Iberia, BA Explore Merger, Banks Fall

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

UK home loans and mortgage loans fell to an eight-year low in June and below last six month average. Tight credit market conditions played a key role in the weak lending. UK retail sales in July fell and further weakness is expected in August according to a trade report. In London trading banks continued to decline and British Air entered in merger talks with Iberia of Spain. Vedanta Resources first quarter profit rose 6.3% on higher iron ore output.

[R]1:40PM New York, 6:40PM London - UK retail sales fall in June. British Airways in merger talks with Iberia. Home loans and mortgage approval fall in June to the lowest level in the last seven years.[/R]

London stock indexes gained fractionally as gains in commodity stocks helped to offset a drop in financial stocks. In London trading FTSE 100 rose 0.12% or 6.6 at 5,319.20.

Of the 102 FTSE 100 stocks 61 rose, 38 declined, and 3 were unchanged. Compass Group led advancers in the index shares with a rise of 6.28% followed by British Airways increasing 6% as the airliner reported that it is in merger talks with Iberia.

UK Retail Sales Slump in July

The Confederation of British Industries reported on its Web site today that retail sales volumes fell markedly in July and forecasted that the outlook for August remains depressed.

In the latest Distributive Trades Survey, CBI noted that 61% of respondents said sales in the first half of July were lower than a year ago, while 25% said sales increased.

As a result, a balance of minus 36 read on the sentiment was the lowest since 1983. A similar drop of minus 32 is forecasted for August.

The three-month moving average of sales volumes, which takes out monthly volatility, continued to drop from last summer, with the balance of minus 20 being the lowest since November 2005.

According to the report, sales were reported as poor by a balance of 46% of firms, which was worse than expected (-17%), and similarly poor sales of minus 37 are predicted in August.

In addition, a balance of 37% reported a fall in order volumes from a year ago, more than the earlier forecasted minus 13.

The demand for durable household goods and furniture and carpets were the most affected, followed by clothing retailers, while only grocers, including supermarkets, and footwear & leather retailers were the only sectors to report year-on-year sales growth.

Andy Clarke, Chairman of the CBI Distributive Trades Panel, and Retail Director of Asda, said, “Pressure from higher fuel and food prices is prompting many people to rein in their spending, proving that value retailing has never been more important.

The faltering housing market has really depressed sales of home furnishings and white goods this month and the high street is still struggling, but supermarkets are faring better. The retail sector will have to focus more than ever on providing good value to customers if they want to keep the sun shining this summer.""""

UK Net Home Loans Fall in June

The Bank of England reported on its Web site today that the value of home loans increase in June declined to £3.1 billion or increase of 0.3% from May or 7.5% from a year ago while the value of mortgages issued fell to £16.8 billion in June. The monthly loans in June were below last six month average of £24.4 billion.

Gainers & Losers

Compass Group led advancers in the FTSE 100 index shares with a rise of 6.28% followed by increases in British Airways of 5.97%, in Wolseley Plc of 5.56%, in Marks & Spencer of 5.10%, and GlaxoSmithKline of 3.26%.

British Airways rose after the airline reported that it is in merger talks with Spanish airline Iberia.

Commodity stocks rose as Vedanta Resources reported that first-quarter profit rose 6.3% after record iron ore output. Xstrata increased 2.26%, Vedanta Resources edged up 2%, Anglo America advanced 1.82% and Antofagasta spiked 1.57%.

HBOS Plc led decliners in the FTSE 100 index shares with a fall of 5.13% followed by losses in Barclays of 4.13%, in BG Group of 3.11%, in TUI Travel of 3.03%, and Royal Bank of Scotland of 2.67%.

Financial stocks fell on lingering global financial woes. Standard Chartered shed 1.73% as a result.

British Airways in Merger Talks

British Airways reported on its Web site today that the airline and Iberia Lineas Aereas de Espana SA are holding talks with a view to an all-share merger between the two companies.

The negotiations are supported unanimously by the boards of both companies, but it will take several months to reach agreement on the terms of the merger and to finalize a joint business and integration plan for the combined group. The EU has already granted British Airways and Iberia approval to cooperate.

However the British Airways and Iberia names will be retained as part of a combined group.

British Airways'' chief executive Willie Walsh said, ''The aviation landscape is changing and airline consolidation is long overdue. The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment. We''ve had a successful relationship with Iberia for a decade and are confident that both companies'' shareholders would benefit from the proposed tie-up.”

Europe Markets Review

In London FTSE 100 Index closed higher 6.60 or 0.12% to 5,319.20, in Paris CAC 40 Index decreased 3.96 or 0.09% to close at 4,320.49 and in Frankfurt DAX index higher 47.65 or 0.75% to close at 6,398.80. In Zurich trading SMI increased 24.37 or 0.35% to close at 6,993.30.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 194.33 or 1.46% to 13,159.45, Hang Seng index in Hong Kong decreased 429.21 or 1.89% closed to 22,258.00. ASX 200 index in Australia decreased 74.70 or 1.52% to close 4,847.40. The KL Composite index in Malaysia decreased 3.29 or 0.29% closed to 1,150.80.

The Kospi Index in South Korea decreased 31.09 or 1.95% to close at 1,567.20, SET index in Thailand closed lower 8.80 or 1.28% to 676.73 and JSE Index in Indonesia increased 3.01 or 0.13% to 2,278.68. The Sensex index in India decreased 557.57 or 3.89% to 13,791.54.