UK Inflation Slows, Systemic Weakness at London Trading Desks

Arthi Gupta
06 Jul, 2012
New York City

The UK indexes slid after output price inflation eased in June. London trading desks are targets by regulators for their systemic weakness. Aviva lowered its stake in Delta Lloyd. Seagate Technology slumped 3.1% on weak outlook.

[R]3:20 PM London – The UK indexes slid after output price inflation eased in June. London trading desks are targets by regulators for their systemic weakness. Aviva lowered its stake in Delta Lloyd. Seagate Technology slumped 3.1% on weak outlook.[/R]

The UK indexes traded lower a day after central banks in UK, Europe and China offered more monetary steps to revive economic growth.

However the sentiment on the trading desks was negative as regulators target British banks for their efforts to influence Libor and Euribor and the scandals may widen.

London has been the focus of international regulators for its systemic weakness that has led to two largest investment losses in the last five years.

AIG collapsed after a trader at its London office placed highly leveraged bets with almost no supervision and JPMorgan office carried out derivatives trading that are likely to lead to $9 billion in losses.

Barclays and several other banks are the latest target of regulators for influencing Libor, the rate relied by international investors to seal trillions of dollars of contracts and home and auto loans are let using the rate.

In London, the benchmark index FTSE 100 declined 24.77 or 0.5% to 5,668.15 and the pound edged higher to $1.5539.

For the week, the FTSE 100 gained 1.7%.

UK Output Price Inflation Slows

UK output price inflation eased in June, the Office for National Statistics said Friday.

The output price index for home sales of manufactured products rose 2.3% annually in June compared with a rise of 2.9% in May. The last time the annual rate was lower was in October 2009, when the index rose 1.5%.

The output price index, excluding food, beverages, tobacco and petroleum, rose 2% annually in June compared with a rise of 2.3% in May. This is the lowest annual rate since January 2010 when the index also rose 2.0%.

In the year to June, the total input price index fell 2.3% compared with a flat reading last month. The last time the annual rate was lower was in September 2009, when the index fell 6.1%.

Gainers & Losers

Xyratex Ltd. soared 13.4% to $13.29 after the data storage technology provider said second quarter revenues declined 4.9% to $322 million from last year. Net income was $7 million or 24 cents per diluted share compared to net loss of $4.6 million or 15 cents per share last year.

Aviva plc surged 2.5% to 291.80 pence after the insurer announced that it has priced the sale of part of its stake in Delta Lloyd at an offer price of €10.75 per share with gross cash proceeds of £318 million.

Anglo American plc slumped 2.5% to 2,108 pence after the miner received consent from the South African Minister of Mineral Resources to acquire the Oppenheimer family’s 40% stake in De Beers.

Associated British Foods plc climbed 0.8% to 1,294 pence after the food and ingredients retailer group announced the acquisition by Westmill Foods of Elephant Atta and smaller related ethnic flour brands from Premier Foods Plc.

Seagate Technology PLC slumped 3.1% to $24.25 after the computer hard disk maker estimated fourth quarter revenue of about $4.5 billion and adjusted gross margin of 33.6%.