UK Economic Growth Unrevised at 0.5%, Dixons Surges 9%

Arthi Gupta
24 Nov, 2011
New York City

The UK indexes rose after the third quarter economic growth estimate was held at 0.5% but business investment declined. The UK services index rose in September and Ireland said annualized wholesale prices increased in October.

[R]1:55 PM London – The UK indexes rose after the third quarter economic growth estimate was held at 0.5% but business investment declined. The UK services index rose in September and Ireland's annualized wholesale prices increased in October.[/R]

Stocks in London gained after third quarter economic growth was left intact and Germany reported positive economic data.

The trading however was cautious after German debt auction attracted buyers for 65% of its intended 8 billion euros of 10-year bonds. Bond yields hovered near record low at 1.98%.

Investors are increasingly worried that the rising debt contagion is slowly spreading to the core of the euro zone and may extend further to the UK and U.S.

The yields of bonds issued by Germany, UK and U.S. do not reflect the sovereign risks entailed as all three nations are struggling with the rising deficits and from growing imbalances in world trade.

U.S. debt exceeds $14 trillion and German debt is way above the 60% target established for the EU nations. UK suffers from a surge in social and out of control defense spending for the size of its economy.

Bank of England policymaker David Miles warned that one of the countries in the 17-nation euro area will exit due to the aggravated debt crisis in the region.

""""""""""""""""I don't think any of us can feel confident one way or another about whether all the countries that are currently in the euro zone will still be in it,"""""""""""""""" reports quoted Miles as saying in an interview on ITV broadcast on Wednesday.

In an unexpected development, Fitch Ratings downgraded the sovereign ratings of Portugal by one notch to 'BB+' from 'BBB-' today.

The agency concluded that the large fiscal imbalances, high indebtedness across all sectors and adverse macroeconomic outlook indicates the sovereign's credit profile is no longer consistent with an investment-grade rating.

In London, FTSE 100 Index gained 32.99 or 0.6% to 5,172.60 and the pound edged lower to $1.5543.

James Murdoch, the deputy chief operating officer of News Corp. resigned as the director of the company's UK newspaper operations. Murdochs have been under pressure from the UK lawmakers and a growing body of evidence suggested that James and his father Rupert Murdoch knew more than they admitted at the Parliament inquiry held earlier in the year.

James Murdoch and his father Rupert Murdoch have steadfastly insisted that hacking scandal was limited to only one rogue reporter and is not systemic at News Corp.

However, police and parliament inquiries show that the hacking practice was widespread at the company and many senior executives including James Murdoch were aware of the extent of the illegal hacking practice and did not do anything about it.

UK GDP Expands, Business Investment Falls

The UK economy expanded 0.5% in the third quarter, unchanged from the preliminary estimate published on November 1, compared to 0.1% expansion in the second quarter, the Office for National Statistics said today. The expansion is the largest since the third quarter of 2010.

From a year ago, the economy grew 0.5% in the third quarter.

Separately, the UK business investment declined by a seasonally adjusted 1.4% in the third quarter from the prior quarter, the Office for National Statistics said. However, on a yearly basis, business investment grew 0.3%.

UK Manufacturers' Order Books Drop

UK manufacturers said order books decreased in November, driven by a decline in export orders, a monthly survey conducted by the Confederation of British Industry showed.

The total order book balance fell to -19 percent in November, from -18 percent in October, the Industrial Trends Survey showed.

The export order book balance was -31 in November, the lowest since January 2010.

UK Services Index Rises

The UK's services index, an indicator of service sector output, increased in September, the Office for National Statistics said.

The seasonally adjusted index of services rose 0.1% on a monthly basis in September. On an annual basis, the index rose 1.2% during the month.

Irish Output Price Inflation Soars

Ireland's factory gate prices increased 2.5% on an annual basis in October, following the 0.2% rise in September, data released by the Central Statistics Office showed.

Output price of food products rose 4.1% annually, while textile prices climbed 0.6% in October.

On a monthly basis, output prices decreased 0.3% in October, reversing the 1.2% growth in September.

Gainers & Losers

Antofagasta Plc rose 1.7% to 1,045 pence after the Chile-based copper mining company said group revenue in the nine months ended September rose 31.5% to $4.17 billion, from $3.17 billion in the same period last year

Balfour Beatty Plc gained 2.3% to 219.60 pence after the infrastructure group announced that along with its joint venture partners Morgan Sindall and Vinci Construction, has been awarded the Whitechapel Crossrail contract worth £110 million.

Dixons Retail Plc surged 9% to 10.20 pence after the specialist electrical retailer said for the 24-weeks ended October 15 total group sales, including those from the closed business, fell 1.5% to £3.30 billion compared to £3.35 billion last year.

Profit during the period was £3.1 million or 0.1 pence per share versus a loss of £4.9 million or 0.1 pence per share in the previous year.

Kier Group Plc dipped 0.2% to 1,277 pence after the construction, services and property group said a three-way joint venture comprising Kier, BAM and Ferrovial has been awarded a £200 million plus contract on the Crossrail scheme for works at Farringdon Station.

London & Stamford Property Plc slumped 4% to 114 pence after the property investment company reported first-half loss was £5.26 million or 1 pence per share compared to a profit of £16.31 million or 3.3 pence per share in the prior year.