Taylor Wimpey Caution, BoE Auction

123jump.com Staff
17 Apr, 2008
New York City

The Bank of England weekly auction received more than three times bids for its offer of 13.7 billion pounds as interbank credit market remain seized. The Libor rate declined a fraction, but still hovered near 5.9%, significantly above the BoE target. Separately, Taylor Wimpey issued cautionary earnings guidance for the rest of the year. Of the FTSE 100 stocks, 31 rose and 70 declined on weak trading sentiment.

[R]1:00AM New York, 6:00PM London - Retailers and Homebuilders drags London stocks. The Bank of England auction, though widely popular, failed to lower Libor.

Stock in London fell led by retailers and homebuilders after Taylor Wimpey reported today in its interim management statement that ongoing market weaknesses will persist for the rest of the year and may require write down of land and work in progress on the sites.

Market sentiment

In London trading FTSE 100 declined 1.09% or 65.8 to 5,980.40.

Of the FTSE 100 stocks 31 rose, 70 declined, and 1 was unchanged. Thomson Reuters led decliners in the FTSE 100 index shares after the two companies formally merged today.

Banks take up £13.7 billion in auction

The Financial Times reported that banks were eager to participate in a weekly auction for £13.7 billion from the Bank of England. The BoE received bids worth more than three times the offer size.

The three-month Libor rate declined to 5.926% but significantly above the BoE target rate of 5%. Earlier this week bids could barely reach £15 billion on offer, but demand for short-term cash has since increased.

In today’s auction, only government issued debt was eligible for collateral.

The report noted that over the past three months, the average weekly auction has been oversubscribed by 4.5 times, adding that in recent weeks, the bank has taken steps to try to ease the logjam in short-term lending by increasing the amount it will lend for three months to £15 billion from £10 billion in January and also allowing banks to markedly increase the amount of cash they hold in reserve and against which they can borrow.

In addition, the central bank is considering plan along with finance ministry to accept or swap mortgage-based assets in exchange for government bonds, which will be used for interbank lending to improve credit markets functioning and liquidity in mortgage lending.

Gainers & Losers

SAB Miller led advancers in the FTSE 100 index shares with a rise of 5.27% followed by rises in International Power Plc of 2.87%, in Resolution Plc of 2.66%, and in Amec Plc of 2.06%.

Thomson Reuters soared after Thomson based in Canada paid £15.9 billion for the acquisition of Reuters Group in London formally merged to form the largest financial, medical and academic information provider.

Thomson Reuters led the decliners in the index with a fall of 9.3% followed by losses in Eurasian Natural with a drop of 5.07% followed by losses in Wolseley Plc of 4.08%, in Next Plc of 3.92%, in Experian Group of 3.73%, and Lonmin Plc of 3.57%.

Homebuilders fell as Taylor said the market was likely to remain depressed. “Based on current market conditions in the UK and the US, we anticipate that full year results will be at the lower end of our expectations,” said the company.