UK Inflation Accelerates to 4.5%, Home Prices Ease; Cairn Slumps 10%

Arthi Gupta
13 Sep, 2011
New York City

The UK indexes closed higher but inflation accelerated in August and exports and imports rose to a record high in July. Mitchells & Butlers rebuffed takeover bid by Piedmont citing that it significantly undervalues the company.

[R]3:00 PM London – The UK indexes closed higher but inflation accelerated in August and exports and imports rose to a record high in July. Mitchells & Butlers rebuffed takeover bid by Piedmont citing that it significantly undervalues the company.[/R]

UK stocks closed higher and latest read on inflation showed a surge in prices for the third month in a row on the higher energy and import prices. The exports and imports also rose to a record high in July.

German Chancellor Angela Merkel said in an interview to Germany''s Info on RBB radio an “uncontrolled bankruptcy of Greece” must be avoided. She further added that the euro could only be stable if uncontrolled processes would be prevented.

An Italian government spokesman confirmed that the country''s Finance Minister Giulio Tremonti held talks with Chinese officials earlier this month, reports said on Tuesday. However, it is still unclear whether bond purchases were discussed.

The media reports suggest that China may have considered taking stakes in Italian banks but the rising bond yields and worries about Greece held back any decision.

In London, FTSE 100 Index gained 12.76 or 0.25% to 5,142.03 and the pound edged lower to $1.5809.

Exports rose 5.6% to £25.4 billion and imports increased 4.3% to £34.3 billion in July, according to the data released by the ONS.

UK Inflation Rises

Inflation in the UK rose for a second consecutive month in August, led by higher costs of clothing and footwear, latest data from the Office for National Statistics showed today.

Annual inflation rose to 4.5% in August from 4.4% in July, with clothing and footwear prices rising 4% annually in August. The consumer price index rose 0.6% on a monthly basis in August after remaining flat in July.

Core inflation, that excludes price changes in food, alcohol, tobacco and energy, remained unchanged at 3.1% in August.

Retail price inflation rose to 5.2% in August from 5% in July.

UK Home Prices Ease, Deficit Stable

The home price index in the United Kingdom declined 1.5% on an annual basis in July, following the 2% fall in June; data released by the Department for Communities and Local Government and showed Monday. Prices fell for the fourth consecutive month in July.

The average mix-adjusted house price was £207,690 in July, higher than £204,981 recorded in June.

On a monthly basis, home prices increased a seasonally adjusted 0.3% in July, after rising 0.4% in June.

In another survey, UK home prices recorded a modest decline in August, according to the latest housing market survey by the Royal Institution of Chartered Surveyors. The seasonally adjusted house price balance edged down to minus 23 in August from minus 22 in July.

Separately, the deficit in UK''s trade in goods was £8.9 billion in July, data released by the Office for National Statistics showed on Tuesday. A year ago, the shortfall was £8.6 billion.

Gainers & Losers

Abcam plc rose 1.1% to 348 pence after the biotech company reported agreeing to acquire privately-held biochemical reagents supplier Ascent Scientific Ltd. for a total consideration of £10 million comprising £6 million in cash and £4 million in Abcam shares.

Ashmore Group Plc plunged 4.1% to 383.60 pence after the investment manager reported fiscal year 2011 total net revenue climbed 17% to £333.8 million from £286.2 million last year. Operating margin for the year declined to 72% from 73% in the prior year.

Cairn Energy Plc plummeted 9.86% to 281.70 pence after the oil and gas company failed to find oil in its one of its wells off the coast of Greenland.

IG Group Holdings Plc climbed 2.50% to 439.20 pence after the financial derivatives and sports betting company said first quarter revenues increased 26% to £99.8 million from £79.1 million in the previous year.

Mitchells & Butlers Plc advanced 2.72% to 242 pence after the pub and restaurant operator rejected a takeover approach by Piedmont Inc. for 230 pence per share, noting that it significantly undervalues the company.