UK GDP Shrink Revised Lower to 0.6%; Lloyds Banking Plunges

Arthi Gupta
25 Feb, 2011
New York City

The UK indexes edged higher after the economy contracted more than initially estimated in the fourth quarter. The UK consumer confidence grew, service sector activity declined and business investment fell. Tata Steel UK sold certain assets of TCP to Sahaviriya in a deal valued at $469 million.

[R]3:00 PM London – The UK indexes edged higher after the economy contracted more than initially estimated in the fourth quarter. The UK consumer confidence grew, service sector activity declined and business investment fell. Tata Steel UK sold certain assets of TCP to Sahaviriya in a deal valued at $469 million.[/R]

UK stocks traded sideways after fourth quarter GDP shrink was revised to 0.6% from the previous fall of 0.5%. Lloyds Banking fell after it guided weaker results for the year and stocks were halted in trading on technical glitches in London trading.

The Bank of England policymaker Sentance speaking at an event in London said the bank must raise interest rates now to avoid a hasty and damaging exit from accommodative monetary policy.

However, another Bank of England monetary policy committee member Adam Posen on Friday was quoted as saying the he was not worried about second round inflation effects arising from wage growth.

Speaking in Mumbai, India Posen reportedly said people calling for an immediate interest rate rise to quell inflation were overstating the impact of inflation expectations.

In London, FTSE 100 Index gained 52.67 or 0.90% to 5,972.26 and the pound edged lower to close at $1.6090. For the week, the FTSE 100 Index fell 0.41%.

UK GDP Contracts

The British economy contracted more than initially estimated in the fourth quarter, data from the Office for National Statistics showed today.

Gross domestic product fell 0.6% in the fourth quarter, revised down from the previously estimated fall of 0.5%.

Annually, GDP in the fourth quarter grew 1.5%, down from the previous estimate of 1.7%.

UK Consumer Confidence Grows

UK consumer confidence edged higher in February from January''s 22-month low, according to a survey report released on Friday. The GfK NOP consumer confidence index rose to -28 in February from -29 in January.

UK Service Sector Activity Declines

Activity in the UK services industry declined more than expected in December, as severe winter weather hit the industry hard.

The seasonally adjusted index of services dropped 1.3% in December compared to the previous month, the Office for National Statistics said on Friday.

The services accounts for nearly two-thirds of the UK''s gross domestic product and is a key component of the economy.

UK Business Investment Drops

The seasonally adjusted business investment in the UK fell 2.5% sequentially to £29.6 billion in the fourth quarter, preliminary data from the Office for National Statistics showed on Friday.

On an annual basis, total business investment grew 10% in the final three months of 2010.

Tata Steel UK Sells Assets of TCP

Tata Steel UK Ltd agreed to sell certain assets of Teesside Cast Products to Sahaviriya Steel Industries UK Ltd in a deal valued at $469 million.

The deal will also result in Tata Steel and Sahaviriya entering into a joint venture to operate Redcar Wharf, giving Tata Steel the flexibility to use Teesside to serve its other steelmaking operations, while also meeting Sahaviriya requirements on Teesside.

Gainers & Losers

Cobham plc gained 1.85% to 220.50 pence after the manufacturing company said it was chosen by Boeing to provide hose and drogue aerial refueling systems for use on the U.S. Air Force''s new KC-46A Tanker Aircraft.

Lloyds Banking Group plc plunged 4.47% to 62.84 pence after the financial services group reported full-year 2010 loss of £320 million or 0.5 pence per share compared to profit of £2.83 billion or 7.5 pence per share last year.

Spectris plc surged 8.95% to 1,363.00 pence after the precision instruments maker stated fiscal year 2010 revenue grew 15% to £901.9 million from £787.3 million last year. Profit for the year soared 126% to £96.2 million or 81.6 pence per share compared to £42.6 million or 36.8 pence per share in the prior year.

The Rank Group Plc surged 4.96% to 131.20 pence after the gaming business reported fiscal year 2010 Group revenue rose 5.1% to £567.8 million from £540 million in the prior year. Profit climbed 29% to £48.9 million for fiscal year 2010 compared to £37.9 million last year.

Basic earnings per share for the year increased to 13.7 pence from 9.9 pence in the prior year.

Warner Chilcott Plc fell 0.64% to $23.21 after the specialty pharmaceutical company reported fourth quarter total revenues grew 1.2% to $694.38 million from $686.22 million in the same quarter last year. Net income generated in the quarter was $15.45 million or 6 cents per diluted share compared to a net loss of $9.49 million or 4 cents per share in the prior-year quarter.

William Hill PLC gained 3.11% to 189.20 pence after the betting and gambling company reported fiscal year 2010 net revenues climbed 7% to £1,072 million from £997.9 million last year. Profit for the fiscal year rose 112.3% to £129.7 million or 18.4 pence a share compared to £61.1 million or 9.4 pence a share in the previous year.