UK Stocks Fall, Credit Worries

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

Stocks in UK dropped after a business activity index showed a decline in activities in May. Businesses are battling tight credit conditions and low consumer confidence. Luxury home prices are expected to fall 5% by the end of the year. Kingfisher, home renovation retailer reported first quarter earnings jumped 9% to

[R]2:00AM New York, 7:00PM London – Credit market weakness, a decline in business activity index and a possible capital infusion needed at largest banks.[/R]

Stocks in London fell led by commodity stocks as the price of both oil and metals dipped as dollar strengthened. The price of crude oil also fell after India passed on 5% rise in fuel prices to consumers. Indonesia, Malaysia and Sri Lanka have also passed on higher fuel costs to consumers. Higher prices at pump stations are likely to dampen the demand for fuel.

Market sentiment

In London trading FTSE 100 stocks fell 1.45% or 87.6 to 5,970.10.

Of the 103 FTSE 100 stocks 36 gained, 64 declined, and 3 were unchanged. British Airways led advancers in the index shares with a rise of 5.63% as crude contract prices for July delivery fell by 0.9% to $123.15 per barrel.

[U.K services from banks to airlines fell first time in five years

The Chartered Institute of Purchasing and Supply reported on its website today that according to the latest CIPS/NTC Purchasing Managers Index on services, activity in the sector in May registered a figure of 49.8 from April’s growth figure of 50.4%. A figure below 50 represents contraction.

The CIPS also reported that new orders also fell for the first time in five years, as activity declined to 48 in May from 51.5 realized a month earlier on conservative spending by clients. In addition, input prices jumped to 67.7 from 67.3 in April spurred by fuel prices.

On the overall, the sector’s profitability declined to 43.9 from 45.9 a month before, while staff levels fell to 46.5, dropping below 50 for the first time in 57 months.

Luxury home prices fall to lowest since 1990s

Knight Frank LLP reported in a statement today that the average price of houses and apartments costing more than £2 million declined 1.5% in May for luxury home prices in central London.

The company said the prime-property market for central London has declined significantly in the past two months and prices are likely to decline 5% by the year.

Knight Frank''s head of residential research Liam Bailey commented, “Purchasers are struggling to access finance at the current time and, combined with weaker sentiment, this has led to a slump in sales.''''

Gainers & Losers

British Airways led advancers in the FTSE 100 stocks with a rise of 5.63% followed by rises in Smith & Nephew of 3.84%, in Smith Group Plc of 3.45%, in Alliance & Leicester of 3.06%, and First Group Plc of 2.80%.

British Airways rose after crude oil prices dropped, with contract prices for July delivery falling 0.9% to $123.15 a barrel as India lowered its fuel subsidies.

Vodafone led decliners in the FTSE 100 stocks with a fall of 4.98% followed by losses in London Stock Exchange of 4.47%, in Vedanta Resources of 4.21%, in BP Plc of 3.89% and National Grid Plc of 3.81%.

Vedanta Resources and other commodity stocks fell after crude oil and metal prices dropped and 1.2% fall in gold price. Vedanta has recently made a bid for a bankrupt mine Asarco located in Arizona, U.S.

Kazakhmys shed 3.80%, Royal Dutch Shell-A declined 2.91% and Royal Shell-B fell 2.88%.

Financial stocks also fell as well. Barclays declined 2.29% after Fitch Ratings analyst at a conference in Tokyo suggested that the bank and Societe Generale and BNP Paribas need to raise capital. Standard Chartered fell 2.93%.

Kingfisher’s earnings rise 8.9%

Kingfisher reported in its trading update for the first quarter ended May 3 earnings before interest and tax jumped 8.9% to £96 million beating the analysts’ estimate of £83.3 million. As at May 3 2008 net debt was at £1.5 billion and net sales were £4.9 billion.

Also outdoor seasonal product sales fell compared to a year ago at most European locations due an early Easter holiday and poor weather.