Lonmin Surges 47%; Economy Slows

123jump.com Staff
06 Aug, 2008
New York City

Lonmin Plc led advancers in the index shares with a rise of 47.74% after Xstrata Plc made an unsolicited

[R]1:00PM New York, 6:00PM London - U.K GDP growth slows at 0.1% in three months to July. Lonmin surged 47% after Xstrata acquired a stake in the company.[/R]

London stock indexes rose despite a report showed that U.K. house prices fell in July after Xstrata Plc made an unsolicited offer for Lonmin Plc.

Market Sentiment

In London trading FTSE 100 rose 0.58% or 31.6 to 5,486.10. Of the 102 FTSE 100 stocks 56 rose, 40 declined, and 6 were unchanged. Lonmin Plc led advancers in the index shares with a rise of 47.74% after Xstrata Plc made an unsolicited £5 billion bid for Lonmin Plc.

UK GDP Rises 0.1% in July

The National Institute of Economic and Social Research reported today that the country’s growth rate in the three months through July is forecasted at 0.1% from 0.2% in the three months to June. Economic growth in the period was the lowest since the quarter through May 2005.

The recent estimate has a standard error of between 0.1% and 0.2% point compared to the first estimate produced by the Office for National Statistics.

NIESR contends that it is likely that the growth rate will rise further in the three months to August “unless there is a clear indication of an increase in public sector output”.

U.K Home Prices Fall 1.7% in July

Nationwide Building Society reported on its Web site today that U.K house prices fell 1.7% from the previous month and 8.1% from a year earlier to £172,415 in July. However, the prices remain almost £11,000 higher than three years ago.

Chief economist Fionnuala Earley, “The sharp increases in food, gas and electricity prices will push up inflation and slow economic growth as disposable incomes are squeezed, a development that will better position the monetary policy committee to cut its interest rates.”

“As the cost of mortgages begins to come down, activity could be bolstered and restore some liquidity to the housing market. However this is not likely to happen overnight. Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly. But, if oil prices continue to fall and the MPC is satisfied that its inflation credentials are intact, the possibility of earlier rapid cuts in interest rates increases, which would be good news for borrowers,” explained Earley.

Gainers & Losers

Lonmin Plc led advancers in the FTSE 100 index shares with a rise of 47.74% followed by increases in Johnson Matthey of 7.09%, in Eurasian Natural of 7.05%, in London Stock Exchange of 4.43%, and Antofagasta.

Lonmin increased as Xstrata made a bid for the company worth £5 billion. Xstrata also reported that it has acquired through the a wholly-owned subsidiary, a further 4,147,060 Lonmin shares, at a price of 3,300 pence per share representing an estimated 2.65% of the existing issued share capital of Lonmin. Xstrata is interested to acquire a total of 16,706,483 Lonmin shares, reflecting 10.68% of the issued share capital of Lonmin.

Other commodity stocks gained as well. Anglo-American increased 3.16%, Rio Tinto rose 2.42% and BHP Billiton edged up 2.38%.

Old Mutual led decliners in the FTSE 100 index shares with a fall of 11.37% followed by losses in Liberty International of 7.22%, in ITV of 5.83%, in Lloyds TSB Group of 3.16%, in Wolseley of 2.96%.

Old Mutual dropped on news that its annuities unit in Bermuda will take a charge of £257 million, adding that it might take a further £15 million if stock markets widen their losses.

Realty stocks slid as a report showed that house prices fell in July. British Land Co shed 2.83% and Land Securities slumped 2.54%.

Europe Markets Review

In London FTSE 100 Index closed higher 31.60 or 0.58% to 5,486.10, in Paris CAC 40 Index increased 61.98 or 1.41% to close at 4,448.33 and in Frankfurt DAX index higher 42.69 or 0.65% to close at 6,561.39. In Zurich trading SMI increased 18.56 or 0.26% to close at 7,209.34.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 340.23 or 2.63% to 13,254.89. ASX 200 index in Australia increased 148.70 or 3.08% to close 4,969.10. The KL Composite index in Malaysia increased 4.73 or 0.42% closed to 1,133.59. Market of Hong Kong was closed today.

The Kospi Index in South Korea increased 43.17 or 2.81% to close at 1,578.71, SET index in Thailand closed higher 9.23 or 1.38% to 676.35 and JSE Index in Indonesia increased 1.59 or 0.07% to 2,187.20. The Sensex index in India increased 112.47 or 0.75% to 15,073.54.