UK Rates on Hold; Rio Tinto, Diageo Fall; Smith & Nephew Rises

Marcus Jacob
10 Feb, 2011
New York City

UK stocks closed lower and the Bank of England held rates and left bond buying program unchanged. Rolls Royce net was nearly wiped on costs related Qantas engine failure charges. Rio Tinto net soared and said it is focused on lowering its debt and will spend $12 billion in capital expenditure.

[R]5:00 PM London – UK stocks closed lower and the Bank of England held rates and left bond buying program unchanged. Rolls Royce net was nearly wiped on costs related Qantas engine failure charges. Rio Tinto net soared and said it is focused on lowering its debt and will spend $12 billion in capital expenditure this year.[/R]

UK stocks declined after the Bank of England left its key rate unchanged and Rolls Royce said profits plunged and Rio Tinto net soared nearly three times.

FTSE 100 index declined 42.34 or 0.7% to 6,009.95 and the FTSE All Share index fell 17.12 to 3,122.31.

One UK pound fetched $1.605.

The Bank of England left its key rate unchanged at 0.5% to a two-year low and left its bond buying program of £200 billion. Monetary Policy Committee deliberation will be published on Feb 23.

Investors have betting on higher inflation and rates to rise by the end of the year. Inflation accelerated in December to 3.7% and retail stores sales rose at the fastest pace in January.

UK factory output increased 0.1% in December from November when it rose 0.6% according to the latest data released by the Office for National Statistics.

Overall industrial output rose 0.5% in the month and gained 3.6% from a year ago.

Mining activities declined 9.7% that included cement, brick and clay and large drops were also reported in chemicals and man-made fibers and machinery. Manufacturing increased 4.4% and utilities rose 6.1% on the month.

Stock Movers

Diageo plc dropped 4.7% to 1,194 pence after the branded beverage alcohol company said six quarter net sales increased to £5.32 billion from £5.21 billion a prior year. Net profit in the six quarter increased to £1.19 billion or 47.9p per share compared to £1.02 billion or 40.9p per share a year ago.

Rolls-Royce Group plc, the integrated power systems company reported net revenue for the year increased to £11.09 billion from £58.3 billion a prior year. Net profit for the year decreased to £0.54 billion or 28.82 pence a share compared to £2.21 billion or 119.09 pence a share a year ago.

Rio Tinto Plc said it extended its offer period to acquire Riversdale Mining by another fourteen days to March 4 and declined 2.6% to 4,537 pence.

Net earnings for the year ending in December soared 194% to $14.32 billion from $4.87 billion a year ago. The global miner also increased full year dividend 20% to $1.08 per share of which final dividend is 63 cents.

The company also announced the $5 billion stock buyback program and also said it lowered its debt to $4.3 billion at the end of the year from $18.9 billion.

The strong operations and profits were driven by a sharp increase in production and prices in iron ore operations. Iron Ore group generated net profit of $10.2 billion, 147% higher than a year ago and Pilbara region mines production soared to 224 million tons.

Smith & Nephew rose 1.7% to 724 pence after it reported flat quarterly revenues of $1.06 billion and annual revenues increased 4% to $3.962 billion. Full year earnings rose $895 million from $670 million.

Of the stocks in the FTST 100 index, Autonomy Corp led gainers with a rise of 2% followed by increase in Smith & Nephew of 1.7% and in Fresnillo of 1.3%.

Of the stocks in index, International Consolidated Airlines Group SA led the decliners with a loss of 5% followed by losses in Diageo of 4.7% and in GKN of 2.8% and in Xstrata Plc of 2.8%.