UK Indexes Slump 2.3%, Household Finance Index Decline Slows

Arthi Gupta
23 Jul, 2012
New York City

UK indexes extended world markets decline as the debt crisis in the euro zone resurface and the Libor scandal widens to regulators. UK household finance index rose in July and manufacturing sector is expected to contract this year.

[R]3:30 PM London – UK indexes extended world markets decline as the debt crisis in the euro zone resurface and the Libor scandal widens to regulators. UK household finance index rose in July and manufacturing sector is expected to contract this year.[/R]

The UK indexes declined more than 2% and deepened losses in the European trading after Spanish crisis moved from the banking sector to the broader economy and six regional governments are preparing to seek help from Madrid.

The weak commodities prices and on-going Libor scandal also contributed to the market weakness. Trading in London is linked to resources stocks and commodities and the thin volume in the summer months also exaggerated daily swings.

Regulators around the world sharpened their focus on the role of UK banks in fixing Libor and many banks in the U.S. may drop the referencing the interbank rate.

In London, the benchmark index FTSE 100 slumped 131.03 or 2.3% to 5,521.40 and the pound edged lower to $1.5523.

UK Household Finance Index Rises

Household finances in the United Kingdom deteriorated at the slowest pace in four months in July, data from a survey by Markit Economics showed today.

The headline Markit Household Finance Index rose for the second month running to 37.5 in July, from 37.0 in June but nonetheless indicated the slowest deterioration of household finances since March.

Around 32% of respondents reported that their household finances worsened in July, compared to 7% that signaled an improvement.

The index measuring households’ expectations for their finances over the year ahead climbed to 43.1 in July from 42.8 in June.

UK Manufacturing Sector to Shrink

The UK manufacturing sector is likely to contract this year, according to a report published by Engineering Employers'' Federation today.

EEF revised down the outlook for manufacturing in 2012 to decline 0.3% from the 0.1% fall forecast earlier as the uncertainty in the euro-zone, the UK’s main export market continues.

Rémy Cointreau UK Agrees to Buy Bruichladdich

Rémy Cointreau UK Limited, a wholly owned subsidiary of the Rémy Cointreau Group agreed to acquire Bruichladdich Distillery Company Limited, the Islay single malt Scotch whisky distiller.

Total transaction value amounts to £58 million, comprising of £48 million for the acquisition of the entire share capital of Bruichladdich and estimated debt of £10 million. The transaction is expected complete in 6 weeks.

Gainers & Losers

African Barrick Gold Plc plunged 10.3% to 338.40 pence after the gold miner in Tanzania reported revenue in the first half declined 8% to $534.47 million.

Net profit in the period slumped 46% to $65 million from last year.

BP plc dropped 4% to $39.85 after the energy company proposed the payment of a $1 billion interim dividend by its Russian joint venture TNK-BP.

easyJet Plc slumped 2.6% to 539 pence after the low-cost airline confirmed that its Chairman Mike Rake is not interested in becoming chairman at Barclays plc.

Essar Energy PLC fell 1.7% to 111.10 pence after the India focused energy firm’s subsidiary, Essar Oil Ltd. secured a new loan facility with banks of up to 50 billion rupees or about $900 million to meet the deferred sales tax liability of 61.69 billion rupees or around $1.12 billion owed to the Gujarat State.