UK Stock Fall 2.6%, Weak Home Prices

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

The stocks in UK fell sharply after home prices fell 0.9% in June and home sales remained weak across the country. The weakness in the U.S. trading at the UK close also contributed to the weak sentiment in London trading. Record crude oil prices, rising inflation fears and worries related to further write downs at UK banks dragged market indexes lower. Barclays shed 3.4%, Royal Bank of Scotland declined 5% and Standard Chartered fell 2%.

[R]1:00PM New York, 6:00PM London- House prices fall 0.9% in June. Manufacturing index unexpectedly declines in June.[/R]

London market averages fell sharply on the first trading day of the second half as reports showed that house prices fell and manufacturing unexpectedly declined in June. Record crude oil prices are expected to fuel inflation for the rest of the year.

Market sentiment

In London trading FTSE 100 declined 2.6% or 146 at 5,479.90.

Of the 102 stocks in FTSE 100 index, 5 rose and 97 fell. Reckitt Benckise led advancers in the index shares with a gain of 2.04% followed by 1.9% rise in Hammerson.

House Prices Fall 0.9% in June

Nationwide Building Society reported that house prices dropped 0.9% from a month earlier in June and 6.3% from a year ago to £172,415, and house purchase transactions were weak across the country.

Fionnuala Earley, Nationwide''s Chief Economist commented, “The pace of house price falls slowed significantly in June. House prices fell by 0.9% during the month, less than half of the rate of the 2.5% fall recorded in May. Prices in June are now 6.3% lower than this time last year and have fallen 7.3% from their peak last October. The price of a typical house is now £172,415. This is over £13,500 less than it would have cost at the top of the market and over £11,500 less than this time last year.

However, the strength of house price growth up until last year means that prices are still 4% higher than two years ago and 9% higher than three years ago.”

Purchasing Managers Index Falls

The Chartered Institute of Purchasing and Supply reported on its Website today that the CIPS/Markit U.K purchasing managers index declined to 45.8 in June, from a downwardly revised 49.5 in May.

Separately Knight Frank said luxury home prices dropped in June as sales declined.

Insurance for 65% of Bank Deposits

The Financial Times reported on its Website today that the Chancellor of the Exchequer Alistair Darling will put in place a new financial stability system and depositor guarantee scheme that is set to increase the 100% guarantee on individual savings in a failing bank to £50,000 from the current £35,000 – covering 65% of all deposits effective February of the next year.

Gainers & Losers

Reckitt Benckise led advancers in the FTSE 100 index shares with a rise of 2.04% followed by gains in Hammerson of 1.90%, in RSA Insurance of 1.19%, in BT Group Plc of 1.05%, and International Power Plc of 0.98%.

Eurasian Natural led decliners in the index shares with a fall of 11.85% followed by losses in Ferrexpo Plc of 9.11%, in Kazakhmys Plc of 8.48%, in Carphone Warehouse of 7.28%, and Antofagasta of 6.23%.

Commodity stocks fell on profit taking and Xstrata declined 5.13%.

Financial stocks dropped on concern that asset write downs and loan defaults will rise as the economy enters a recession. Barclays shed 3.43%, Royal Bank of Scotland declined 5.12% and Standard Chartered fell 1.96%.

European Markets Indexes

The CAC 40 fell 93.64 or 2.11% to 4,341.21. In Germany the DAX 30 index dropped 102.38 or 1.60% to 6,315.94. Swiss Market index declined 108.84 or 1.56% to 6,849.67. The FTSE 100 closed lower 146.00 or 2.60% to 5,479.90.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 18.18 or 0.13% to 13,463.20. In Australia ASX 200 index lower 76.40 or 1.46% to close 5,138.90. In Malaysia KL Composite index decreased 11.74 or 0.99% closed to 1,174.83. Market of Hong Kong was closed today.

In South Korea Kospi Index decreased 8.46 or 0.51% to close at 1,666.46 and Indonesia JSE Index edged increased 29.70 or 1.26% to 2,378.81. Sensex index in India plunged 499.92 or 3.71% to 12,961.68. Thailand markets were closed today.