Weak UK Service Sector

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

UK service sector index that tracks output rose 0.5% in the quarter ending in March, according to government statistics released by the ONS. The anemic rise in the service sector dragged stocks lower. The output fell fractionally in the last two months. Separately, Halliburton made an offer to purchase Expro International at 1,525 pence, 7% higher than the offer from Candover Partners. Expro jumped 6% to close above the offer price from Halliburton.

[R]1:00PM New York, 5:00PM London - UK service sector output index rises at an anemic rate of 0.5% in the quarter to March.[/R]

London stock indexes plummeted after a government report showed that the economy expanded at the slowest pace since 2005. Falling nickel prices and oil that retreated from a record gains in the recent weeks, also dragged commodity stocks.

In London trading FTSE 100 fell 1.53% or 94.3 at 6,087.30. Of the 102 FTSE 100 stocks 21 gained, 79 declined, and 3 were unchanged. Imperial Tobacco led advancers in the index shares with a rise of 6.39% followed by Cable & Wireless increasing 4.09%.

Output index for the service sector rises 0.5% in the quarter to March

The Office of National Statistics reported today that the seasonally adjusted chained volume index for the output of the service sector increased 0.5% from a quarter earlier in the three months to March. Significant increases were recorded in government and other services, business services and finance and distribution.

Between February and March service sector output declined by 0.1%, with the most significant drop in business service and finance.

According to the statistics office, output from distribution advanced 0.8% in the three months to March from the previous quarter with the most significant increase was in retail and output from hotels and restaurants was unchanged.

In addition output from transport, storage and communication advanced 1% in the quarter to March compared with the previous quarter and the most significant increases were in land transport and other transport services.

Output from business services and finance increased by 0.4% in the three months ending March and output from business services and finance declined 0.4% between February and March.

In the quarter to March, output from government and other services rose by 0.5% compared with the previous quarter.

Statistics also show that investment fell 1.6% in the first quarter from the previous three month after, while the business services and finance category grew 0.4% and consumer spending advanced 1.3% on the quarter.

Halliburton made a higher offer for Expro international

Halliburton Company, the military contractor and oilfield service provider made an offer of £1.71 billion for the second largest driller, Expro International. The deal values the company at 1,525 pence per share.

The oilfield drillers and contractors are enjoying on the steepest rise in business on sustain demand for oil from the U.S., China and India. The all cash offer for deep driller from Halliburton comes at a time when crude oil is trading at a record high near $133 a barrel.

The rise in crude oil supply has not kept up with the surge in demand in the last five years. Much of oil that is discovered in the recent past has been in difficult geographies and complex geologies. The oil companies have been searching for oil at depths below 3,000 feet or 1,000 meters. Expro is known for its deep drilling and testing capabilities.

The Halliburton bid tops the earlier bid on April 17 from Candover Partners and Goldman Sachs Group of 1,435 pence per share. The stock in London trading today jumped 5.5% to 1,626 pence on the hopes that Candover will return with a higher offer.

Gainers & Losers

Imperial Tobacco led advancers in the FTSE 100 index shares with a rise of 6.39% followed by rises in Cable & Wireless of 4.09%, in Capita Group of 2.12%, in ITV Plc of 2.07%, and Kingfisher of 1.97%.

Cable & Wireless extended yesterday’s gains when it said that it may split itself up and sell some of its assets.

Kazakhmys Plc led decliners in the FTSE 100 index shares with a drop of 5.57% followed by losses in Rio Tinto Plc of 5.55%, in Antofagasta Plc of 5.26%, in Anglo America of 4.83%, and BHP Billiton of 4.74%.

Commodity stocks fell after Nickel fell in London today on slower demand rise from China. Oil prices also retreated from the record jump to $135 per barrel, but rose today by $2 to $132 a barrel on busier hurricane season forecast in the U.S. Tullow Oil fell 3.61%, Xstrata dropped 3.93% and Vedanta Resources shed 2.68%.