UK Manufacturing Expands, Home Prices Fall

Arthi Gupta
03 Oct, 2011
New York City

The UK indexes tracked weaker European markets after banks took another hit today. Greece confirmed higher than estimated budget deficit. A ratings agency affirmed the UK

[R]4:15 PM London – The UK indexes tracked weaker European markets after banks took another hit today. Greece confirmed higher than estimated budget deficit. A ratings agency affirmed the UK’s triple-A status with stable outlook. The UK manufacturing activity climbed but home prices fell in September.[/R]

UK indexes slid after Standard & Poor''s affirmed its ''AAA'' long-term and ''A-1+'' short-term sovereign credit ratings on the UK today. The outlook remains stable, the agency said.

""The unsolicited ratings on the UK reflect our view of its wealthy and diversified economy, fiscal and monetary policy flexibility, and relatively adaptable product and labor markets,"" S&P said.

The UK is one of only 10 countries in the world that still has a triple-A rating with a stable outlook.

The European crisis deepened after the Greek finance ministry on Sunday conceded that the government will not be able to meet the deficit reduction targets imposed by the European Union and the International Monetary Fund for this year and the next.

The Greek Finance Ministry said that the country''s deficit is expected to reach €18.69 billion, or 8.5% of gross domestic product, this year compared to the target of €17.1 billion, or 7.8% of GDP.

The wider than estimated deficit forecast has led to concerns about the possibility of a default by Greece and the struggling nation is also seeking larger than agreed 21% reduction in bond swap t the time of the bailout talks in July.

Greece is likely to seek as much as 40% cut in loan repayment and some economists are estimating that bond swaps may lead to repayments of only 40% of the original loans.

In London, FTSE 100 Index dropped 55.71 or 1.1% to 5,072.08 and the pound edged lower to $1.5494.

Banking stocks were heaviest hit on concerns of a default by Greece. Standard Chartered slumped 4.8% to 1,225.50 pence, Barclays declined 3.9% to 155 pence and Royal Bank of Scotland plunged 5.3% to 22.24 pence.

UK Manufacturing Activity Increases

The UK manufacturing activity expanded moderately in September, according to a survey by Markit Economics today.

The Markit/Chartered Institute of Purchasing & Supply Purchasing Managers'' Index rose to 51.1 in September from a revised reading of 49.4 in August.

Manufacturing production as well as new orders improved in September. However, manufacturing employment fell for the third successive month.

UK Home Prices Fall

The average asking price for a home in the United Kingdom declined 0.1% in September compared to the previous month, Hometrack said on Monday - unchanged from the August reading and falling for the 15th straight month.

On an annual basis, prices dipped 3.5% in September after falling 3.7% in August.

Gainers & Losers

BAE Systems Plc fell 2.7% to 260 pence after the defense and security firm secured a $134 million order from the U.S. government for 70 lightweight howitzers.

HSBC Holdings plc dropped 1.3% to 490.60 pence after the banking and financial services firm, through its wholly-owned subsidiary HSBC Bank Canada, agreed to sell the full-service investment advisory business of HSBC Securities (Canada) Inc. to a wholly-owned subsidiary of National Bank of Canada.

Integra Group surged 6.5% to $1.63 after the diversified oilfield services provider said it closed the agreement on acquisition of SIAM Company, a Russian oilfield services company specializing in wireline and slickline services, production logging and testing.

ITE Group Plc gained 1.8% to 160.90 pence after the international exhibitions group estimated revenues for the year ended September 30 of £154 million, up from £113 million generated in the prior year.

Rolls-Royce Holdings Plc fell 0.5% to 592 pence after the turbine engine maker received an order to design and provide integrated power and propulsion systems for two Rolls-Royce NVC 405 cargo vessels purchased by Norwegian transportation company, Nor Lines AS.

Rolls-Royce said this is its first order for vessels based on its Environship concept.