UK Deficit Narrows, Diamond Forfeits

Arthi Gupta
10 Jul, 2012
New York City

The UK indexes advanced after Spanish concerns eased for now. UK retail sales climbed in June and production improved and deficit narrowed in May. Barclays former CEO Bob Diamond agreed to give up his bonus but will keep his salary.

[R]3:30 PM London – The UK indexes advanced after Spanish concerns eased for now. UK retail sales climbed in June and production improved and deficit narrowed in May. Barclays former CEO Bob Diamond agreed to give up his bonus but will keep his salary.[/R]

The UK indexes gained after industrial output rose more than anticipated and trade deficit narrowed more than estimated in May.

European finance ministers extended the deadline for the “correction of the excessive deficit” in Spain by one year to 2014 and also reiterated a commitment to permitting the bailout fund buy government bonds.

The ministers agreed to release €30 billion to banks in Spain by the end of this month through the European Financial Stability Facility. Final approval is expected by July 20.

Diamond Forfeits Bonus on Libor Scandal

Barclays plc''s Chairman Marcus Agius testified before the House of Commons Treasury Select Committee today on allegations faced by the bank with regards to the London Interbank Offered Rate or Libor.

The lender was fined £290 million recently by U.S. and UK regulators to settle rate manipulation allegations.

In his statement, Agius said he was aware of the ongoing Libor manipulation as early as 2011.

Separately, Barclays announced that Bob Diamond, who quit as the bank''s chief executive officer on July 3 taking responsibility but not culpability for the scandal agreed that he will not receive any future bonus or incentive awards and will not receive any further compensation payment in connection with the termination of his employment.

He also agreed to forgo his bonuses and unvested stock compensation that may add up to £20 million, but will receive up to 12 months'' salary, pension allowance and other benefits of £2 million.

In London, the benchmark index FTSE 100 gained 50.70 or 0.9% to 5,677.77 and the pound edged lower to $1.5511.

UK Retail Sales Rise

Same-store retail sales in the United Kingdom rose 1.4% in June compared to a year earlier, according to data released by the British Retail Consortium. Total retail sales climbed 3.5% annually in June.

Prices for non-food items fell 0.3%, while food items advanced 3.5% in June.

UK Home Price Balance Drops

Housing market activity in the United Kingdom declined in June, the latest survey by the Royal Institution of Chartered Surveyors showed today.

The survey showed the seasonally adjusted net house price balance dropped to -22 in June from -17 in May.

The balance on new buyer inquiries fell to -10 in June from -2 in May.

UK Output Climbs

The UK industrial production climbed 1% in May from a 0.4% fall in April, the Office for National Statistics said.

Manufacturing output rose 1.2% from a month ago in May compared to the 0.8% drop for April.

Annually, industrial production dropped 1.6% and manufacturing output dipped 1.7% in May.

UK Deficit Narrows

The UK’s deficit on seasonally adjusted trade in goods and services was £2.7 billion in May compared with a deficit of £4.1 billion in April, data released by the Office for National Statistics showed.

The deficit on seasonally adjusted trade in goods was £8.4 billion in May compared with a deficit of £9.7 billion in April. The surplus on seasonally adjusted trade in services was estimated at £5.6 billion in May unchanged compared to April.

Excluding oil and erratic items, the seasonally adjusted volume of exports was 6.6% higher, and the volume of imports was 1% higher in May compared with April.

Gainers & Losers

Balfour Beatty plc slumped 2.7% to 302.70 pence after the infrastructure services company said its overall trading performance continues to be consistent with expectations. Order book has remained stable at £15 billion.

Barclays plc gained 1.8% to 166.45 pence after the financial services provider reached an agreement with former chief executive Robert Diamond that will forgo his long term compensation and bonus that may add up to £20 million. Diamond will keep his salary and also previous bonuses issued at the time of the Libor scandal.

BP plc rose 0.6% to $39.92 after the oil and gas explorer has indefinitely deferred the development at its Liberty oil project in Alaska following the completion of its 18-month review of the project, media reports say.

Marks & Spencer Group plc increased 2.8% to 329.70 pence after the retailer first quarter sales fell 0.7% at constant currency rates.