FTSE Plunges 1.7%; UK Retains Key Rate at 0.5%

Arthi Gupta
10 Mar, 2011
New York City

The UK indexes plunged after the Bank of England retained key rate at 0.5% and bond buying program. British manufacturing output rebounded and industrial production slackened in January and Irish inflation soared in February. Rio Tinto raised its conditional offer for Riversdale.

[R]4:00 PM London – The UK indexes plunged after the Bank of England retained key rate at 0.5% and bond buying program. British manufacturing output rebounded and industrial production slackened in January and Irish inflation soared in February. Rio Tinto raised its conditional offer for Riversdale.[/R]

In London, FTSE 100 Index plunged 101.75 or 1.72% to 5,835.43 and the pound edged lower to close at $1.6148.

BoE Retains Key Rate

The Bank of England on Thursday retained its key interest rate again at a historic low of 0.5%. The rate is the lowest since the central bank was established in 1694.

The quantitative easing program was also left unchanged at £200 billon and economists speculated the need for additional stimulus if oil prices remain elevated.

UK Manufacturing Output Rebounds

British manufacturing output grew 1% on a monthly basis in January reversing a 0.1% fall in December, according to data published by the Office for National Statistics on Thursday. This was the biggest monthly increase since March 2010.

Annually, manufacturing output growth rose to 6.8% in January from 4.5% in December.

UK Industrial Production Slackens

UK industrial production recorded a monthly growth of 0.5% in January, down slightly from December''s 0.6% increase, the Office for National Statistics said on Thursday.

On a yearly basis, industrial output growth accelerated to 4.4% in January from 3.7% in December.

UK GDP Expands

The UK economy expanded 0.2% on a quarterly basis during the three months ended February, rebounding from a 0.2% contraction in the quarter ended January, monthly GDP estimates of the National Institute of Economic and Social Research showed on Thursday.

Annually, the GDP grew 0.6% during the period compared to a revised 0.8% decline in the previous three months.

Irish Inflation Soars

Ireland''s consumer price index increased 2.2% annually in February compared to January''s 1.7% rise, official data showed. The latest inflation rate is highest since November 2008, when it was 2.5%.

On a monthly basis, prices grew 0.9% in February from a 0.2% fall January.

Rio Tinto Raises Bid Offer

Rio Tinto Ltd raised its offer price by 3% to A$3.9 billion or £2.4 billion for Australian coking coal miner Riversdale Mining Ltd with significant operations in Mozambique.

Rio Tinto increased its offer price to A$16.50 per share from A$16 per share for Mozambique-focused Riversdale if Rio obtains more than a 50% interest in Riversdale by March 23.

In addition, the mining giant said it has freed the bid of all conditions other than the 50% minimum acceptance condition.

The A$16.50 per share offer price represents a 17% premium to Riversdale''s closing stock price of A$14.10 on December 3, the last trading day prior to the announcement of the Rio Tinto offer.

Tata Steel, which owns 24% of Riversdale, approved the offer in January. Last week, just 19% of Riversdale''s shareholders had backed the deal. Brazil based CSN controlled 23% of the company.

Gainers & Losers

Home Retail Group Plc plummeted 6.83% to 196.50 pence after the home and general merchandise retailer provided a reduced pre-tax profit outlook for the year ended February 26, highlighting the difficult and volatile trading conditions, particularly at Argos.

The company said it expects group benchmark profit before tax to be between £250 million and £255 million. Earlier outlook was in a range of £250 million to £275 million.

IG Group Holdings plc fell 1.06% to 465.40 pence after the spread betting firm said group revenue for the quarter ended February 28 rose 10% to £76 million compared to £69 million in the corresponding quarter in the prior year.

Punch Taverns Plc surged 5.70% to 75.05 pence after the pub operator reported like-for-like sales rose 8.6%, with managed like-for-like food sales increasing 11.7% and managed like-for-like drink sales growing 7% for the second quarter ended on March 5, and said it is on track to meet its full-year expectations, despite challenges in the UK consumer environment.

Schroders PLC fell 1.28% to 1,777.00 pence after the investment manager reported fiscal year 2010 net revenue soared 55% to £1.16 billion from £0.75 billion last year. Profit for the year surged 223% to £307.9 million or 108.3 pence per share from £95.4 million or 34.2 pence per share last year.

Standard Life plc plunged 5.35% to 231.60 pence after the insurer stated fiscal year 2010 total net revenue grew 8.2% to £18.57 billion from £17.17 billion in the year 2009. IFRS profit for the year attributable to equity holders surged 103% to £432 million or 19.2 pence per share from £213 million or 9.7 pence per share in the preceding year.

William Morrison Supermarkets plc gained 1.71% to 285.30 pence after the grocery retailer said fiscal year 2010 turnover rose 7% to £16.5 billion from £15.4 billion last year, with about half the growth coming from sales in its forecourts due to the worldwide increase in oil prices.

Profit for the year increased 5.7% to £632 million or 23.43 pence per share from £598 million or 22.37 pence per share in the previous year.