UK Indexes Up 2%; Q2 GDP Lowered to 0.1%

Arthi Gupta
05 Oct, 2011
New York City

The UK indexes rose on European hopes. The UK shop price inflation remained flat, job growth slowed, and service sector activity grew in September. UK GDP growth revised down but business investment rose in the second quarter. Premier Oil agreed to acquire for

[R]2:30 PM London – The UK indexes rose on European hopes. The UK shop price inflation remained flat, job growth slowed, and service sector activity grew in September. UK GDP growth revised down but business investment rose in the second quarter. Premier Oil agreed to acquire for £221 million.[/R]

The UK indexes surged 2.3% on the optimism that finance ministers of the euro area are formulating measures to contain widening debt contagion in the region and central bank is looking for ways to recapitalize banks.

However, investors are increasingly worried that banks in the euro region may have to take larger than estimated losses linked to Greek bonds. Banks in UK and in Europe have declined more than 40% in the last one month of trading.

In London, FTSE 100 Index soared 113.61 or 2.3% to 5,057.19 and the pound edged lower to $1.5422.

UK Shop Price Inflation Flat

UK shop price inflation remained unchanged in September, data from the British Retail Consortium showed.

The BRC-Nielsen shop price index rose 2.7% from a year ago in September, at the same rate as in August. Food inflation was also steady at 5% and non-food inflation eased to 1.3% in September from 1.4% in August.

UK Job Growth Slows

UK private sector job growth in September moderated to the weakest level since August 2009, according to the Recruitment and Employment Confederation and KPMG Report on Jobs, published today.

The index on permanent placements in the KPMG/REC survey dipped to 51.2 in September from 52.4 in August.

Temporary/contract staff appointments also recorded the slowest expansion since August 2009, the report said with the index at 50.9 in September, down from 52.5 in August.

UK Service Sector Grows

UK’s service sector activity grew more than estimated in September, according to the survey by Markit Economics and CIPS.

The seasonally adjusted business activity index for the services sector advanced to 52.9 in September from 51.1 in August. The growth in activity was driven by higher new orders.

Separately, gross international reserves of the United Kingdom decreased from the previous month in September, data released by the HM Treasury showed.

The government''s gross international reserves, comprising gold, foreign currency assets and IMF Special Drawing Rights, decreased to $93.11 billion in September from $98.06 billion in August.

UK Business Investment Up

Business investment in the UK climbed 11.6% in seasonally adjusted terms in the second quarter to £30.6 billion, the Office for National Statistics said.

Total manufacturing investment rose 13.8% to £3.2 billion and non-manufacturing investment surged 11.3% to £27.4 billion in the second quarter.

UK GDP Growth Revised Down

The UK economic growth in the second quarter was lowered to 0.1% from the previous estimate increase of 0.2%, according to the Office for National Statistics data released today.

The growth was slower than the 0.4% rate it logged in the first quarter.

Irish Service Sector Activity Rises

Ireland''s services sector activity increased in September, data from a survey by Markit Economics and the NCB Group showed today. The seasonally adjusted business activity index for the services sector climbed to 51.3 in September from 51.1 in August, the ninth successive monthly growth.

New orders in the services sector decreased at the fastest pace since December 2010, driven mainly by weakening economic conditions and a fall in client confidence.

Gainers & Losers

BTG plc surged 12.1% to 266.80 pence after the healthcare company estimated full-year revenue guidance of £160 million to £165 million versus a current analyst consensus of £139.6 million, as a result of the strong performances of ZYTIGA and BeneFIX during the first-half of the year.

J Sainsbury Plc climbed 3.6% to 284.60 pence after the grocery retailer said second quarter total sales rose 7.8% and comparable sales increased 5.4%.

Mothercare Plc plunged 29% to 220.10 pence after the retailer stated that its total group sales increased 4.9% and worldwide network sales grew 4.5% in the second quarter.

Premier Oil Plc rose 0.9% to 341.90 pence after the oil producer said it is acquiring EnCore Oil Plc for 70 pence per share in cash, totaling about £221 million or $340 million.

Tesco Plc gained 1.4% to 385.30 pence after the department stores operator reported first-half revenue, excluding value added tax improved 7.8% to £31.81 billion from £29.51 billion in the prior year.

Profit for the period increased 17% to £1.38 billion or 17.09 pence per share from £1.18 billion or 14.72 pence per share in the prior year.