Smith Nephew Led FTSE Stocks Decline

123jump.com Staff
01 May, 2008
New York City

The Bank of England in its report on financial stability said that the current re-pricing in the credit markets is taking longer than anticipated. But, added that prices of securities are likely to rebound from the current low in levels in months ahead. FTSE 100 index close unchanged on a weakness in energy and mining and metals related stocks. Smith & Nephew led decliners in the FTSE 100 shares with a drop of 13% followed by losses in Eurasian Natural of 3%, in Home Retail Group of 2.8%.

[R]1:00PM New York, 5:00PM London – The BoE hopes that credit markets stability will lift mortgage securities prices in the following months.[/R]

Stocks in London were flat as the Bank of England reported that confidence and risk appetite is likely to return to the market in the coming months.

Market sentiment

In London trading FTSE 100 closed unchanged at 6,087.30.

Of the 102 FTSE 100 stocks 45 gained, 56 declined and 1 was unchanged. British Airways led advancers in the index share with a rise of 7.3% on news that the airline is likely to form a tie-up with American Airlines.

Risk appetite to return in the market

The Bank of England in the Financial Stability Report published on its Web site that rising U.S. sub-prime defaults have triggered a broad-based re-pricing of risk and deleveraging in credit markets, adding that the adjustment is proving even more prolonged and difficult than anticipated.

The report added that prices in some credit markets are now likely to overstate the losses that will ultimately be felt by the financial system and the economy as a whole, as they seemingly include “large discounts for illiquidity and uncertainty.”

John Gieve, Deputy Governor for Financial Stability, said: “The unavoidable correction after the credit boom is proving protracted and difficult. However the pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals. So, while there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months.”

“To reinforce those prospects of recovery, we need to restore confidence in the banking system. That is why we have launched the Special Liquidity Scheme and why I welcome the steps taken by some banks to strengthen their capital positions.”

Economic activity fails to grow in April

The U.S. Institute of Supply Management reported today on its Web site that economic activity failed to grow in April, while the overall economy grew for the 78 months in a row.

""The manufacturing sector failed to grow in April as the PMI fell below 50% for the third consecutive month. Manufacturers are in a situation where both new orders and production are slowly declining, but prices continue to rise at highly inflationary rates. Bright spots this month are the growth in the Backlog of Orders Index after six consecutive months of decline, continued strength in new export orders and a reduction in customers' inventories,"" said Norbert J. Ore, C.P.M, chair of the ISM committee.

Gainers & Losers

British Airways led advancers in the FTSE 100 index shares with a rise of 7.28% followed by rises in Rexam Plc of 4.36%, in Thomson Reuters of 3.33%, in BG Group of 2.36%, and Carnival Plc of 2.27%.

British Airways gained on news that it is talks with Continental Airlines to broaden its One World Alliance program.

Financial stocks increased after the Bank of England reported today that confidence and risk appetite is likely to return to the market in the coming months. Standard Chartered advanced 2.01% and Barclays increased 1.86%.

Smith & Nephew led decliners in the FTSE 100 index shares with a drop of 12.98% followed by losses in Eurasian Natural of 3.33%, in Home Retail Group of 2.75%, in British Land Co. of 2.62%, and Persimmon of 2.50%.

Smith & Nephew earnings rise 23%

Smith & Nephew reported first quarter sales increased 22% to $911 million and net income increased 23% to 182 million from $148 million a year ago. Earnings per share declined to 9.3 cents from 9.7 cents. Revenue when adjusted for currency rates (up 6%) and acquisition (added 14%) was up 2%.

The medical product company purchased 7.2 million shares and added $146 million in debt to a total of $1.45 billion.

World markets review

In Tokyo Nikkei 225 Index closed lower 83.13 or 0.60% to 13,766.86, in Australia ASX 200 index lower 9.60 or 0.17% to close 5,585.80. Markets in Hong Kong and Malaysia, South Korea, Thailand, Indonesia and India were closed today.

In London FTSE 100 Index closed unchanged to 6,087.30. Market in Paris, Frankfurt and Zurich were closed today.