UK Production Falls 0.6%; RBS to Slash 3,500 Jobs

Arthi Gupta
12 Jan, 2012
New York City

The UK indexes rose after successful bond auctions by Spain and Italy and the Bank of England left key rate and bond purchase program unchanged. The UK industrial output declined in November. RBS planned to cut 3,500 jobs over three years.

[R]3:40 PM London – The UK indexes rose after successful bond auctions by Spain and Italy and the Bank of England left key rate and bond purchase program unchanged. The UK industrial output declined in November. RBS planned to cut 3,500 jobs over three years.[/R]

The UK indexes advanced after Spain and Italy raised nearly €22 billion in bond auctions today lifting market sentiment. Banks led the rally.

Royal Bank of Scotland soared 4.8% to 22.83 pence, Barclays gained 0.8% to 191.80 pence and Lloyds Banking is rising 2.1% to 28.76 pence.

The UK central bank decided to leave the key interest rate and quantitative easing unchanged.

The Monetary Policy Committee of the Bank of England led by Governor Mervyn King left the size of asset purchases unchanged at £275 billion and kept the key interest rate at 0.50% today.

Spain raised €9.98 billion from the sale of its combined long-term debt, nearly double the maximum target of €5 billion set for the auction, reports said.

The Treasury placed €4.27 billion of 4% July 2015 bonds and also sold €2.5 billion of 3.25% April 2016 bonds and €3.211 billion of 4.25% October 2016 paper.

The Italian Treasury also sold €12 billion of Treasury bills at an auction today.

The European Central Bank left its interest rates unchanged on Thursday. The Governing Council led by ECB President Mario Draghi decided to maintain the main refi rate at 1%.

In London, FTSE 100 Index declined 6.48 or 0.1% to 5,663.61 and the pound edged lower to $1.5335.

UK Production Plummets

UK industrial output declined by more than estimated in November, with the output by mining, energy and manufacturing industries contracting during the month, data from the Office for National Statistics showed today.

On a monthly basis, industrial production dropped 0.6% in November after a revised 1% contraction in October.

Industrial production declined 3.1% in November. This was the biggest fall in production since December 2009, the statistics office said.

RBS Plans Organisational Changes

RBS announced changes to its wholesale banking operations to ensure they continue to deliver against the group''s strategy announced in 2009.

The company envisaged 3,500 job cuts over three years, split between its UK and non-UK locations.

RBS stated that it will reorganize its wholesale businesses into ""Markets"" and ""International Banking"" and plans exit and downsizing of selected existing activities.

Gainers & Losers

Barratt Developments Plc soared 8.5% to 105.20 pence after the home builder and property developer estimates first-half operating profit to be about £61 million, up 40% from a year ago.

Centrica PLC dipped 0.7% to 281.80 pence after the integrated energy company announced its wholly-owned subsidiary, British Gas, is to reduce its standard domestic electricity rate by 5%.

Home Retail Group Plc slumped 5% to 82.90 pence after the home and general merchandise retailer said total sales at Argos decreased 7.8% to £1.72 billion and like-for-like sales fell 8.8% from the same period last year.

The company anticipates a significant cut in dividend for the current financial year due to the uncertain UK economy.

Ryanair Holdings Plc fell 1.4% to €3.85 after the Irish low-cost airline said it would introduce a €0.25 levy per passenger for all bookings made from January 17 to cover the costs of the EU''s new carbon tax regime.

Tesco Plc plunged 14.8% to 328.05 pence after the supermarket chain said that its sales for the six weeks ended January 7 increased from last year, with improved performance across all regions, mainly in the United States.

Total sales for the six weeks grew 4.2% including petrol, and 2.9% excluding petrol.