Home Prices Decline, Friends Provident Up

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

Northern Rock unveiled a plan to repay the Bank of England by the year 2011 and shrink its balance sheet by more than half. Stocks in London trading recovered after a steady rise in copper and other metal prices lifted mining stocks. Friends Provident gained 3% after it rejected $7 billion takeover offer. Home prices fell 0.2% in March and for the year home sales volume is expected to decline.

[R]1:00PM New York, 6:00PM London- Home prices fall 0.2% in March and home sales are expected to decline in the year. Troubled lender Northern Rock unveils plans to repay BOE by 2011[/R]

Stocks in London reversed earlier losses to close higher after strength in mining stocks and rally in base metal prices. Home price report dragged stocks lower in the morning but firm metal prices lifted mining stocks in the afternoon trading.

Market Sentiment

In London trading FTSE 100 reverse a 1.9% slump in the morning session to close up 0.16% or 9.2 to 5,702.10, falling 3.2% for the month and 12% in the quarter to March.

Of the 102 FTSE 100 stocks 40 rose, 60 declined and 2 were unchanged. Antofagasta led advancers in the FTSE 100 stocks with a rise of 3.77%.

Homebuilders also rose as well. Persimmon gained 2.07% and British Land Co increased 1.66%.

Home prices fell 0.2% in March

Hometrack reported on its Web site today that house prices fell 0.2% in March and the annual rate of growth rose 0.4%, the lowest in the last two years. Hometrack forecasted 17% decline in home sale transaction activity in 2008 compared to 2007. The report further noted, “London saw an increase in the supply of homes for sale in March rising by 8.4%, while demand only grew by 2% this month.”

Recently Nationwide reported that house price inflation dropped to a 15-year low by an annualized 1.7% in March.

Northern Rock statutory loss tops £167.6 million in 2007

Northern Rock Plc reported on its Web site today that the statutory loss before tax slumped to £167.6 million in 2007 from a profit of £626.7 million a year ago due to the company’s strategic review and impairments to treasury and the turbulence on the global credit markets.

There was a slowdown in lending, especially in the second half of the year as total gross lending eased to £32.3 billion in 2007 from £33.0 billion a year ago, with total net lending of £12.2 billion.

Northern Rock predicted a loss in 2008 on further deterioration in the credit markets, the current restructure and the higher funding costs.

In addition the company announced today further details of a provisional business plan that has been approved by the Treasury that aims at pursuing four strategic priorities to meet the Tripartite Authorities’ objectives.

The plan entails reducing the balance sheet from £107 billion in 2007 to approximately £50 billion by the end of 2011, accelerating mortgage redemptions and discontinuing unsecured lending and commercial lending.

The Bank of England debt will be repaid by the end of 2011, and a funding strategy with retail deposits representing approximately 50% of the total funding by 2012 will be established.

Specific commitments in the plan include the provisions that Northern Rock will limit its share of retail deposit balances to 1.5% in the UK and 0.8% in Ireland, and its share of gross new mortgage origination to no more than 2.5%.

Inflation in the eurozone rises to 16 year high in March

Inflation in the euro zone rose from 3.3% in February to 3.5% in March according to the European Union statistics office, Eurostat in Luxembourg. Earlier the office had reported a rise of 2% in industrial orders index in January after dropping 3.6% in December.

Rising food and energy prices have been key contributors to the inflation index.

Gainers & Losers

Antofagasta led advancers in the FTSE 100 index stocks with a rise of 3.77% followed by increases in HBOS of 3.70%, in Friends Provident of 2.91%, in Hammerson Plc of 2.77%, and Kazakhmys Plc of 2.57%.

Friends Provident gained after the company rejected a $7 billion takeover bid from U.S. buyout firm JC Flowers & Co saying that the bid undervalues the company.

ITV Plc led decliners in the FTSE 100 index shares with a drop of 6.77% followed by losses in Old Mutual Plc of 4.08%, in London Stock Exchange of 4.05%, in Vodafone Group of 3.89%, and ICAP Plc of 3.48%.

ITV fell after it was downgraded from “neutral” to “sell” by UBS, which also cut its price estimate of the company by 14% to 60 pence. Vodafone also plummeted on a downgraded.

Retailers also fell on concern over deteriorating conditions in the sector. Marks & Spencer fell 2.27%, Tesco Plc shed 2.88% and Next declined 1.89%.

International Markets

In Tokyo Nikkei 225 Index closed lower 294.93 or 2.30% to 12,525.54, in Hong Kong Hang Seng index decreased 436.75 or 1.88% closed to 22,849.20. In Australia ASX 200 index higher 4.60 or 0.09% to close 5,355.70. In Malaysia KL Composite index decreased 10.89 or 0.87% closed to 1,247.52.

In South Korea Kospi Index increased 2.16 or 0.13% to close at 1,703.99, in Thailand SET index closed lower 8.14 or 0.99% to 817.03 and Indonesia JSE Index edged decreased 30.29 or 1.22% to 2,447.30. Sensex index in India decreased 726.85 or 4.44% to 15,644.44.