on locations where it is able to provide its retail customers with high quality, accessible and flexible retail formats which are able to meet their current and future needs.

National Commission Blames BP and Contractors

The National Oil Spill Commission appointed by the U.S. President Barack Obama reported that the primary cause for the blowout at BP plc''s Macondo well was the result of cumulative risk from “decisions and actions was both unreasonably large and avoidable” at BP and its contractors Halliburton Co. and Transocean Ltd.

The commission released in advance the chapter from its upcoming full report that contains the key findings from its extensive investigation into the causes of the blowout.

The chapter reports that errors and misjudgments by the three companies BP, Halliburton and Transocean contributed to the disaster. The chapter also notes that many of the decisions taken by the three companies, whether purposeful or not, increased risk, but clearly saved them significant time and money.

Gainers & Losers

Abbey plc gained 0.97% to €5.20 after the Ireland-based holding company said that on January 5, 2011, it purchased 350,000 ordinary shares of €0.32 each in the issued share capital of the company at €5.15 per share for cancellation.

According to the company, the total number of ordinary shares in issue is 23,851,992.

Admiral Group plc edged higher 0.89% to 1,579.00 pence after the motor insurance company confirmed that it currently sold AdmiralDirekt, the Group''s car insurance operation in Germany, to Itzehoer Versicherung. The value of the gross assets disposed of is £4.4 million or €5.2 million.

ARM Holdings plc, the chip maker surged 5.96% to 499.50 pence after Microsoft confirmed chips designed by the firm would be run on the next version of its Windows personal computer operating system.

British Airways PLC soared 3.37% to 297.30 pence after the international scheduled airline said December traffic fell 8.3% to 8.07 million revenue passenger miles from 8.81 million revenue passenger miles.

Costain Group plc declined 2.31% to 221.75 pence after the construction and civil engineering company said that it approached the Board of Mouchel Group PLC with a enhanced proposal to make a recommended all share offer for the entire issued and to be issued share capital of Mouchel.

Accordingly, the enhanced proposal comprises 0.5947 new Costain ordinary shares for each Mouchel ordinary share and the Enhanced Proposal values each Mouchel ordinary share at about 135.0 pence.

Morgan Sindall Group plc climbed 0.35% to 722.50 pence after the construction and regeneration company was granted two education sector contracts worth £50 million.

Mothercare Plc plunged 6.35% to 560.00 pence after the parenting and children products retailer in a trading update for the third quarter ended January 1, said total group sales for the period increased 0.4% from last year and worldwide network sales improved 9.6%.

The company said the UK sales were impacted significantly by adverse winter weather conditions and hence it expects full year underlying profit before tax below current market expectations.

Tarsus Group plc surged 7.63% to 127.00 pence after the international business-to-business media company said that group like-for-like organic revenue growth for the year to December 31 increased about 6%, excluding any benefit from currency movements.