UK Home Prices Rise; BP Alliance with Rosneft Raises Questions

Arthi Gupta
17 Jan, 2011
New York City

The UK indexes fell after home prices rose in January. Rolls-Royce agreed to supply gas turbines and waterjets to the U.S. Navy. BP formed alliance with Russia-based Rosneft and also won four Australian deepwater licenses.

[R]3:00 PM London – The UK indexes fell after home prices rose in January. Rolls-Royce agreed to supply gas turbines and waterjets to the U.S. Navy. BP formed alliance with Russia-based Rosneft and also won four Australian deepwater licenses.[/R]

In London, FTSE 100 Index declined 10.56 or 0.18% to 5,991.47 and the pound edged higher to close at $1.5919.

UK Home Prices Rise

The UK home prices rose for the first time in three months in January.

Home prices rose 0.3% in January on a monthly basis following a 3% decrease in December as the demand increased, according to the Web site Rightmove.

Compared to the same month a year ago, home prices rose 0.4% in January, following a similar increase in the prior month.

ITEM Club Lifts UK Growth Outlook

The Bank of England should not raise its key interest rate until the economy makes a full recovery, the Ernst & Young ITEM Club said today. The think tank raised its economic growth forecast for 2011, but lowered the 2012 outlook.

The British economy is now projected to expand 2.3% this year and 2.8% in 2012, led by a resurgent manufacturing sector. The think tank upgraded 2011 growth forecast from 2.2%, while the 2012 projection was lowered from 2.9%.

UK Firms Slash Marketing Budgets

Most of the UK firms slashed their marketing budget in the fourth quarter following an upward revision in the preceding quarter as firms turned pessimistic about their financial prospects, a survey showed.

The IPA/BDO Bellwether report showed that 22% of the firms surveyed revised down their spending on marketing in the fourth quarter, while 17% reported an increase.

The net balance result fell to a one-year low of minus 5.4%, but remained higher than that posted throughout the whole of 2009 and much of 2008, when the financial crisis was at its worse, the survey report said.

Irish Construction Activity Declines

Activity in the Republic of Ireland''s construction sector continued to decline at a marked pace in December, new survey data showed.

The Markit Economics-Ulster Bank construction purchasing managers'' index fell to a 7-month low 40.6 in December from 41.7 in November.

The rate of contraction in the civil engineering category was the steepest overall, while the rate of decline in the housing sector eased from November.

Rolls-Royce Inks Deal with U.S. Navy

Rolls-Royce, the global power systems company, will supply gas turbines and waterjets for ten of the U.S. Navy’s Littoral Combat Ships – the Group’s largest ever marine naval surface ship contract.

Each LCS will be equipped with two Rolls-Royce MT30 gas turbines powering four large waterjets, enabling the vessels to reach speeds in excess of 40 knots. At 36 megawatts, the MT30 is the world''s most powerful marine gas turbine, the company said.

BP Forms Alliance with Russia-based Rosneft

BP and Russia’s state owned major Rosneft agreed to explore and develop three license blocks - EPNZ 1,2,3 – on the Russian Arctic continental shelf. These licenses were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometers in a highly prospective area of the South Kara Sea.

Under the terms of the deal, Rosneft will hold 5% of BP’s shares, while BP will receive a 9.5% stake in Rosneft. The deal also puts in doubt its joint venture with TNK in Russia.

Environmentalists are also raising serious questions if BP can be trusted to drill in one of the most environmentally sensitive areas after a track record of mishaps in the U.S. including a refinery fire in Texas, oil spill in Alaska and an oil well blowout in the Gulf of Mexico.

BP has been awarded four deepwater offshore blocks in the Ceduna Sub Basin within the Great Australian Bight, off the coast of South Australia.

BP said that it will explore Exploration Permit for Petroleum areas EPP 37, EPP 38, EPP 39 and EPP 40 covering an area of 24,000 km2 for oil and gas reserves, with the right to develop any commercially viable discoveries.

Gainers & Losers

Balfour Beatty plc gained 1.96% to 328.30 pence after the international infrastructure group said it reached financial close for the £80 million Hertfordshire Schools scheme.

Kofax Plc soared 4.31% to 339.00 pence after the provider of document driven business process automation solutions entered into an agreement to sell its hardware business to Germany-based Hannover Finanz, a private equity firm, and to members of the business unit''s management team. The transaction is expected to yield at least $20 million of net after tax cash proceeds.

Lloyds Banking Group PLC fell 2.44% to 67.91 pence after the financial services group appointed António Horta-Osório as an Executive Director.

The company stated that Horta-Osório will succeed Eric Daniels as Group Chief Executive on March 1.

SDL plc climbed 2.19% to 631.00 pence after the provider of global information management solutions said it expects fiscal 2010 profit and revenue to be above analysts'' consensus expectations.

Separately, the company announced the appointment of John Hunter as new chief executive officer and Matthew Knight as new chief financial officer.

Stanley Gibbons Group PLC edged higher 0.29% to 172.00 pence after the company specializing in the retailing of collectable postage stamps and similar products said that turnover for 2010 is projected to be ahead of and profits broadly in line with market expectations.

Vodafone Group Plc advanced 1.77% to 175.00 pence after the mobile communications company plans to sell its 44% holding in France''s SFR.