Market Updates
UK Sells
Darlington Musarurwa
16 Jun, 2009
New York City
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In cautious trading stocks in London edged higher. UK debt offering received substantially higher interest for its debt offering that was increased to
[R]1:00PM New York, 6:00PM London – In cautious trading stocks in London edged higher. UK debt offering received substantially higher interest for its debt offering that was increased to £7 billion. The consumer price index in May declined to 2.2% but stayed above the central bank target. Rolls Royce Group received two orders from airlines based in the Middle East and Asia.[/R]
UK stocks edged higher after inflation fell in May but stayed above the level targeted by the Bank of England. The UK debt auction also attracted bids worth twice the amount of £7 billion offered.
The UK inflation is expected to fall to 1% but the rate of decline has been slower than previously projected. The weak pound and a rise in commodities prices have contributed to higher food and transportation costs.
In London trading FTSE 100 Index rose 0.1% or 2.56 to 4,328.57.
Of the 102 FTSE 100 index stocks 53 rose, 48 declined, and one was unchanged. BT Group led gainers in the index shares with a rise of 8%.
U.K. Inflation Slows to 2.2% in May
The Office of National Statistics reported today that the consumer price index annual inflation declined 2.2% in May from 2.3% a month ago.
Annual inflation measured by the Retail Prices Index, that includes housing costs such as mortgage interest payments and council tax eased to -1.1% in May, compared with -1.2% in April.
Downward pressure on CPI inflation came from food and non-alcoholic beverages, on slowing meat prices, while housing and household services also contributed to the decline, mainly due to electricity bills, where tariffs fell this year.
However, upward pressure on the CPI came from alcoholic beverages and tobacco, reflecting the increase in excise duty in this year’s budget.
In addition, further increases came from recreation and culture, including an effect from recording media such as pre-recorded DVDs where prices rose this year but fell from a year ago.
RPIX inflation - the all-items RPI excluding mortgage interest payments was 1.6% in May from 1.7% in April.
U.K. Sells £7 billion of 25-Year Gilts
The UK Debt Office Management reported today that it completed £7 billion of 4.5% 2034 Treasury bonds that yielded 4.646%. The bid to cover ratio was 2.18.
Investors bid £15.3 billion of the bonds.
A day ago the Debt Management Office had estimated to raise between £3 billion and £5 billion. The high interest came mostly from domestic investors as they snap 96% of all bonds offered.
UK government is planning to raise £220 billion this fiscal year and investors are still worried that bond markets may not be able to absorb all the debt. However, if today’s auction was any indication the government will have no difficulty in selling all the bonds in the current fiscal year.
UK used for the first time a syndicated auction in the last since 2005 when it offered 50- year inflation-protected securities.
HSBC, Royal Bank of Scotland and Goldman Sachs and Barclays Plc managed the debt offering. Media reports suggest that they received between £12 and £15 million in fees.
Gainers & Losers
Rio Tinto fell 2.5% on falling commodity prices.
Nighthawk Energy Plc plunged 24.3% to 32 pence after the company failed to receive initial payment of $10.9 million due today for 10% working interest from the company and its partner. The deal focused on the Jolly Ranch production and development field in Colorado.
San Severina Holdings SA based in Lugano, Switzerland had earlier indicated to acquire 20% stake in the field and pay $21.9 million and later expand that to six other fields with a total investment of $80 million.
Rolls Royce Group increased 1.4% to 331 pence after it received an order valued on a list price basis as much as $1.8 billion from AirAsia X aircraft and $190 million share in an order for UAE based airline Etihad to fit engines for a total of 20 Airbus A320 planes.
Broker upgrade lifted stocks of BT Group and Serco.
FTSE 100 Index Movers
Of the stocks in the FTSE 100 index, 53 increased, 48 declined and 1 were unchanged.
Rio Tinto plc decliners in the FTSE 100 index with a loss of 2.45% followed by losses in BG Group plc of 2.18%, in Smith & Nephew plc of 2.06%, in AMEC plc of 2.05% and in Balfour Beatty plc of 1.87%.
BT Group plc led gainers in the FTSE 100 index with a rise of 8.01% followed by increase in Man Group Plc of 4.28%, in Lloyds Banking Group plc of 3.74%, in National Grid plc of 3.32%, in Friends Provident plc of 2.26%.
Europe Markets Review
In London FTSE 100 Index closed higher 2.56 or 0.06% to 4,328.57, in Paris CAC 40 Index decreased 5.63 or 0.17% to 3,213.95 and in Frankfurt DAX index closed higher 0.78 or 0.02% to 4,890.72. In Zurich trading SMI decreased 23.05 or 0.43% to 5,377.10.
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