BoE Pumps Liquidity, UK Stocks Rise

123jump.com Staff
18 Dec, 2007
New York City

Stocks in London rise after the Bank of England pumps liquidity in the system. The bank received 10.85 billion pounds for three-month loans at average rate of 5.949%. The interbank rate known as Libor declined 4 basis points after the auction to 6.39%. Inflation in November stayed at 2.1% in the UK, however Retail Price Index rose by 4.3% on higher food and energy cost.

[R]2:00PM New York, 7:00PM London - UK stocks edged higher after the Bank of England adds liquidity to the system. November inflation rises.[/R]

In London trading, FTSE 100 gained 0.02% or 1.5 to 6,279.30 lifted by gains recorded in LSE Group. British Airways, Cadbury Schweppes, and Standard Life were among the shares that traded higher.

Most financial shares also traded higher in response to the injection of 10 billion pounds by the BoE to boost liquidity on the market.

The Bank of England on Tuesday said it had released 10 billion pounds of three-month loans as it seeks to lower money-market interest rates. The UK bank said in a statement that banks have applied for 10.85 billion pounds for the loans at an average rate of 5.949%.

The cover ratio, a measure of demand, declined from recent auctions, while the lowest rate accepted was below the central bank''s key benchmark of 5.5%.

Of the FTSE 100 stocks, 46 advanced, 55 declined, and 2 remain unchanged. Mortgage lenders Northern Rock and Alliance Leicester led the decliners in the index.

The Consumer Price Index in November remained unchanged at 2.1% annualized rate.


National Statistical Office yesterday said the price increases were driven by rising fuel prices. Average petrol prices rose by 3.5 pence per liter in November above one pound per liter; this compares with a fall of 0.4 pence per liter last year. Diesel prices also rose, by 5 pence per liter compared with a fall of 0.4 pence during the same period last year.

Retail Price Index, a measure of inflation rose by 4.3% during the period under review, up from 4.2% two months ago. The main factors influencing the RPI were similar to those affecting the CPI though there were additional upward contributions from food and motor vehicle purchase costs and a partially offsetting downward contribution from vehicle insurance. RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.2% in November, up from 3.1% in October.

When compared on equal measures CPI in the UK rose at 2.1% compared to 3.1% rise in inflation in the Euro zone.

Of the FTSE 100 stocks, LSE Group advanced 2.7% followed by increases in British Airways at 2.5%, Cadbury Schweppes at 2.5%, Standard Life at 2.2%, and Kazakhmys at 2.9%.

Home Retail advanced 0.88%, Scottish and Newcastle added 0.83%, British Land jumped 0.68%, Royal Scotland climbed 0.56% while BG Group closed firmer at 0.37%.

BHP and Lonmin tied at 1.4% firmer each while Anglo America and Vodafone surged 1% each. Rio Tinto gained 0.92%.

Of the index shares, Northern Rock fell 4.9%. The BoE treasury said on Tuesday that it was extending the guarantee it had granted to creditors of Northern Rock to a wider range of the troubled mortgage bank''s debts to preserve its credit rating. Without the support from the BoE, Northern Rock would be unable to continue to borrow in the money markets.

Of the other stocks in the FTSE 100 index, Alliance Leicester retreated 3.5%, Mitchells slid 3.3%, and Smith Nephew slumped 2.7% while Rexan traded weaker at 2.5%.

Across Europe markets closed mixed led by a weakness in brokerage and insurance stocks. Metals and mining stocks declined as well. In London FTSE 100 Index up by 1.50 or 0.02% to 6,279.30, in Paris CAC 40 Index decreased 5.51 or 0.10% to close at 5,509.37, and in Frankfurt DAX index also increased 25.30 or 0.32% to close at 7,850.74. In Zurich trading SMI closed down 77.52 or 0.91% to 8,467.07.