Rate Hike Leads London Lower

Ivaylo
11 Jan, 2001
New York City

The central bank raised the base rates from 5% to 5.25% in a move that took the market by surprise. Real estate and housebuilders were worst hit by the sell-off. Investors took profits from the retail sector sending shares of Sainsbury south. However, the downslide in the retail sector was offset by strength in the mining sector, with BHP Billiton a leading advancer. The FTSE 100 shed 16.2 points at 6,144.5 in early afternoon trade.

[R]9:30AM NY-2:30PM London The FTSE 100 dips following central bank rate hike.[/R]
Having advanced 38 points before the announcement of the central bank, the FTSE 100 lost 16.2 points at 6,144.5 in early afternoon trade.

Economic news

Interest rates reached their highest level in more than five and a half years on Thursday after the Bank of England raised the cost of borrowing to 5.25%. The bank supported its move by saying that there is a risk if the inflation rising further above the targeted 2% in the near term.

Manufacturing output in the UK advanced for the first time in three months during November, but underlying growth remained almost unchanged, a report says on Thursday.

Advancers

Miners advanced, with BHP Billiton a leading the sector higher, up 2.4%. ITV rose 1.4% after Deutsche Bank raised its rating on the commercial broadcaster from hold to buy”. Insurer Royal & Sun Alliance firmed 2 % after Citigroup increased its rating from sell to hold and raised its price target. British Airways rose 1.2% and cruise ship operator Carnival put on 2.2% as travel and leisure stocks were cheered by the continued fall in oil prices.

Decliners

Persimmon slumped 3.5%, British Land fell 2.2%, Land Securities was off 2.1% and Enterprise Inns eased 3.1%. PartyGaming lost 4.4% on reports that UBS had placed 160 million shares in the online gaming group.

Sainsbury slipped 1.6%. Strong quarterly performance attracted profit-booking after the company announced that sales gained 4.2 % and Christmas week online sales rose by more than 60%. Alliance Boots lost 1.4% after it missed forecasts for third-quarter underlying sales. HMV fell 1.2% as the music and book company posted a first-half loss of 31.8 million pounds but said that sales had improved over the Christmas period.

[R]7:30 AM Asian markets fell Thursday, Japan led the decline on rate fears.[/R]
Asian markets declined Thursday. Tokyo''s Nikkei 225 index ended down 0.6% at 16,838.17. Tokyo Electron rose 1.2% after the company said orders for chip-making equipment rose sharply in the July-to-September period. Matsushita Electric Industrial Co. gained 0.9% after unveiling a business strategy aimed at boosting profits. Toyota Motor Corp reversed early gains to end 0.4% lower. However, Honda Motor Corp rose 0.4%.

Hong Kong''s blue chip Hang Seng Index ended 0.9% lower at 19,385.37. The China Enterprises Index, following shares of mainland-incorporated companies listed in Hong Kong, shed 1.4% to 9,511.76. The Kospi in South Korea ended 0.70% higher at 1,365.31. Samsung Electronics advanced 1%. Samsung will reportedly supply semiconductors for the new iPhone of Apple.

Elsewhere in Asia, Australia S&P/ASX 200 gained 0.8% at 5,564.90, but China Shanghai Composite shed 2.1% to 2,765.40, Malaysia KLSE Composite dipped 0.6%, Taiwan Weighted Price Index gave up 0.6% and Indonesia JSX Composite lost 0.4%.

[R]6:30 AM European shares were higher on Thursday on techs, Metro.[/R]
European markets advanced in early trade on Thursday. The U.K. FTSE 100 advanced 0.5% at 6,188.60, the German DAX Xetra 30 index gained 0.6% at 6,606.09 and the French CAC-40 index rose 0.6% at 5,532.11.

Advancers

Of updates, shares in German retailer Metro Group rose 2.1% as its 2006 sales gained 7.5% to around 60 billion euros, helped by sales growth of 1.9% in Germany and international sales growth of 12.4%. Dutch bank ABN Amro advanced 2.6% after Merrill Lynch upgraded the company to buy. Deutsche Bank upgraded U.K. broadcaster ITV to buy from hold. ITV shares rose 2.6% in London. Spanish tobacco company Altadis advanced 1.6% on a report that Imperial Tobacco Group is considering a 10 billion-euro bid for its Franco-Spanish rival.

Miners BHP Billiton and Rio Tinto climbed more than 1.9%. Technology sector was higher with Nokia advancing 1.5% and Infineon Technologies up 1.6% on strength in the technology sector and Alcoa Inc. strong start to the fourth-quarter earnings season. Vodafone Group Plc, the world''s largest cellular-phone company, rose 0.5. Lehman Brothers Holdings Inc. raised its recommendation Vodafone shares to overweight from equal weight.

Decliners

U.K. supermarket chain J. Sainsbury declined 1.6% after it said that its third-quarter comparable sales increased 4.2%, or 5% excluding fuel.

Oil and gold

Crude oil declined and was below $54 a barrel, after U.S. demand for fuel dipped to its lowest in more than two years. Crude oil for February delivery fell $1.08, or 2%, to $52.94 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude for February settlement shed $1.09, or 2%, to $52.60 a barrel in electronic trading on the ICE Futures exchange. Gold for immediate delivery lost $1.70, or 0.3%, to $609.60 an ounce.

Currencies

The euro advanced to 155.96 yen in early trade in London from 154.77 late yesterday in New York. It also was at $1.2964 against the dollar from $1.2938. The yen fell to 120.29 against the dollar, from 119.64.

[R]5:00 AM Copper futures bounced back on short covering, gold declined.[/R]
Most-active March copper gained 10.8 cents to close at $2.6640 per pound while February gold lost $1.60 to end at $613.40 a troy ounce. March silver settled down 15 cents at $12.445. April platinum advanced $23.10 at $1,156.80 an ounce while March palladium finished lower 65 cents at $330.90 an ounce.

Crude oil dipped $1.62 to finish at $54.02, the lowest close since June 10, 2005. February heating oil slipped 3.10 cents to close at $1.5255 a gallon. February gasoline settled down 4.04 cents to $1.4292 a gallon while February natural gas gained 12.4 cents to end at $6.755 per million British thermal units.

On the New York Board of Trade, Arabica coffee futures advanced and the March contract closed up 2.35 cents at $1.2075 a pound, with May up 2.35 cents at $1.2385. Futures on raw sugar in foreign ports for March moved 0.02 cent higher to close at 11.12 cents a pound, with May up 0.04 cent at 11.23 cents.