UK Confidence at 3-Year Low; Public Borrowing Drops

Arthi Gupta
21 Dec, 2011
New York City

The UK indexes climbed on positive developments in Europe. Public sector borrowing in the UK declined in November and consumer confidence fell in December. The Bank of England policy makers were unanimous in holding key rates and quantitative easing.

[R]2:30 PM London – The UK indexes climbed on positive developments in Europe. Public sector borrowing in the UK declined in November and consumer confidence fell in December. The Bank of England policy makers were unanimous in holding key rates and quantitative easing.[/R]

The UK indexes advanced after the European Central Bank allocated €489 billion to 523 euro area banks and extended maturities to three years.

The Bank of England''s policymaking body unanimous decided to maintain the size of bond purchases unchanged at £275 billion and kept the key interest rate at 0.50% at the end of the two-day meeting ending on December 8, the minutes of the final meeting of the year showed today.

Moody''s warned that the UK faces formidable and rising challenges, largely emanating from its exposure to Europe and weaker near-term macroeconomic outlook.

""As a result, the outlook on the rating is likely to be sensitive to future developments in the euro area''s debt crisis, even though the UK is not a member of the monetary union,"" it added.

The European Central Bank offered cheap loans to a large number of small and large banks and expanded the quality of collateral it accepted.

The central bank lent 523 euro area banks a total of €489.2 billion from the European Central Bank’s new three-year loan facility to ensure banks have enough liquidity. Funds are expected to be disbursed tomorrow.

Of the nearly half a trillion euros of loans from the central bank, €110 billion are expected to be available for new lending by the banks and the rest are to facilitate the rollover of the existing loans.

The move was widely welcome by investors in the region and further eased the pressure on the sovereign debt market in the euro zone.

The large amount of loans also helped bond yields of Italy and Spain to ease as many banks used cheap loans to purchase sovereign bonds that pay higher interest rates. The loans from the ECB will charge 1% annual interest.

In London, FTSE 100 Index declined 23.03 or 0.4% to 5,396.39 and the pound edged higher to $1.5684.

UK Public Borrowing Dropss

Public sector borrowing in the UK declined in November, according to data released today.

The public sector net borrowing excluding the temporary effects of financial interventions dropped to £18.1 billion from £20.4 billion in the same month last year, the Office for National Statistics said.

UK Consumer Confidence Falls

The latest survey of UK consumer confidence showed a decline in December.

Research firm GfK NOP reported that its consumer confidence index posted -33 in December compared to -31 in November and -32 in October. The December reading is the lowest since February 2009.

Old Mutual Sells Finnish Branch

Old Mutual plc agreed terms to sell the Finnish branch of Skandia Life Assurance Company Ltd to OP-Pohjola osk as the insurer restructures its operations. Financial details of the deal were not disclosed.

Gainers & Losers

Artisan (UK) Plc plunged 48.3% to 7.50 pence after the commercial property developer reported fiscal year 2011 total revenue declined 21.3% to £7.40 million from revenue of £9.40 million reported for the previous year. Loss in the period widened 43.2% to £2.62 million or 19.67 pence per share compared to a loss of £1.83 million or 13.75 pence per share a year ago.

Balfour Beatty Plc dipped 0.1% to 260 pence after the infrastructure group said it won, in an alliance with Thiess and Sinclair Knight Merz, a contract worth A$835 million, or £535 million, for works on the Regional Rail Link project in Melbourne, Australia.

Renewable Energy Generation Limited rose 0.5% to 48 pence after the renewable energy group purchased three Vestas V80 2MW wind turbines for its site at South Sharpley in County Durham.

STM Group Plc slumped 14.8% to 13 pence after the financial services provider said revenue for the second half of 2011 is expected to be below management''s expectations that is expected to lower the earnings in the period.

Travelzest Plc plunged 23.6% to 6.40 pence after the online tour package seller said it terminated its merger talks with Red Label Vacations Inc.