UK Inflation at 2.4%, HSBC Faces $1 Billion Fine

Arthi Gupta
17 Jul, 2012
New York City

The UK indexes dropped after inflation eased and home prices rose. HSBC is facing as much as $1 billion in fines for violating anti-terrorism laws. Bank of England Governor denied that the New York Fed gave warnings on rate fixing.

[R]4:05 PM London – The UK indexes dropped after inflation eased and home prices rose. HSBC is facing as much as $1 billion in fines for violating anti-terrorism laws. Bank of England Governor denied that the New York Fed gave warnings on rate fixing.[/R]

The UK indexes slid after annual inflation eased unexpectedly in June.

The Federal Reserve Chairman Ben Bernanke repeated his weak assessment of the U.S. economy and said economic recovery is modest and jobs market is improving “frustratingly slow.”

Bernanke held the Fed’s outlook for the economy and said that the economy will continue to expand at a “moderate” pace in coming quarters and said planned cuts in federal spending at the end of the year could push the economy back into recession.

However, he said the Fed has kept interest rates at record lows for more economic growth but expects the unemployment rate to hold above 8% through year''s end.

He did not cite any specific strategy for an improvement in economic growth.

In London, the benchmark index FTSE 100 declined 19.16 or 0.3% to 5,643.31 and the pound edged lower to $1.5620.

Bank of England governor Mervyn A. King told a parliamentary committee that the New York Fed in 2008 did not suggest any illegal activities in reporting Libor rates.

In his appearance to the British parliamentary committee on Tuesday, King said discussions with the Fed officials in New York focused on how to improve the London interbank offered rate.

King said, “At no stage did he or anyone else at the New York Fed raise any concerns with the Bank that they had seen any wrongdoing.”

Timothy F. Geithner, then the head of the New York Fed and now the U.S. Treasury Secretary, sent an e-mail to Mr. King in June 2008 that suggested reforms to the Libor including recommendations that regulators “strengthen governance and establish credible reporting procedure” and eliminate “incentives to misreport.”

UK Inflation Eases

UK annual inflation eased unexpectedly in June, data from the Office for National Statistics showed today.

Consumer price inflation fell to 2.4% in June from 2.8% in May. From a month ago, the consumer price index declined 0.4% in June following a 0.1% fall in May.

Retail price inflation eased to 2.8% in June from 3.1% in May. The annual rate is the lowest since December 2009.

UK Home Prices Rise

Home prices in the United Kingdom rose in May, data released by the Office for National Statistics showed.

The home price index increased 2.3% annually in May following a 1.4% rise in April.

The annual increase reflected growth of 2.6% in England and 3.5% in Wales, offset by declines in Scotland and Northern Ireland of 1.0% and 10.3% respectively.

Gainers & Losers

HSBC Holdings plc fell 0.9% to 551.70 pence after the financial services provider will appear before the United States Senate Permanent Subcommittee on Investigations about its role in facilitating financial transaction that violated U.S. laws.

The bank is likely to face as much as $1 billion in fines.

Rio Tinto plc declined 1.9% to 2,931 pence after the miner reported second quarter iron ore production was unchanged from a year earlier and shipments increased 4% to 115 million tons from a year ago period.

Royal Dutch Shell Plc rose 0.1% to 2,215.50 pence after the oil and gas explorer said it would not revise its 220 pence per share offer to acquire Cove Energy Plc and not take part in the auction procedure for Cove.

Wolseley plc slumped 2.8% to 2,264 pence after the plumbing and heating products distributor decided to explore strategic options for the future of its businesses in France.