Weak Banks, UK Benchmark Down 2.4%

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

Stocks in London fell after the inflation in June rose at a rate of 3.8% and investors sold stocks of banks. Burberry, the luxury retailer confirmed its earnings guidance and expects to push its stock buyback to the second half of the year. The largest UK food maker, Premier Foods expects to meet annual earnings guidance as it passes on price increase to customers. Rio Tinto Group is expected to release trading update tomorrow.

[R]1:00PM New York, 6:00PM London - UK inflation climbs 3.8% in June.[/R]

Stocks in UK fell after plans by the U.S. Federal Reserve to rescue Freddie Mac and Fannie Mae fell short of investors’ expectations. Financials and home builders fell.

Market Sentiment

In London trading FTSE 100 shed 2.42% or 128.50 at 5,171.90.

Of the 102 FTSE 100 stocks 17 rose, and 85 declined. TUI Travel led advancers in the index shares with a rise of 3.34% followed by Tesco increasing 2.85%.

UK Inflation Jumps 3.8% in June

The Office of National Statistics reported today on its Web site that the consumer price index gained 3.8% in June from 3.3% in May. However, retail prices index advanced 4.6% in the month under review from 4.3% the previous month.

The ONS added that the largest contribution to change was from food and non-alcoholic beverages. Meat prices rose by more than last year, led by gains in beef prices. Price rise in fruit, bread and cereals contributed to the inflation pressures.

Transport costs gained as the average price of petrol increased by 5.3 pence per litre between May and June this year, to stand at 117.6 pence, compared with a rise of 1.3 pence last year, while diesel prices rose by 7.1 pence per litre this year compared with a rise of 0.6 pence last year.

Transactions Fall in June

The Royal Institution of Chartered Surveyors reported on its Web site today that the average number of transactions per surveyor fell further in June but prospective buyers are likely to return to the market.

RICS noted that 88% more Chartered Surveyors, representing a drop from 92.2 in April, reported a fall than a rise in house prices. In addition, the average number of transactions per surveyor currently stands at 15.3.

On the overall, 35% more Chartered Surveyors reported a fall in buyer enquires compared to 50% in May and 69% in April.

The balance of Chartered Surveyors reporting new instructions to sell property fell to negative 13% from negative 25% in May.

RICS spokesperson Jeremy Leaf said, “With demand so low, would-be-buyers are negotiating from a position of strength. Even in a weak market there are always opportunities for investors and buyers to profit and some are starting to circle for bargains. However, transaction levels remain incredibly low with many buyers cut out of the process by tight lending conditions.""""

Gainers & Losers

TUI Travel led advancers in the FTSE 100 index shares with a rise of 3.34% followed by increases in Tesco of 2.85%, in Thomas Cook Group of 2.10%, in Imperial Tobacco of 1.91%, and British Airways of 1.69%.

TUI Travel and other travel stocks advanced as oil prices eased to $138 a barrel.

Retailers also edged up. Sainsbury climbed 1.31% and Marks & Spencer spiked 0.11%.

Royal Bank of Scotland led decliners in the FTSE 100 index shares with a fall of 7.06% followed by losses in Carphone Warehouse of 6.64%, in Antofagasta of 6.42%, in Vedanta Resources of 5.82%, and Ferrexpo of 5.62%.

Royal Bank of Scotland and other financial stocks declined as investors worried that the move by the Fed Reserve to bail out mortgage lenders Fannie Mae and Freddie Mac was not enough.

Commodity stocks also plummeted as oil prices fell below $138 a barrel. Anglo America shed 5.38%, Kazakhmys fell 5.35% and BHP Billiton declined 4.81%.