UK Indexes Drop; Petropavlovsk Swings to Profit

Arthi Gupta
25 Aug, 2011
New York City

The UK indexes declined after retail sales fell in August. The UK and Switzerland agreement on taxes increase the reach of UK government. U.S.-based SPX agreed to acquire CLYDEUNION Pumps for

[R]4:00 PM London – The UK indexes declined after retail sales fell in August. The UK and Switzerland agreement on taxes increase the reach of UK government. U.S.-based SPX agreed to acquire CLYDEUNION Pumps for £700 million. Diageo fiscal year earnings rose.[/R]

The Bank of England announced that it will extend its swap line to the European Central Bank until September 28, 2012. This will allow the ECB to borrow as much as £10 billion in sterling.

The coordinated move between central banks will facilitate the workings between the ECB and the temporary rescue fund to purchase more sovereign bonds of Spain and Italy, largely from the other commercial banks.

Martin Weale, external member of the Monetary Policy Committee said in a speech that the implications for monetary policy depend on how the necessary rebalancing of demand away from consumption and towards exports and investment with a consequent increase in national savings.

The UK government reached an agreement with the Swiss authorities wherein future income of British bank clients in Switzerland will be subject to a final withholding tax and the proceeds will be transferred to the British authorities, the Swiss Finance Ministry said in a statement on Wednesday.

The tax rate has been fixed between 27% and 48%, depending on the category of capital income. Swiss banks will make an initial down payment of Sfr500 million to the UK.

In London, FTSE 100 Index declined 77.38 or 1.5% to 5,128.77 and the pound edged lower to $1.6346.

UK Retail Sales Drop

U.K. retail sales volume fell at the fastest pace in August, according to the Confederation of British Industry.

The group’s Distributive Trades Survey found that 31% of retailers saw the volume of sales rise in the two weeks to August 16 against 46% experiencing a fall. The balance of retailers reporting a fall in sales volume dipped more than expected to -14%, the largest fall since May 2010.

Retailers expect the volume of sales to fall again in the year to September. Around 27% expect a rise and 35% predict a fall, resulting in a balance of -7%.

SPX to Acquire Clydeunion Pumps

SPX Corp., the industrial products and services provider agreed to acquire UK-based Clydeunion Pumps, a supplier of pump technologies, for £700 million or $1.15 billion. The agreement also includes a potential earn out of up to £50 million based upon the acquired company''s operating earnings in 2012.

Gainers & Losers

Aegis Group Plc fell 0.74% to 134.80 pence after the media and market research group reported first-half revenues increased 17.9% to £519.1 million from £440.4 million in the same period last year. Profit before tax for the period increased 48.6% to £37 million from £24.9 million in the previous year.

Axis-Shield plc declined 0.63% to 475 pence after the medical diagnostics firm asked its shareholder to reject Alere AS Holdings Ltd.''s 460 pence per share acquisition offer.

Diageo Plc surged 5.01% to 1,174 pence after the beverages company stated fiscal year 2011 net sales rose 2% to £9.94 billion from £9.78 billion a year ago. Pre-tax profit for the year increased 5.4% to £2.36 billion from £2.24 billion reported last year.

Kazakhmys Plc soared 4.9% to 994 pence after the UK-based copper miner with main assets in Kazakhstan reported first-half revenues increased 19% to $1.82 billion from $1.52 billion in the same period last year. Profit before tax for the period declined 13% to $550 million from $631 million in the previous year.

Petropavlovsk PLC rose 4.07% to 818 pence after the miner and explorer with its principal assets located in Russia said first-half group revenue surged 143% to $475.15 million from $195.70 million in the previous year. Profit in the period was $106.04 million or $0.57 per share versus a loss of $56.15 million or $0.31 per share a year ago.