FTSE Plunges 2%; Five Irish Banks Downgraded

Arthi Gupta
18 Apr, 2011
New York City

The UK indexes plunged after a ratings agency lowered its debt ratings on five Irish banks. The UK home price index rose in April and manufacturing workers'' pay deals increased. Capital Pub Company surged as revenues improved 24%.

[R]4:00 PM London – The UK indexes plunged after a ratings agency lowered its debt ratings on five Irish banks. The UK home price index rose in April and manufacturing workers'' pay deals increased. Capital Pub Company surged as revenues improved 24%.[/R]

Market indexes turned lower in London, Europe and New York after negative views on sovereign debts and lowered rating on Irish banks.

China raised banks´ required reserve ratio by 50 basis-points, to 20.5%, effective from April 21. This is the fourth such decision so far this year.

In London, FTSE 100 Index slumped 123.68 or 2.06% to 5,861.05 and the pound edged lower to close at $1.6288.

Moody''s Downgrades Irish Banks

Moody''s Investors Service lowered the long-term bank deposit ratings of Allied Irish Banks, Bank of Ireland, EBS Building Society and Irish Life & Permanent by two notches, while that of ICS Building Society was cut by one notch.

The rating action reflected the reduction in the level of systemic support embedded in the deposit ratings following the downgrade of the sovereign rating, Moody''s said in a statement.

Separately, Standard & Poor''s cut its ratings outlook on the U.S. to negative from stable today morning. The ratings agency kept the country''s gold-standard Triple-A rating in place, but said the negative outlook reflected the material risk that Congress will fail to address budget concerns by 2013.

UK Home Price Index Rises

Home prices in the UK rose sharply in April, while real estate agents reported the biggest jump in unsold stock since May 2007 amid a mismatch between property supply and demand.

The Rightmove said its house price index rose a seasonally adjusted 1.7% percent on a monthly basis in April to £235,822 compared to a 0.8% increase in March.

On a yearly basis, prices rose an unadjusted 0.1% in April decelerating from the 0.9 % increase in March.

London remains the exception as buyer demand pushes asking prices to a new record of £431,013.

UK Manufacturing Pay Deals Improve

The UK manufacturing workers'' pay deals increased during three months to the end of March, a survey conducted by the Engineering Employers Federation showed on Monday.

However, the average pay rise was 2.4%, the same rate of growth as seen during three months to February.

Gainers & Losers

AVEVA Group Plc slumped 3.14% to 1,543.00 pence after the engineering software firm said it expects full year results to be in line with expectations after a good performance in Asia Pacific Oil and Gas and Power sectors.

Balfour Beatty PLC dipped 0.33% to 328.90 pence after the professional and construction services company said its rail unit agreed to sell its UK trackwork manufacturing business to Progress Rail Services, a wholly-owned subsidiary of Caterpillar Inc.

Capital Pub Company plc surged 5.91% to 148.80 pence after the company engaged in the management and operation of public houses said it traded “extremely strongly” for the year ending March 2011 with revenues up 24% compared with last year.

M. P. Evans Group PLC gained 1.91% to 440.25 pence after the operator of oil-palm plantations in Indonesia and Malaysia stated fiscal year 2010 revenue rose 48.3% to $42.09 million from $28.39 million last year.

Profit for the period increased 20% to $21.91 million from $18.25 million a year before. Earnings per share from continuing operations grew to 40.52 cents from 31.01 cents last year.

Warner Chilcott Plc declined 2.87% to $23.33 after the Ireland-based specialty pharmaceutical firm said it plans to restructure its Western European operations, as its osteoporosis drug Actonel (risedronate sodium) lost exclusivity in the region in late 2010.

The restructuring plan is expected to be complete by the middle of 2012 and would impact nearly 500 employees.