UK Services Expand to 8-month Peak, GlaxoSmithKline Up

Nigel Thomas
03 Feb, 2011
New York City

UK stocks edged lower and service industry expanded in January at a faster pace. Royal Dutch Shell fourth quarter earnings were lower than expected and Vodafone Group Plc guided higher operating earnings. GlaxoSmithKline rose after the drugmaker increased dividend payout and announced share buyback.

[R]5:00 PM London – UK stocks edged lower and service industry expanded in January at a faster pace. Royal Dutch Shell fourth quarter earnings were lower than expected and Vodafone Group Plc guided higher operating earnings. GlaxoSmithKline rose after the drugmaker increased dividend payout and announced share buyback.[/R]

UK stocks came under pressure as commodities hovered near recent highs and Royal Dutch Shell reported lower than expected quarterly earnings. The service industry index increased in January but the input cost rose at the fastest pace in fifteen years.

The benchmark index FTSE 100 index declined 21.17 or 0.35% to 5978.90 tracking losses in European markets.

A private estimate of service industry showed an increase in January. The Purchasing Managers’ Index tracked by Markit/CIPS increased to 54.5 from 49.7 in December.

The input cost index increased to 65.8 from 60.50 in December. The increase in input cost or inflation was the largest since the survey began in 1996.

European indexes traded mixed with a downward bias. Royal Dutch Shell reported lower than expected earnings but Hermes and Vodafone Group earnings were ahead of expectations.

Commodities were in focus for the third day in a row as crude oil, copper and cotton trade higher as violence in Egypt spread to Yemen and Jordan’s king requested new government.

Total SA declined more than 1.5% and the company said that its natural gas venture in Yemen is operating normal as people carry out mass demonstration against the government.

The euro declined to a dollar and the yen after the ECB President Jean-Claude Trichet at a press conference in Frankfurt said that the central bank is closely watching the rising prices.

He also added that the recent rise in prices are driven by an increase in commodities prices but has not affected “our assessment that price developments will remain in line with price stability” over our target horizon.

Stock Movers

Vodafone Group Plc said fiscal third quarter services revenues on a constant currency basis increased 2.5% to 10.96 billion pounds. Higher revenues in UK, Turkey and turnaround in India helped the telecom carrier in the period.

Revenues increased 32% in Turkey and 17% in India but declined 7.4% in Spain.

The company guided adjusted operating earnings for the full year in the range of 11.8 billion pounds to 12.2 billion pounds.

Royal Dutch Shell Plc said its adjusted earnings in the fourth quarter increased to $4.1 billion. Net income increased to $6.79 billion from $1.96 billion a year ago quarter.

In the year production increased 5.5% to 3.314 million barrels and in the current year the oil explorer is planning to spend at least $25 billion.

GlaxoSmithKline Plc added 2.5% to 1,155 pence after it lost in the fourth quarter 690 million pounds compared to a profit of 1.67 billion pounds a year ago. The company earlier had mentioned that it will take a charge of 2.2 billion pound related to legal costs arising from the U.S. investigation into its sales practices.

The drug maker also increased its fourth quarter dividend per share to 19 pence from 16 pence a share and said it will repurchase its stock between 1 billion pounds and 2 billion pounds.