UK, Europe Indexes Near 20% Loss

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

UK stocks fell as credit market worries linger. Business survey predict business recession in the near term. The FTSE 100 index is down 20% from its peak in the last one year of trading. The stock of LSE led the decliners in FTSE 100 index after an analyst estimated a revenue decline of 4% ahead of annual meeting tomorrow. Standard Chartered Bank dropped 2.2%, HBOS fell 1.6% and Barclays declined 1%. European markets declined led by a fall in banks across the region.

[R]1:00PM New York, 6:00PM London – The FTSE 100 index drops below 20% decline and reached a bear market territory. British business survey predicts recession in less than a month. LSE stock declines on lower revenue estimate.[/R]

UK hit a bear market today as stocks declined on falling crude oil prices and lingering worries of credit market losses. The FTSE 100 has now slipped 20.4% from a high touched on July 15, 2007. The FTSE 100 index closed down 72.20 or 1.31% to 5,440.50.

On the other hand, retailers bucked the downtrend on rumors that Marks & Spencer may receive a take-over bid.

Businesses Predict Recession

The British Chambers of Commerce reported on its Web site today that the latest quarterly economic survey based on a response from 5,000 small and large businesses.

BCC added that the UK business sector is now only one quarter away from technical recession as UK domestic balances for “home sales and orders recorded negative growth in the last three months in both manufacturing and services”.

The survey also indicated all confidence dropped markedly in both the manufacturing and services, while the service sector is hit harder than manufacturing sector.

Director General of the British Chambers of Commerce David Frost commented, “The temptation for the Government will be to raise business taxes in the next PBR because the exchequer is running out of money.”

He further added, “I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country: to put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on – confidence.”

Barclays to Stop Selling New Loans

Bloomberg News reported today that Barclays will stop selling new loans at its UK subprime loans unit and slash 300 jobs but will keep 130 employees at Cardiff location.

Gainers & Losers

Marks & Spencer led advancers in the FTSE 100 index shares with a rise of 6.68% followed by rises in British Airways of 5.46%, in GlaxoSmithKline of 3.01%, in Kingfisher of 2.85%, and Carnival Plc of 2.67%.

Other retailers advanced as well. Tesco jumped 2.08% and Next gained 1.99%.

London Stock Exchange led decliners in the FTSE 100 index shares with a drop of 7.06% followed by losses in Ferrexpo Plc of 6.92%, in Cairn Energy of 6.36%, in BHP Billiton of 6.12%.

LSE fell sharply after analysts at Sanford C. Bernstein & Company estimated 4% decline in first quarter revenue to 159 million pounds. The estimate revision is ahead of its annual meeting tomorrow when the exchange is expected to report its latest quarterly revenue. Rising competition from the smaller and private trading pools is lowering revenue for the exchange. The analyst also projected 12% earnings rise at Deutsche Boerse to 1.22 euros which reports its earnings on July 31.

LSE stock has fallen nearly 70% from its peak of 1977 pence in January of this year.

Commodity stocks slumped as crude oil extended their losses by slipping below $137 a barrel today. Antofagasta shed 5.8%, Rio Tinto tumbled 5.7%, Vedanta Resources declined 5.2% and Tullow Oil edged down 0.15%.

Financial stocks fell after Lehman Brother noted yesterday that the U.S. mortgage lenders Fannie Mae and Freddie Mac will need to raise $75 billion if the proposed accounting FAS 140 rule is implemented. The new rule will require including all off-balance sheet liabilities in the financial statements.

Standard Charted plunged 2.23%, HBOS Plc fell 1.63% and Barclays declined 1.06%.

World Markets Review

The CAC 40 fell 66.98 or 1.54% to 4,275.61. In Germany the DAX 30 index decreased 91.34 or 1.43% to 6,304.41. Swiss Market index dropped 27.60 to 6,788.13. The FTSE 100 index closed down 72.20 or 1.31% to 5,440.50.

The Nikkei 225 Index in Tokyo closed lower 326.94 or 2.45% to 13,033.10, Hang Seng index in Hong Kong decreased 692.25 or 3.16% closed to 21,220.81. ASX 200 index in Australia decreased 69.60 or 1.39% to close 4,932.90. The KL Composite index in Malaysia decreased 6.01 or 0.53% closed to 1,121.25.

The Kospi Index in South Korea decreased 46.25 or 2.93% to close at 1,533.47, SET index in Thailand closed lower 8.06 or 1.10% to 722.50 and JSE Index in Indonesia decreased 24.84 or 1.08% to 2,278.97. The Sensex index in India decreased 176.34 or 1.30% to 13,349.65.