UK Indexes Pare Losses, ITV, HSBC Fall

Marcus Jacob
11 May, 2011
New York City

Bank of England lowered its economic growth views for 2011 and 2012 and lifted inflation warning to as high as 5%. Separately, UK trade deficit increased in March. HSBC declined after it plans to trim costs as much as $3.5 billion and ITV fell on weaker advertising outlook.

[R]4:00 PM London – Bank of England lowered its economic growth views for 2011 and 2012 and lifted inflation warning to as high as 5%. Separately, UK trade deficit increased in March. HSBC declined after it plans to trim costs as much as $3.5 billion and ITV fell on weaker advertising outlook.[/R]

UK stocks opened lower but pared earlier losses after corporate news overshadowed he sentiment.

FTSE 100 index declined 0.6% or 22.53 to 3,960.11 and All Ordinaries Index dropped 0.4%.

The UK pound edged higher 0.7% to $1.647 after the Bank of England signaled higher rates before the end of 2011.

BoE Lowers Growth Outlook and Lifts Inflation Views

The Bank of England lifted its inflation forecast and indicated tighter monetary policy. The central bank noted in its report that inflation may rise to 5% by the end of the year and is more than likely to stay above 2% target in 2012.

Bank of England Governor Mervyn King said inflation fell back to 4% in March but it remains “uncomfortably high” and is likely to touch 5% if utility prices continue to rise.

On the economic front, UK reported higher trade deficit in March despite a rise in crude oil exports.

Central bank also lowered its 2011 economic growth outlook to 1.7% from 2% and 2012 estimate to 2.2% from 3%.

UK Trade Deficit Rises

The UK trade deficit in goods and services increased to £3 billion in March compared to deficit of £2.7 billion in February.

The goods deficit fell to £3.2 billion in March from £4.2 billion in February. Exports increased £1.2 billion and imports rose £0.2 billion.

Stock Movers

ITV Plc declined 4.9% to 72.20 pence after the broadcaster estimated advertising revenue growth to slow in the first half as clients trim advertising budget. First quarter revenues increased 11% to 550 million pounds.

HSBC Holdings Plc declined 1.3% to 647.40 pence after the bank said that it plans to cut costs between $2.5 billion and $3.5 billion by 2013 and sell businesses where it lacks scale as it prepares for stricter capital rules.

Mining companies opened lower but extended losses after China reported higher inflation and industrial production was weaker than expected. Loans in April also declined 3% but year-to-date loans increased 17.5% according to the data released by the People’s Bank of China.

Fresnillo Plc declined 3.6% to 1,417 pence, Kazakhmys Plc fell 2.7% to 1,266 pence and Eurasian Natural Resources declined 2.1% to 863.50 pence.

Burberry Group Plc gained 2.3% after Hermes International SCA reported first quarter sales increase of 26%.

Rexam PLC declined 1.3% to 392.60 pence.