UK Banks Lead Indexes Lower; Thomas Cook Plunges 28%

Arthi Gupta
12 Jul, 2011
New York City

The UK indexes declined after home prices fell, annual total retail sales increased 1.5% and inflation dropped unexpectedly to 4.2% in June. The UK leading index climbed in May. Thomas Cook plummeted 28% after bleak third quarter underlying operating profit outlook.

[R]3:05 PM London – The UK indexes declined after home prices fell, annual total retail sales increased 1.5% and inflation dropped unexpectedly to 4.2% in June. The UK leading index climbed in May. Thomas Cook plummeted 28% after bleak third quarter underlying operating profit outlook.[/R]

UK indexes turned lower for the second day this week after fears of debt contagion widened in the euro-zone to include Italy and Spain.

British banks declined on the worries that British bank may have to set aside more capital to cover the potential future losses emanating from the euro-zone.

In London, FTSE 100 Index declined 66.37 or 1.12% to 5,862.85 and the pound edged lower to $1.5834.

The annual celebrations held to commemorate the 1690 Battle of the Boyne led to unprecedented violence in several parts of Belfast, Ireland.

UK Home Prices Fall

The UK home prices decreased for the second consecutive month in May, according to data from the Department for Communities and Local Government published today.

Home prices declined 1.6% in May from a year ago, following a 0.3% drop in April.

On a monthly basis, home prices dipped 0.5% in May as against the 1.1% decrease logged in April. The average mix-adjusted home price was £203,528.

In a separate report, home prices in the UK continued to decline in June as economic worries hampered sale of properties, a key survey showed today.

The Royal Institution of Chartered Surveyors'' seasonally adjusted house price balance edged up to minus 27 in June from minus 28 in May, according to reports

UK Total Retail Sales Up

Retail sales in the United Kingdom were higher in June, but same-store sales declined, the British Retail Consortium reported on Tuesday.

Like-for-like sales, which exclude those stores that opened or closed during the year, decreased 0.6% in June from a year ago following a 2.1% decline in May.

Total retail sales excluding automotive fuel rose by an annual 1.5% in June in value terms, up from the 0.3% annual decline in May.

UK Inflation Drops, Deficit Widens

Inflation in the UK slowed unexpectedly in June, according to data published by the Office for National Statistics today. However, it continues to stay well above the 2% target set by the Bank of England.

Consumer prices eased to 4.2% from a year ago in June and declined from 4.5% in May, the data shows.

On a monthly comparison, consumer prices dropped 0.1%, following a 0.2% rise in May, the first drop for June since 2003.

In the year to June, RPI annual inflation fell 5% from 5.2% in May.

In another report, the UK trade deficit widened to £8.5 billion in May from a revised £7.6 billion in April, data from the Office for National Statistics showed.

Trade deficit in goods and services was £4.1 billion in May compared to deficit of £3.1 billion from April. The goods deficit with EU countries widened to £3.4 billion in May from £3.1 billion in April. Exports rose to £1.1 billion and imports rose to £1.3 billion.

UK Leading Index Climbs

The UK''s leading economic index climbed 0.6% on a monthly basis in May after rising 0.4% in April, according to data from the Conference Board released today.

The coincident index, a measure of current economic activity, remained flat in May for a third month.

Gainers & Losers

Bank of Ireland plunged 7.9% to €0.09 after the Irish lender received shareholder approval to raise up to €1.91 billion via a rights issue.

Thomas Cook Group Plc plummeted 28.4% to 87.85 pence after the tour operator said third quarter underlying operating profit is likely to be around £20 million, £5 million down from the previous year, due to a higher-than-previously forecast impact of ongoing political unrest in the Middle East and North Africa, particularly on its French operations.

Vedanta Resources Plc decreased 1.9% to 1,874 pence after the diversified mining company purchased 191.92 million shares in Cairn India Limited from Cairn Energy plc, representing 10% of the fully diluted share capital of Cairn India, for a gross consideration of $1,505.7 million in cash.

Wolseley Plc slumped 3.34% to 1,908 pence after the plumbing and heating products company said it would sell its Electric Center business to Edmundson Electrical, a distributor of electrical equipment.

Yell Group Plc surged 13.28% to 10.75 pence after the provider of print and digital marketing services said it plans to form a strategic alliance with Microsoft Corp. to offer innovative online advertising and business solutions to small and medium sized businesses.