UK Gilt Offering Worries; Punch Tavern Plunges

123jump.com Staff
15 Jun, 2009
New York City

UK and European stocks closed lower on worries of rising inflation, a prospect of slower economic recovery and increased government debt. UK plans to raise

[R]6:00 PM London, 1:00 PM New York – UK and European stocks closed lower on worries of rising inflation, a prospect of slower economic recovery and increase government debt. UK plans to raise £5 billion in government bond offering this week.[/R]

UK stocks closed lower as metal prices fall, investors worry about rising government debt and inflation and euphoria at G-8 ministers’ meeting last weekend. Miners and financials led the decliners in London trading.

In London FTSE 100 Index closed lower 115.94 or 2.61% to 4,326.01

UK government plans to raise as much as 5 billion in a syndicated debt offering that may be completed as early as tomorrow. The UK plan to raise 220 billion in debt this year has left many investors worried about the level of interest rate on the long and short term debt.

Barclays, Goldman Sachs, Royal Bank of Scotland and HSBC are part of the syndicate that will offer gilt that matures in 2034 with 4.5% interest rate.

The yield of bonds due in 2036 increase to 4.69% and may rise more in the second half of this year.

Gainers & Losers

Punch Taverns Plc plunges 30% to 104 pence after it announced a plan to raise £375 million and use most of the proceeds to repay convertible debt £275 million maturing next year. The company will sell 375 million shares at 100 pence each.

The owner of 8,400 pubs in the UK has cut £404 million of debt will still have £4 billion of debt after the repayment of debt next year.

Ten Alps Plc increased 3.9% to 26.75 pence after it reported annual net income increase of 7% to £3 million.

Majestic Wine Plc declined 2.4% to 182 pence after it reported 71% decline in full year income.

Lonmin Plc plunged 9.8% to 1,300 pence after the platinum miner close its furnace in South Africa and will be closed for thirty days to complete repairs.

BHP Billiton Plc declined 2.8% to 1,443 pence, Anglo American Plc dropped 2% to 1,693 pence and Xstrata fell 7.1% to 706 pence.

HSBC Holdings Plc decreased 3.1% to 530 pence, Royal Bank of Scotland fell 5% to 37.90 pence and Barclays dropped 4.5% to 278.75 pence.

Earnings Review

Majestic Wine PLC, the largest wine warehouse chain said full-year sales rose 2.4% to £201.8 million from £197.03 million a year ago. Net profit in the year fell 71% to £3.26 million or £5.3 per diluted share compared to net profit of £11.25 million or £17.7 per share a year ago.

Majestic Wine PLC, in the last one year traded as high as 224.00 pence in May 2009 and as low 105.00 pence in January 2009. Based on the Friday’s closing price of 186.00 pence the company has market cap of £114.31 million.

Ten Alps plc, a media production company said full-year revenues fell 1.5% to £80.2 million from £81.4 million a year ago. Net profit in the year rose 7.1% to £3.0 million or £5.31 per diluted share compared to net profit of £2.8 million or £4.79 per share a year ago.

Ten Alps plc, in the last one year traded as high as 58.50 pence in June 2008 and as low18.00 pence in May 2009. Based on the Friday’s closing price of 26.00 pence the company has market cap of £16.62 million.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 3 increased, 98 declined and 1 were unchanged.

Lonmin Plc decliners in the FTSE 100 index with a loss of 9.78% followed by losses in Fresnillo Plc of 7.41%, in Eurasian Natural Resources Corporation PLC of 7.26%, in Vedanta Resources plc of 7.19% and in Xstrata plc of 7.11%.

Lloyds Banking Group plc led gainers in the FTSE 100 index with a rise of 2.30% followed by increase in AstraZeneca PLC of 0.80%, in Admiral Group plc of 0.77%, in Reckitt Benckiser Group Plc of 0.00%.

Europe Markets Review

In London FTSE 100 Index closed lower 115.94 or 2.61% to 4,326.01, in Paris CAC 40 Index decreased 106.56 or 3.20% to close at 3,219.58 and in Frankfurt DAX index declined 179.30 or 3.54% to close at 4,889.94. In Zurich trading SMI decreased 121.69 or 2.20% to close at 5,400.15.