UK Indexes Soar 2.9%; Growth Outlook Lowered

Arthi Gupta
28 Nov, 2011
New York City

The UK indexes surged tracking gains in Europe and U.S. The BCC lowered growth outlook for the UK economy. Home prices in the UK fell and retail sales slumped in November. Ireland''s retail sales rose in October.

[R]3:30 PM London – The UK indexes surged tracking gains in Europe and U.S. The BCC lowered growth outlook for the UK economy. Home prices in the UK fell and retail sales slumped in November. Ireland''s retail sales rose in October.[/R]

Indexes in London soared 2.9% in early trading on the optimism that European leaders are working on issues to bring the debt crisis under control. Investor sentiment was also boosted after U.S. Thanksgiving retail sales surged 16% to record $52.4 billion.

In London, FTSE 100 Index surged 146.14 or 2.9% to 5,310.76 and the pound edged higher to $1.5570.

UK Growth Outlook Lowered

The British Chambers of Commerce trimmed the growth outlook for the UK economy. The industry group now estimates the economy to grow 0.9% this year, slower than the previously predicted 1.1%.

In 2012, the economy is expected to grow 0.8% compared to the previous forecast of 2.1%. The gross domestic product outlook for 2013 was cut to 1.8% from 2.5%.

The BCC forecasted annual consumer inflation at 4.5% in the current year and a decline to 3.3% increase in 2012 and 2% in 2013.

Consumer spending is expected to decline 1.2% in the current year, followed by growth of 0.5% in 2012 and 1.6% in 2013.

UK Home Prices Fall

Home prices in the UK fell for a seventh consecutive month in November, the latest survey results from Hometrack showed today.

Prices fell 0.2% on a monthly basis in November, at the same pace as in October, according to data from Hometrack.

Annually, prices fell 2.3% in November, slower than the 2.8% fall in October.

Separately, home prices in England and Wales decreased for the tenth consecutive month in October, data from a survey by Land Registry showed on Monday.

The home price index decreased 3.2% on an annual basis in October, faster than the 2.9% decrease in September, revised up from 2.6%.

On a monthly basis, the home price index declined 0.9% in October, after falling 0.6% in September.

The average home price in England and Wales dropped to £159,999 in October from £161,461 in September. A year earlier, the average home price was £165,246, the agency said.

UK High Street Sales Slump

UK high street sales volume was at -19% in November, the latest Distributive Trades Survey from the Confederation of British Industry showed. This was the sixth consecutive month of decline and marking the fastest drop since March 2009.

The survey of 136 firms was conducted between October 27 and November 16.

Irish Retail Sales Rise

Ireland''s seasonally adjusted retail sales volume increased 0.1% on a monthly basis in October, recovering from the 0.7% decline in September, revised down from 0.8%, data released by the Central Statistics Office showed.

From a year ago, retail trade decreased 3.8% in October, unchanged from the rate of decline in September.

Gainers & Losers

Bank of Ireland soared 11% to 3 cents after the commercial bank operation agreed to sell another €0.59 billion worth of project finance loans to entities controlled by Sumitomo Mitsui Financial Group Inc.

Lloyds Banking Group Plc rose 4.5% to $1.40 after the financial services group may take a £400 million loss from the sale of a portfolio of property loans worth £1 billion, the Sunday Times reported.

Rio Tinto plc climbed 4.3% to 3,161 pence after the miner estimates capital expenditure for 2011 to be around $12 billion, in line with its previous guidance.

Rolls-Royce Holdings Plc gained 2.1% to 692.50 pence after the provider of power systems and services said the company and the trustees of its pension fund agreed a longevity swap that will give additional security to all members of the company''s final salary pension scheme.

Rolls-Royce noted that the contract with Deutsche Bank reduces the risk on around £3 billion of the fund''s liabilities. The company added that the cost of the transaction will be borne by the pension fund and will have no material effect on the funding arrangements. About 37,000 pensioners are covered by this agreement.

Thomas Cook Group Plc surged 14% to 20.54 pence after the tour operator said it reached an agreement with its banks for a new £200 million facility.

Thomas Cook said that its banks, led by Barclays, HSBC, RBS and UniCredit, have agreed to provide a new 200 million pounds facility available until April 30, 2013, which replaces the £100 million short-term facility announced on October 21.