Crude Oil Rises, UK Financials Decline

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

UK stocks fell after yet another day of weak financial stocks. Sumitomo Bank is reported to agree to inject 100 billion yen in Barclays Bank. The bank has denied that it needs to raise capital to strengthen its capital base and has sufficient capital to cover the losses in its risky loans. Crude oil surged 3% as Israel conducted military exercises in preparation of possible strikes to Iranian nuclear installation.

[R]3:00PM New York, 8:00PM London – Weak banks, financials dragged indexes. Rising tensions in Middle East lifted crude oil price 3%.[/R]

London stock indexes fell on investor downgrades and weaknesses in financial stocks on news that Sumitomo Mitsui Banking Corp. will inject 100 billion yen in Barclays to bolster its capital base.

Market sentiment

In London trading FTSE 100 fell 1.53% or 87.6 at 5,620.80.

Of the FTSE 100 stocks 26 gained, 75 declined, and 1 was unchanged. Tullow Oil led advancers in the index shares with a rise of 6.07% followed by Antofagasta gaining 4.72%.

Brokerages downgrade HBOS

HBOS reported on its Web site yesterday that house prices declined 2.4% in May from the previous month but increased 3.8% from a year earlier at £184,111.

Commented chief economist Martin Ellis said, “The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability. These factors have curbed housing demand. High employment levels, low interest rates and a shortage of new homes support housing valuations.""""

Brokerages Credit Suisse, Lehman Brothers Holdings Inc and Merrill Lynch & Co. lowered their price estimates on the mortgage lender.

Bean appointed Deputy Governor

The Financial Times reported today that former chief economist of the Bank of England Charlie Bean has been appointed as deputy governor and career economist Spencer Dale was promoted to chief economist.

Gainers & Losers

Tullow Oil led advancers in the FTSE 100 index shares with a rise of 6.07% followed by increases in Antofagasta Plc of 4.72%, in British Land Co of 3.03%, in Amec Plc of 2.26%, and British Energy of 2.24%.

Tullow Oil gained after oil prices rebounded above $136 a barrel ahead of a meeting between consumers and oil producers in Jeddah, Saudi Arabia. Israel ratcheted up tensions in the Middle East by conducting military exercises that many believe are in preparation for a possible strike to targets in Iran.

Hammerson surged 2.18%, Land Securities spiked 1.67% and Persimmon edged up 1.58%.

Wolseley led decliners in the FTSE 100 stocks with a drop of 5.26% followed by losses in Carphone Warehouse of 5.24%, in Tate & Lyle of 5.07%, in HBOS Plc of 4.89%, and Thomson Reuters of 4.36%.

Wolseley fell after Morgan Stanley downgraded the shares to “underweight” from “equal-weight”.

HBOS Plc dropped as Credit Suisse Group AG, Lehman Brothers Holdings Inc. and Merrill Lynch & Co. lowered their estimated target price on the lender.

Also financial stocks plunged on news that Sumitomo Mitsui Banking Corp. is likely to inject 100 billion yen into Barclays. Royal Bank of Scotland fell 2.45% and Barclays shed 2.40% on the news.