UK Indexes Drop 1.8%; Centrica Inks Deal With Statoil

Arthi Gupta
21 Nov, 2011
New York City

The UK indexes fell on the global economic outlook. The UK home prices declined in November and Ireland''s residential property price index fell in October. Centrica inked 10 year gas supply deal with Norway based Statoil ASA.

[R]2:30 PM London – The UK indexes fell on the global economic outlook. The UK home prices declined in November and Ireland''s residential property price index fell in October. Centrica inked 10 year gas supply deal with Norway based Statoil ASA.[/R]

The UK indexes fell 1.8% tracking losses in the U.S. and Europe. Investors are concerned that the U.S. Congressional Super Committee is not able to reach a consensus to cut government spending by $1.2 trillion over ten years.

The market sentiment was weak after Moody’s Investor Services raised concerns on French bonds. Last week the French bond yields rose to 3.51% and spreads to German bunds increased to 167 basis points.

French bond yields decreased a fraction on Monday, but yields hovered near the record high set last week since the creation of the euro. Moody’s analyst Alexander Kockerbeck reported in a note that elevated borrowing costs “persisting for an extended period” would “amplify” the fiscal “challenges the French government faces amid deteriorating growth outlook, with negative credit implications.”

In addition, China’s Vice Premier Wang Quishan said in an interview that global economy may enter into a long term recession.

The U.S. Federal Reserve and the European Central Bank must buy more government securities to bring down borrowing costs and stimulate their economies, the Bank of England policymaker Adam Posen said in an opinion piece written for the International Herald Tribune newspaper on Monday.

In another report, the outlook on Ireland''s banking system remains negative, Moody''s Investors Service said in a Banking System Outlook published today. The negative outlook has been in place since 2008 and continues to reflect the banks'' weak funding and liquidity profiles; the still very challenging operating environment; and the rating agency''s view that profitability will remain weak.

In London, FTSE 100 Index declined 98.00 or 1.8% to 5,264.97 and the pound edged lower to $1.5646.

The European Commission and the International Monetary Fund said on Monday that Hungary has made a ""precautionary"" request for financial aid.

UK BRC Footfall Index Falls

The number of visitors to the UK''s shopping centers declined in the three months through October, a survey by British Retail Consortium showed today.

The BRC/Springboard-ATCM footfall and vacancies monitor, which measures the number of customers visiting the shopping centers in town and city center locations, dropped 2.3% from a year earlier in the August to October period.

UK Home Prices Decline

Housing market activity in the UK weakened considerably in November, according to Rightmove.

The average asking price of a property on the UK market tumbled 3.1% from October to £232,144, the steepest pace since November last year, according to property Web site Rightmove. Prices fell by £7,528 in a month, representing the largest monetary fall since December 2007.

UK Business Confidence Tumbles

Confidence among senior business leaders in the UK declined sharply due to the continuing euro-zone crisis, survey conducted by the Confederation of British Industry showed on Sunday.

Nearly 70% of leaders said their level of confidence in the economic outlook had fallen since the beginning of August.

Irish Residential Property Prices Drop

Ireland''s residential property price index declined 15.1% on an annual basis in October, faster than September''s 14.3% fall, data released by the Central Statistics Office showed today. Prices have been falling regularly since January 2008.

In Dublin, residential property prices decreased 17.5% in October compared to the 15.6% decline in September.

Centrica Inks Deal with Statoil

Centrica plc signed a strategic agreement with Statoil ASA for the supply of 50 billion cubic meters of gas to the UK. The 10 year, NBP-linked gas supply contract worth £13 billion begins in 2015 and secures sufficient gas to meet around 5% of total UK annual demand, enough for 3.5 million homes.

The company has separately agreed with Statoil Petroleum AS to acquire producing and development assets in the Norwegian North Sea for £1 billion.

Gainers & Losers

Lloyds Banking Group Plc plunged 5.2% to 23.90 pence after the financial services group announced non-executive Director David Roberts would assume interim Chief Executive role, if the CEO António Horta-Osório''s return from his medical leave exceeds beyond year-end.

Mecom Group Plc soared 17.5% to 171.50 pence after the European media company confirmed a potential sale of its Norwegian division Edda Media.

Mitie Group Plc fell 1.6% to 240.10 pence after the outsourcing and energy services firm reported first-half revenues increased 5.8% to £971.7 million from £918.7 million in the same quarter last year. Profit before tax increased 17.3% to £43.3 million from £36.9 million reported last year.

Pearson Plc dipped 0.1% to 1,102 pence after the media and learning solutions company agreed to acquire China''s Global Education & Technology Group Ltd. for $155 million cash.

The company said the acquisition will expand its reach in China from eight cities to 60 and will provide a platform to develop beyond English language teaching.

Phoenix Group Holdings Plc surged 8.4% to 533.50 pence after the life insurer confirmed the recent media speculation that it has received a number of merger overtures.