UK Industrial Production Slows; Tesco Slumps 3.5%

Arthi Gupta
13 Jan, 2011
New York City

The UK indexes slid after the Bank of England held key rate at 0.5% and bond buying program at

[R]3:00 PM London – The UK indexes slid after the Bank of England held key rate at 0.5%. and bond buying program at £200 billion. The UK industrial production slowed in November. Retailer Morrisons agreed to acquire 16 Netto UK stores from Asda for £28.1 million.[/R]

UK indexes opened higher but lost the momentum in the early afternoon. The Bank of England left its key lending rate unchanged at 0.5% for the twenty second month in a row and manufacturing growth eased.

Spain raised €3 billion or $3.9 billion on Thursday in a debt auction. The average yield on the 5-year bonds rose to 4.54% compared with 3.58% at the last auction on Nov. 4. The auction was 2.1 times oversubscribed, compared to 1.6 times last time.

Italy raised €6.0 billion or $10.2 billion in bonds today at unexpectedly high rates. The Treasury issued €3.0 billion in five-year bonds and €3.0 billion n 15-year bonds, the Bank of Italy said in a statement.

The yield was 3.67% for five-year bonds compared to 3.24% at the last sale, and 5.06% for the 15-year bonds compared to 4.81%. The auction was over-subscribed, with the Treasury receiving €8.5 billion in bids.

In London, FTSE 100 Index declined 21.78 or 0.38% to 6,028.81 and the pound edged lower to close at $1.5741.

BoE Holds Key Rate, QE

The Bank of England on Thursday left its key interest rate unchanged at a record low again and retained the size of the quantitative easing at £200 billion.

At the end of two-day rate setting meeting, the Monetary Policy Committee led by Governor Mervyn King decided to hold the interest rate at 0.5%. The current rate is the lowest since the central bank was established in 1694.

Policy makers also voted to retain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion. The minutes of the meeting will be released on January 26.

UK Industrial Production Slows

The UK industrial production recorded an annual growth of 3.3% in November, slower than October''s 3.5% increase, the Office for National Statistics showed today.

British manufacturing output grew more than expected in November, providing strong support to the fourth quarter economic growth.

Manufacturing output expanded 0.6% on a monthly basis, maintaining the pace of growth from October, the Office for National Statistics said in a report on Thursday.

Annually, manufacturing output growth eased to 5.6% in November, from October’s 5.8% increase.

Morrisons Acquires Netto UK Stores from Asda

William Morrisons Supermarket plc, the largest food retailer entered into a conditional agreement with Asda to acquire 16 former Netto UK stores at a cost of £28.1 million.

Obtaining the stores is conditional upon the successful completion of Asda''s acquisition of Netto UK with final approval by the Office of Fair Trading.

Gainers & Losers

Booker Group plc gained 0.34% to 58.35 pence after the food wholesaler in its interim management statement said total sales in the 16 weeks to December 31 rose 7.2%, with like-for-like sales growth of 5.4%.

Dixons Retail Plc plunged 9.14% to 21.56 pence after the specialist electrical retailing and services group reported a 2% decline in total group sales for the 12 weeks ended on January 8, 2011.

Halfords Group plc fell 2.10% to 411.20 pence after the retailer of car parts, car enhancements and bicycles said that Group revenues rose 3.5% for the 13 weeks to December 31, 2010, as a result of Autocentres acquisition in February 2010. Like-for-like retail revenues decreased 6.6% during the period.

Home Retail Group plc surged 9.66% to 225.90 pence after the home and general merchandise retailer in its interim management statement for the 18 weeks from August 29, 2010 to January 1, 2011 stated that total sales at Argos declined 3.2% to £1.86 billion. Like-for-like sales declined 4.9% in the period.

SIG plc soared 6.31% to 144.80 pence after the supplier of insulation, exteriors, interiors and specialist construction products in its trading update for the year ended December 31, 2010 said total sales for the year are anticipated to be in the region of £2.690 billion, down around 2.0% compared with 2009 in Sterling, or down around 0.3% in constant currency.

Tesco PLC slumped 3.50% to 408.85 pence after the international retailer said in a trading statement that group sales in the six weeks to January 8, 2011 grew 7.6%.

In the UK, six-week sales increased 4.2% excluding petrol, and the rise was 4.5% including petrol. Like-for-like sales edged higher 0.6%, as strong like-for-like sales performance in food was nearly offset by subdued growth in non-food, hurt by weather disruption as well as prior year''s strong comparisons.

Total international sales over the period rose 14.2%, with strong performances in all three regions, namely Asia, Europe and the United States.