Mortgage Worries, BP Hikes Reserves

123jump.com Staff
04 Mar, 2008
New York City

FSA survey indicated that nearly 20% of mortgage holders are concerned about meeting their monthly payments. Separately, a survey of construction industry showed a decline in growth in construction activity in February. The two reports dragged stocks lower. BP increased its reserves to cover claims from 2005 Texas refinery explosion to $2.1 billion from $1.6 billion. Cable & Wireless fell after company projected growth rate that analyts found ambitious.

[R]2:00PM New York, 7:00PM London - Worries related to domestic home mortgages, rising credit losses at the American banks and brokerages dragged UK stocks lower. Construction industry survey showed a decline in UK activities.[/R]

Stocks in London fell after a government report showed that one in every five mortgage holders were unsure how they were going to meet their repayments. Analysts were also skeptical after Cable & Wireless forecasted that sales in Europe, Asia and the U.S. will rise 5% to 8% per annum for the next five years.

Market Sentiment

In London trading FTSE 100 stocks fell 0.87% or 50.9 to 5, 767.70.

Of the FTSE 100 stocks 34 gained, 64 declined, and 4 were unchanged. Kazakhmys Plc led advancers in the FTSE 100 stocks with a rise of 5.18% after metal prices increased.

Mortgage holders concerned about repayments

The Financial Services Agency reported on its website yesterday that one in five mortgage holders are concerned about meeting their repayments in the next 12 months

A quarter of those interviewed said they had no plans.

The agency added that it is now launching a £2 million advertising campaign to assist consumers make informed financial decisions and find the right mortgage for them.

According to FSA, it will focus on people with lower introductory rate on fixed rate mortgage and help them to make an informed decision.

Construction Index Falls in February

Bloomberg news reported today that according to the Chartered Institute of Purchasing and Supply an index on a survey of purchasing managers at construction companies declined to 52.4 in February from 53.9 in January.

BP increased the reserve to $2.1 billion for Texas refinery explosion

BP Plc increased its reserve at the end of 2007 to $2.1 billion from $1.6 billion to cover claims from the explosion at a Texas refinery in 2005. The company had earlier estimated to settle nearly 2,000 claims with a total of $1.6 billion. However, the claims have increased since then from the original claims of $700 million. The explosion killed 15 workers and 4,100 lawsuits were filed since then.

The U.S. Court of Appeals is still reviewing the legality of victim rights and maximum limit of $50 million for individual awards.

Gainers & Losers

Kazakhmys Plc led the gainers in the FTSE 100 stocks with a rise of 5.20% followed by increases in Schroders Plc of 3.89%, in Schroders Plc-NV of 3.73%, in Lonmin Plc of 2.54%, and in Anglo American Plc of 2.41%.

Schroders Plc rose after the company reported that full-year profit of £299.7 million was above analyst expectations. Also gains in U.K. and Asia offset withdrawals in funds. The company had a record £8.8 billion to its retail business in 2007.

Admiral Group led decliners in the FTSE 100 stocks with a fall of 15.67% followed by losses in Cable & Wireless of 11.50%, in Yell Group Plc of 6.84%, in Taylor Wimpey of 3.90%, and in International Power Plc of 3.33%.

Admiral Fell after Chief Executive Officer Henry Engelhard it is unlikely to increase rates above the rate of claims.

Homebuilders fell after CIPS said that an index of purchasing managers at construction companies fell to 52.4 indicating a slowdown in the construction industry.

Cable & Wireless declined after reservations by analysts on the phone company’s claims that sales in Europe, Asia and U.S. unit will rise 5% to 8% a year for the next five years and the company will meet its cash-flow targets for this year.

Company News

Travis Perkins said today that second half profit rose 2.9% to £93.1 million from £90.5 million a year earlier. Also sales increased 11% on the year to £1.6 billion.