Gloomy Outlook for UK Stocks

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

Stocks in London declined as investors worried that U.S. financial system crisis is likely to spread further and may require government bailout of two largest mortgage lending agencies. Fannie Mae and Freddie Mac dropped to 2-decade low and dragged with them stocks of banks in the U.S. and UK. The stocks of lenders including HSBC, Barclays, HBOS and Royal Bank of Scotland declined more than 20% in the last nine months of trading.

[R]1:00PM New York, 6:00PM London – UK benchmark index fell 2.7% dragging FTSE 100 index to bear market territory. Home price index in June declined.[/R]

London market averages continue to fall and the bench mark index FTSE 100 has fallen into a bear market territory on speculation that the bailout of US mortgage lenders Freddie Mac and Fannie Mae by the government may not include shareholders.

Separately, a report also showed that UK house prices slid 0.6% in June adding to further losses, but a rise in commodity prices helped limit losses.

In London trading FTSE 100 declined 2.69% or 145.2 at 5,261.60.

Of the 102 FTSE 100 index stocks, 14 gained and 88 declined. Eurasian Natural led advancers in the index shares with a rise of 8.60% followed by Cairn Energy with a gain of 3.72%.

UK house prices decline 0.6% in June

Acadametrics reported on its Web site today that the FT House Price Index fell 0.6% from a month ago, but rose 1.2% from a year earlier at 231. The report notes that average house price now stands at £227,334.

Notwithstanding the continued fall in London prices, the city still has an annual growth rate in the capital of 6.1% (averaged over the past three months), which is an estimated 2% points higher than the next highest region.

About 8 of the 10 regions in England and Wales now have an annual growth rate of less than 3%, while 3 regions - the North West, East Midlands and Wales - have a negative annual rate.

“The market slowdown continues to gather momentum, spurred on by continuing contraction of the mortgage market and falling confidence fuelled by a media focus upon the ‘bad’ news. This is despite the strong fundamentals that underpin the market,” said the report.

Royal Bank of Scotland to Sell ANZ Assets

Bloomberg News reported that the Royal Bank of Scotland is in talks to sell assets in Australia and New Zealand, adding that National Australia Bank Ltd said it is in discussions to buy RBS investment and corporate banking divisions.

The troubled lender is seeking to raise £4 billion in order to shore up its Tier 1 capital ratio to 6% by the end of the year.

UK Gainers & Losers

Eurasian Natural led advancers in the FTSE 100 index shares with a rise of 8.60% followed by increases in Cairn Energy of 3.72%, in Carphone Warehouse of 3.28%, in Tullow Oil of 2.91%, in Ferrexpo Plc of 2.41%.

Commodity stocks gained after crude oil prices rose above $147 a barrel. Kazakhmys spiked 1.21% and Royal Dutch Shell edged up 052%.

Enterprise Inns led decliners in the FTSE 100 index shares with a drop of 8.61% followed by losses in Royal Bank of Scotland of 8.60%, in Standard Chartered of 7.84%, in Kingfisher of 7.27%, in Rolls-Royce Group of 6.49%.

Financial stocks fell on speculation that the US mortgage lenders Freddie Mac and Fannie Mae will be bailed out by government sponsored mortgage financiers. Barclays shed 5.89% and Old Mutual declined 4.65%.