European Banks, UK Home Builders Fall

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

European stocks closed lower after crude oil traded at another record high and prospect more capital raising from European banks. Benchmark indexes in UK, France, Germany and Switzerland fell. Swedbank dropped 6% and Banco Santander lost 4%. Banks may need as much as $90 billion to meet their required capital reserves. UK stocks fell after a private equity fund decided not to proceed with investment in home builder Bradfod & Bingley.

R]1:00AM New York, 5:00PM London – Home builders decline after TPG terminates its £179 million investment in Bradford & Bingley.[/R]

London stock indexes fell on news that TPG Inc has opted out of its £179 million investment in mortgage lender Bradford & Bingley after Moody’s downgraded its senior unsecured and long-term debt ratings from A3 to Baal.

Other homebuilders fell on the news but commodity stocks bucked the downtrend as crude oil price hovered around $145 a barrel.

Market Sentiment

In London trading FTSE 100 declined 1.16% or 63.8 at 5,412.80. Of the 102 FTSE 100 stocks 16 advanced and 86 declined. Tesco led advancers in the index shares with a rise of 5.18% followed by ITV increasing 3.65%

TPG Avoids Bradford & Bingley

Bradford & Bingley said in a statement that TPG has informed the homebuilder that it does not intend to complete its £179 million investment in the company.

TPG’s decision was taken after Moody’s downgraded the lenders senior unsecured and long-term debt ratings from A3 to Baa1 and maintained its short-term rating at P2.

However Bradford & Bingley noted that it will continue with its enlarged rights issue plan supported by the current shareholders including M&G Investment Managers, Legal & General Investment Management, Insight Investment and Standard Life Investments- with net proceeds of approximately £400 million.

In addition, the subscription price will remain unchanged at 55 pence per share and Citigroup and UBS will underwrite the enlarged rights issue.

European Banks Need 90 billion Euros

Goldman Sachs reported that European banks might need to raise 90 billion euros to maintain their current levels in the wake of the turmoil in the credit market.

European banks have already raised $115 billion and may need additional capital of 60 billion euros to raise their Tier 1 capital to 9%.

Gainers & Losers

Tesco led advancers in the FTSE 100 index shares with a rise of 5.18% followed by increases in ITV Plc of 3.65%, in WM Morrison of 2.83%, in Rio Tinto of 2.56%, and Next Plc of 2.28%.

Retailers increased after Qatar Investment Authority shored its stake in JB Sainsbury to 26% by purchasing 12.4 million shares for £10.5 billion between June 25 and July 2.

Rio Tinto and other commodity stocks after crude oil prices hovered around $145 per barrel. Xstrata edged up 1.46% and BHP Billiton advanced 0.80%.

Friends Provident Plc led decliners in the FTSE 100 stocks with a drop of 6.90% followed by losses in British Airways of 5.74%, in TUI Travel Plc of 5.27%, in ICAP Plc of 4.95%, and Legal & General of 4.83%.

Financial stocks fell after Moody’s downgraded Bradford & Bingley’s senior unsecured and long-term debt ratings from A3 to Baa. Barclays slumped 4.45%, Old Mutual declined 4.24% and Standard Chartered slumped 3.46%.

Homebuilders also dropped as well. Wolseley shed 4.43% and Whitbread edged down 3.88%.

World Marts Review

The Nikkei 225 Index in Tokyo closed lower 27.51 or 0.21% to 13,237.89, Hang Seng index in Hong Kong increased 181.04 or 0.85% to close to 21,423.82. ASX 200 index in Australia increased 83.80 or 1.68% to close 5,082.10. The KL Composite index in Malaysia decreased 19.56 or 1.70% to close at 1,134.14.

The Kospi Index in South Korea decreased 28.60 or 1.78% to close at 1,577.94, SET index in Thailand closed higher 0.88 or 0.12% to 743.03 and JSE Index in Indonesia increased 28.14 or 1.23% to 2,314.75. The Sensex index in India increased 359.89 or 2.75% to 13,454.00.

The FTSE 100 index in London closed lower 63.80 or 1.16% to 5,412.80, CAC 40 Index in France decreased 77.99 or 1.80% to close at 4,266.00 and DAX Index in Germany closed lower 81.53 or 1.28% to 6,272.21. The SMI index in Switzerland decreased 71.32 or 1.04% to close at 6,772.74.