Financials Drag UK stocks 2.5% Lower

123jump.com Staff
21 Nov, 2001
New York City

UK stocks declined on the sell-off in banking and resource stocks. FTSE 100 index lost 2.5% to close at 6,070.90. Northern Rock, at the center of the storm in the credit market losses, fell again, seventh decline in a row. UK Monetary Policy Committee minutes of meeting suggest that the interst rate may remain unchanged for a while. Resource stocks fell sharply led by a loss in Vedanta Resources of 5.1% and in Antofagasta of 4.9%. Oil inched near $100 a barrel.

[R]1:00PM New York, 6:00PM London - UK stock fell led by Northern Rock. Oil prices peaks at $99. UK interest rates are likely to remain unchanged.[/R]

In London trading, FTSE 100 declined 2.5% or 155.6 at 6,070.9 on broad selling led by Northern Rock, and weakness in financial and resource stocks. BG Group led the advancers. Of the FTSE 100 index stocks, only 5 advanced while the rest retreated.

The BoE''s Monetary Policy Committee voted 7 to 2 in favour of holding the UK interest rate at 5.75%, according to the minutes from MPC meeting held between November 8th and 9th and released by the BoE today.

The UK interest rates may remain unchanged at 5.75% after seven out of nine policy makers at the Bank of England voted to keep the rates unchanged.

Deputy governor John Gieve and David Blanchflower were the only policy makers who voted for a quarter point reduction to borrowing costs. The two argued that the five increases in rates since August 2006 was sowing the housing market and any delay in lowering the rates will only trigger a wider slow down in the economy.

However, of the policy makers who voted against a move including BoE governor Mervyn King said while there had been a clear change in financial markets and credit conditions, the evidence of significant effects on household or business activity was so far limited.

Oil prices reached a record high on Wednesday as the price of a barrel reached near $100. Prices rose in U.S. trading of Tuesday and were higher in Asia with the light sweet crude West Texas Crude reaching a peak of $99.29. In the UK, Brent crude added 91 cents to a record $96.40 a barrel.

Renewed supply fears and concerns over the weakness of the U.S. dollar lifted oil prices higher. Oil price may rise if the U.S. weekly inventory report show larger decline that expected. Oil price breached the November 7 record prices of $98.62 a barrel are expected to remain high as the beginning of winter in the northern hemisphere approaches.

Oil has risen more than 60% since the beginning of the year and over 40% over the past three months.

Of the FTSE 100 shares, Northern Rock led the decliners at 12.6% on reports that some companies were still interested in taking over the bank but at a lower than yesterday’s close price. After the seventh decline in a row, Northern Rock has lost more than 90%.

In London, other financial share traded lower. Barratt Development shed 5.5%, Standard Life retreated 5.4%, Home Retail slumped 5.2%, Barclays traded lower at 5%, Standard Chartered lost 4% while Bank Scotland fell 3.7%.

Mining stocks were lower. Vedanta Resources lost 5.1%, Anttofagasta fell 4.9% while Anglo America traded lower at 4.5% as platinum and gold prices fell.

Of the UK shares, BG Group surged 2.5%, Royal Dutch SH-B went up 1.8%, Royal Dutch SH-A jumped 1.7%, Enterprises Inns clumped 1.5% while Imperial Tobacco traded firmer at 0.2%.