London Declines on Rate Hike

Ivaylo
09 Nov, 2006
New York City

The Bank of England raised the base rates from 4.75% to 5%, the highest level for five years. Pharmaceutical stocks were among the leading fallers amid fears that the victory for the Democrats in the US mid-term elections would hit the sector. Mining stocks also plunged, while electricity generators advanced. The FTSE 100 index was down 22.8 points at 6,216.2, from a five-year high in the previous session.

[R]9:30 AM London benchmark index falls due to Bank of England rate hike.[/R]
The FTSE 100 index in London lost 22.8 points to trade at 6,216.2, down from a five-year high in the previous session.

Economic News

The Bank of England on Thursday raised its key interest rate to 5% from 4.75%, its highest level in more than five years, as the central bank acts against possible wage increases that may appear in a few months.

Decliners

GlaxoSmithKline lost 1.4%. Concerns that the US Congress will look to cut the price of drugs following the recent mid-term elections had impacted GlaxoSmithKline negatively.

Mining stocks were also sharply weaker, with Xstrata off 2.4%. BT fell 1.8% after it revealed its share of the UK broadband market fell to 25% in the three months to the end of September, down from 30% in the previous quarter.

Man Group lost 0.8%, retreating from a strong run in advance of news of a 33% rise in interim profit before tax of $766 million.

Royal & Sun Alliance met expectations with news of operating profit of 590 million pounds, but its shares lost 1.1% as investors booked profits.

Dairy Crest fell 3.7% after it announced plans to place 6.3 million new shares in order to fund its 248 million acquisition of Saint Hubert, the French and Italian spreads business of Uniq.

Advancers

Scottish Power shares were last flat. Scottish Power shares jumped in early trade on reports that the Spanish group would bid for the company. The news provided hope for a further bout of cross-border consolidation and sent the wider utilities sector higher. Scottish & Southern Energy rose 2.9%.

SABMiller, the brewer, was 2.6% stronger after it reported a 33% rise in interim revenue and a 22% hike in profit before tax.

Punch Taverns was 2.1% stronger after the pub chain reported a 48% increase in profit before tax.

[R]7:30AM Asian stocks finish mixed Thursday, Japan, Australia fall.[/R]
Asian markets finished mixed on Thursday. The Nikkei 225 Index fell 0.1% to 16198.57. Internet and telecom company Softbank Corp. rose 1.1% after reporting strong quarterly profit results. KDDI, cellular operator, rose 2.4% after posting strong subscriber growth in October. NTT DoCoMo, the biggest cellular operator in Japan, traded flat. Shares of Toyota rose 0.2%, extending gains after closing at a life-time high in the previous session.

Hong Kong Hang Seng Index ended 0.8% higher at 18952.86. Oil-related, property and tech stocks lifted the stock market. China largest offshore oil producer, Cnooc, rose 2.2%, while mainland refiner Sinopec rose 1.6%. In the property sector, property developer Cheung Kong Holdings gained 0.6%. Tech shares also helped Hong Kong, with China Mobile, the second biggest large-cap by value, up 1%. Shares of Lenovo Group, the third-largest computer maker in the world by market share, jumped 3.8% ahead of its earnings report due after the market close.

Australia S&P/ASX 200 fell 0.6% to 5429.00. The market fell after the central bank raised rates a quarter point, on Wednesday, to 6.25%, its third increase this year, in a setback to the government. Oil and mining shares declined, with Australian-listed miner BHP Billiton down 0.7%. Bucking the trend, Woodside Petroleum and Santos rose 1% on higher oil prices.

The Kospi index in South Korea jumped 1.4% to close at 1399.44 and Taiwan Weighted Price Index slipped 0.4% to 7151.13. In South Korea, the stock market ended higher helped by a Bank of Korea decision to keep its benchmark overnight call rate steady, and strong construction and banking issues. In Taiwan, shares fell slightly on profit-taking after gains early in the session. New Zealand NZX-50 Index set a fresh record close, eclipsing a record peak set Wednesday, gaining 0.1% to 3823.01.

[R]6:30AM Strong earnings and US stocks give European markets a boost.[/R]
European markets were broadly higher in early trading on Thursday. By mid morning, the FTSE 100 in London nudged lower to 6,233.6, Frankfurt Xetra Dax gained 0.2% to 6,361.94 and the CAC 40 in Paris added 0.2% to 5,447.92.

Advancers

Sampo led the advancers after it agreed to sell its banking division Sampo Bank to Danske Bank. Sampo shares were up 8.5%. Danske, which plans an equity issue fell 5.5%.

Banks were mixed however, with Piraeus Bank of Greece up 1.3% after reporting better-than-expected results on Wednesday. Domestic rival EFG Eurobank was up 2%.

Allied Irish Banks gained 2.3% after its Polish unit Zachodni WBK reported a 29% rise third-quarter profit, boosted by mortgage sales

Inbev, the Belgian brewer, gained 3.5% after reporting a 25% jump in third-quarter net profit, beating expectations thanks to strong growth in Latin America and eastern Europe.

Shares in Numico rose 4% after the Dutch food group announced a better-than-expected 25% rise in third-quarter operating profit.

Decliners

Adidas was at the bottom of the pile, falling 8.4%, after it issued a surprise profit warning. The German sportswear maker cut its 2007 profit forecast after higher spending on its US Reebok division, whose profit growth will now be lower than originally forecast.

Spanish power generator Iberdrola fell 2.3% after it said it was studying a possible bid for for the Scottish Power. Rumours valued Scottish Power at 12 billion pounds. The UK company shares gained 3.8%.

Oil and gold

Oil prices rose above $60 a barrel Thursday in reaction to figures showing lower U.S. gasoline and diesel fuel inventories and to leadership changes in the U.S. Congress following midterm elections. Light, sweet crude for December delivery rose 40 cents to $60.23 a barrel by midday in Europe in electronic trading on the NYME. December Brent crude on London ICE Futures exchange was up 73 cents at $60.32 a barrel.

Gold opened Thursday at a bid price of $617.60 a troy ounce, down from $623.60 late Wednesday.

Currencies

The euro advanced to a record against the yen and rose versus the US dollar on speculation the European Central Bank will increase interest rates to damp inflation. The euro reached 150.81 yen, an all-time high, and was trading at 150.76 yen in London, from 150.34 late in New York yesterday. It traded at $1.2785 from $1.2757. Against the dollar, the British pound was at $1.9064 at 10 a.m. in London from $1.9055 yesterday. It was also at 67.03 pence per euro, from 67.00. The dollar was trading at 117.90 yen by mid-afternoon in Tokyo, up from 117.73 yen from late Wednesday in New York.

[R]5:00AM Profit-taking weighs gold futures lower on Wednesday.[/R]
December gold fell $9.40 to $618.30 a troy ounce on the NYME, while December silver gave up 12.5 cents to $12.55. January platinum settled down $25 to $1,167.30 an ounce. December palladium declined $5.90 to $328.40 an ounce. December copper settled down 12.10 cents at $3.2445 per pound.

The December crude oil contract advanced 90 cents to $59.83 a barrel after trading in a range of $58.88 to $60.30 a barrel. December unleaded gasoline settled up 3.95 cents at $1.5636 a gallon. December heating oil gained 3.03 cents to end at $1.7106 a gallon. December natural gas rose 6.8 cents to finish at $7.823 a million British thermal units.

On the New York Board of Trade, December Arabica coffee futures settled 2.80 cents higher at $1.1575 a pound, with March up 2.80 cents at $1.1985. Futures on raw sugar in foreign ports for March moved 0.38 cent higher at 11.96 cents a pound, with May up 0.33 cent at 12.07 cents.