UK Indexes Slump, Dentsu to Buy Aegis for

Arthi Gupta
12 Jul, 2012
New York City

The UK indexes slumped after home purchase loans rose in May. Irish economy shrunk in the first quarter and inflation eased in June. Aegis agreed to be acquired by Dentsu for

[R]3:30 PM London – The UK indexes slumped after home purchase loans rose in May. Irish economy shrunk in the first quarter and inflation eased in June. Aegis agreed to be acquired by Dentsu for £3.2 billion. Rolls-Royce won $630 million contract from Brazil-based Synergy Aerospace.[/R]

The UK indexes fell more than 1% tracking the weak international markets and weakening commodities prices as investors focused on the latest round of rate cuts from Brazil, Korea and the central bank in Japan held firm.

Crude oil, copper and gold were on the slide ahead of the GDP data from China tomorrow and a growing realization that the growth rates of the economies of the emerging markets are shrinking faster than expected.

The U.S. Fed minutes also showed that the central bank is in no hurry to offer any new incentive at least for now and the Bank of Japan also held its asset program intact.

The Office for Budget Responsibility said the UK public finances are likely to come under pressure over the longer term, primarily as a result of an ageing population.

OBR estimates spending other than on debt interest will rise to 40.8% of GDP by 2061-62, an increase of 5.2% of GDP or £80 billion in today''s term.

The amount of overnight cash deposits of financial institutions at the European Central Bank more than halved after the bank cut the overnight deposit rates to zero last week.

Banks deposited €324.9 billion overnight on Wednesday, well below €808.5 billion they left there on the previous day.

In London, the benchmark index FTSE 100 declined 70.89 or 1.3% to 5,593.86 and the pound edged lower to $1.5442.

UK Home Loans Rise

The number of home purchase loans in the United Kingdom increased 33% from the previous month to around 48,300 in May, data released by the Council for Mortgage Lenders showed today.

Compared to May 2011, the number of total mortgages advanced 24% in May, the agency said.

The total value of home purchase loans availed in May was £7.2 billion, up 36% from April.

Irish Economy Shrinks

Ireland’s gross domestic product decreased a seasonally adjusted 1.1% sequentially in the first quarter, after expanding 0.7% in the fourth quarter, revised from a 0.2% decline, preliminary data released by the Central Statistics Office showed.

Separately, the agency said Ireland''s current account turned to a deficit of €1.05 billion in the first quarter from a surplus of €1.74 billion in the fourth quarter. In the first quarter of 2011, the balance was a deficit of €1.92 billion.

Irish Inflation Eases

Ireland''s consumer price inflation eased to 1.7% in June from 1.8% in Mays, data released by the Central Statistics Office showed.

Food and non-alcoholic beverages prices rose 0.8% while clothing and footwear prices remained flat in June.

Compared to May, consumer prices declined 0.2% in June, after remaining flat in the previous month.

Dentsu Agrees to Acquire Aegis

Dentsu Inc., the Japanese advertising firm agreed to acquire Aegis Group Plc, the British media and digital marketing communications group for 240 pence per share for £3.16 billion or $4.9 billion in cash.

The offer represents a premium of approximately 48% to the closing price per Aegis share on Wednesday.

Centrica Acquires Energy Retailers

Centrica plc’s North American subsidiary, Direct Energy agreed to acquire the New York-based energy retailers Energetix, Inc. and NYSEG Solutions, Inc. for $110 million or £71 million in cash, plus additional working capital.

The acquisition is expected to strengthen Direct Energy’s position as a leading competitive energy retailer in the US Northeast.

Rolls-Royce Wins Brazilian Contract

Rolls-Royce Holdings plc won a $630 million contract from Brazil-based conglomerate Synergy Aerospace to provide Trent 700 engines and TotalCare long-term engine service support for nine Airbus A330 aircraft.

Gainers & Losers

AstraZeneca plc fell 0.9% to 2,900.50 pence after the biopharmaceutical company acquired a portfolio of neuroscience assets from Link Medicine Corp. The financial terms of the deal were disclosed.

Rio Tinto plc slumped 3.5% to 2,928.50 pence after the miner announced the retirement of Chief Financial Officer Guy Elliott.

Associated British Foods plc rose 0.4% to 1,272 pence after the food processing company reported group revenue for the 40 weeks to June 23 increased 11% from the same period last year.

HSBC Holdings plc declined 2.4% to 555 pence after the financial services provider said Sandy Flockhart will retire as a non-executive director of the company.

Vodafone Group plc dropped 1.5% to 181.34 pence after the mobile telephone services provider said its New Zealand unit has agreed to acquire TelstraClear Limited, the New Zealand business of Australia based Telstra Corporation, for NZ$840 million or £430 million.