Record Low Confidence, Home Prices Fall

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

Stocks in UK fell as consumer confidence dipped to a new low and home prices fell in July. The steady drop in home prices and tight monetary conditions have soured consumer moods and expectations of further economic weakness are pervasive. Of the stocks in FTSE 100 index, HBOS led advancers with a rise of 7% and BT Group led decliners with a loss of 7%. Retailers, Next, Kingfisher and Sainsbury fell on the weak consumer related sectors.

[R]1:00PM New York, 6:00PM London - UK house prices fall 1.7% in July and consumer confidence dips to the record low.[/R]

London Stock indexes traded in the negative territory as reports showed that house prices declined further in July and consumer confidence dipped to record levels, intensifying the fears that the economy is slipping into a recession. Retailers and consumer driven stocks fell.

Market Sentiment

In London trading FTSE 100 fell 0.16% or 8.8 at 5,411.90.

Of the 102 FTSE 100 stocks 37 rose, and 65 declined. HBOS led advancers in the index shares with a rise of 7.10% followed Eurasian Natural of 6.84%.

Home Prices Fall 1.7% in July

Nationwide Building Society reported on its Web site today that home prices fell 1.7% from a month ago and 8.1% from a year earlier to £169,316. Market watchers believe the deteriorating market conditions will prompt the monetary authorities to increase interest rates earlier than forecasted.

Fionnuala Earley, Nationwide''s Chief Economist, said, “Continued mild wage growth and the sharp fall in retail sales in June will give the MPC some comfort, as will the slide in oil prices in the last week. But, the impact of the sharp rises in food prices and further news of rises in gas and electricity prices have the double edged effect of pushing up inflation while at the same time slowing the economy as disposable incomes are squeezed. In our view the latter effect will begin to dominate, eventually giving the MPC enough comfort to begin cutting rates.

Consumer Confidence Drops in July

A private research company GfK NOP reported on its Web site today that its consumer confidence index declined a further 5 points to minus 39 in July, which is the lowest ever recorded.

The report also notes that forecasts for personal finances over the next year has dropped nine points to minus 18, 31 points than the same period a year ago.

Expectations for the general economic situation over the next twelve months have also declined a further seven points to minus 52.

Donna Culverwell in the Consumer Confidence team at GfK NOP commented: “There seems to be little sign of any relief either; with the growing spectre of the UK going into recession, people are pessimistic and concerned about their future - reflected in the biggest drop this month being seen in people’s confidence in their own personal financial situation over coming twelve months.”

Gainers & Losers

HBOS led advancers in the FTSE 100 index shares with a rise of 7.10% followed by increases in Eurasian Natural of 6.84%, in Reed Elsevier of 5.97%, in Tullow Oil of 5.92%, and Kazakhmys of 5.56%.

Commodity stocks rose on rebounding oil prices. Antofagasta increased 4.52% as a result.

BT Group led decliners in the FTSE 100 index shares with a fall of 7.10% followed by losses in Unilever of 8.08%, in SABMiller of 4.90%, in ITV of 4.27%, and Next Plc of 4.12%.

Next and other retailers fell after consumer confidence declined in July. Tesco shed 3.46%, Kingfisher dropped 2.79%, and Sainsbury of 2.25%.

Europe Markets Review

In London FTSE 100 Index closed lower 8.80 or 0.16% to 5,411.90, in Paris CAC 40 Index decreased 8.19 or 0.19% to close at 4,392.36 and in Frankfurt DAX index higher 19.44 or 0.30% to close at 6,479.56. In Zurich trading SMI increased 32.30 or 0.45% to close at 7,141.21.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 9.02 or 0.07% to 13,376.81, Hang Seng index in Hong Kong increased 40.50 or 0.18% closed to 22,731.10. ASX 200 index in Australia increased 40.70 or 0.82% to close 4,977.40. The KL Composite index in Malaysia increased 3.15 or 0.27% closed to 1,163.09.

The Kospi Index in South Korea increased 16.97 or 1.08% to close at 1,594.67, SET index in Thailand closed higher 6.42 or 0.96% to 676.32 and JSE Index in Indonesia increased 25.82 or 1.13% to 2,304.51. The Sensex index in India increased 68.54 or 0.48% to 14,355.75.