BoE, ECB Rates On Hold

123jump.com Staff
04 Sep, 2008
New York City

The ECB and the BoE left key rates unchanged. Central bankers in the region are fighting rising inflation and falling growth rates. Economies in the euro-zone and in UK are facing recessionary trends and a decline in retail sales. Sweden raised its key lending rate by 0.25% to 4.75% to combat rising inflation in food and energy prices. The U.S. dollar rose against euro and British pound after the rate decision.

[R]3:00PM New York, 8:00PM London – The Bank of England holds key rate at 5% and ECB left its rate at 4.25%. House prices fall 10.9% in August.[/R]

Stocks in London fell after a report showed that house prices fell in August.

Market Sentiment

In London trading FTSE 100 dropped 2.5% or 137.6 to 5,362.10. Of the 102 FTSE 100 stocks 9 rose, and 93 declined. Unilever led advancers in the index shares with a rise of 6.11% followed by Friends Provident increasing 1.61%.

Bank of England Holds Rate at 5%

The Bank of England reported on its Web site that the Monetary Policy Committee today elected to keep the key interest rate unchanged at 5% in view of the continued deteriorating economic conditions reflected by rising oil and raw material costs.

Separately, the European Central Bank left the key rate at 4.25% and Sweden raised its key rate by 0.25% to 4.75% to fight the rising inflation. European and UK economies are facing rising prices and slowing economies. Euro continued its decline against the dollar to $1.4355. U.K. economy appears to be in a recession as estimated by several private economists as annual inflation in July reached to 4.4%, twice the central bank target and record high in the recent years.

The ECB President Jean-Claude Trichet added that the “upside risks to price stability prevail.” The euro-zone economic growth estimate for the year was lowered to 1.4% from 1.8% in June and for the next year was lowered to 1.2% from 1.5% forecast.

House Prices Fall 10.9% in August

HBOS reported on its Web site today that house prices fell 1.8% from a month ago and 10.9% from a year earlier at £174,178 as a “solid labour market, low interest rates and a shortage of new houses continue to support the market”.

The mortgage lender added that this week’s announcement on stamp duty will benefit homebuyers, especially outside the south east of England.

According to the report, the number of people in employment rose by 20,000 over the quarter to June from the previous quarter and by 384,000 from a year earlier to 29.56 million.

The temporary raising of the initial stamp duty threshold from £125,000 to £175,000 should reduce the stamp duty burden for a considerable number of homebuyers, particularly in south east of England.

Also 230,000 homebuyers in England and Wales in England and Wales would not have paid stamp duty over the past year if the threshold had been £175,000 and £125,000.

HBOS said higher food and fuel prices, which rose 12% and 17% from a year ago is making it difficult for potential house purchasers to enter the market.

Mortgages approved to finance house purchase dropped 6% from a seasonally adjusted to 35,000 in July and was 71% lower than in July 2007.

Also the number of new buyers interested in home purchase and the number of agreed sales both continued to fall in July, but the pace of decline slowed for the third successive month.

Gainers & Losers

Unilever led advancers in the FTSE 100 index shares with a rise of 6.11% followed by rises in Friends Provident of 1.61%, in Tullow Oil of 0.87%, in Cadbury Plc of 0.81%, and BG Group of 0.76%.

HBOS Plc led decliners in the FTSE 100 index shares with a fall of 6.84% followed by losses in Ferrexpo Plc of 6.27%, in Barclays Plc of 6%, in Lloyds TSB Group of 5.68%, and Eurasian Natural of 5.47%.

HBOS fell after house prices dropped 10.9% in August.

Commodity also fell on worries of waning demand for raw materials from China. Anglo America lost 5.04%, Kazakhmys shed 4.50%, and Xstrata plummeted 3.69%.

Financial stocks fell as well. Royal Bank of Scotland tumbled 3.90% and Standard Chartered plunged 4.97%.

Earnings Review

Hydro International plc, offers solutions for the management and treatment of storm water and municipal wastewater said first-half revenues rose 26.17% to £14.9 million from £11.0 million a year earlier. Net profit in the quarter rose 27% to £1.0 million or 4.89 pence per diluted share compared to net profit of £0.8 million or 4.47 pence per share, a year earlier.

Hydro International plc ((HYD)) in the last one year traded as high as 223.50p in September 2007 and as low as 137p in August 2008. Based on the yesterday’s closing price the company has a market cap of £35.71 million.

McBride plc, a provider of private-label household and personal care products said first-half revenues rose 18% to £700.9 million from £592.0 million a year earlier. Net profit in the quarter fell 30% to £21.4 million or 6.3 pence per diluted share compared to net profit of £31.9 million or 11.7 pence per share, a year earlier.

McBride plc ((MCB)) in the last one year traded as high as 198.25p in September 2007 and as low as 73p in June 2008. Based on the yesterday’s closing price the company has a market cap of £187.45 million.

DataCash Group plc, the payment service provider said first-half revenues rose 24% to £12.2 million from £9.86 million a year earlier. Net profit in the quarter rose 37% to £1.54 million or 1.67 pence per diluted share compared to net profit of 970 thousand or 1.06 pence per share, a year earlier.

DataCash Group plc ((DATA)) in the last one year traded as high as 330p in December 2007 and as low as 233p in September 2007. Based on the yesterday’s closing price the company has a market cap of £281.06 million.

Provident Financial plc, engaged in the credit card business said first-half revenues rose 11% to £370.1 million from £329.8 million a year earlier. Net profit in the quarter fell 185% to £36.7 million or 28.1 pence per diluted share compared to net profit of £104.7 million or 40.6 pence per share, a year earlier.

Provident Financial plc ((PFG)) in the last one year traded as high as 950.50p in April 2008 and as low as 655p in June 2008. Based on the yesterday’s closing price the company has a market cap of £1.20 billion.

Europe Markets Review

In London FTSE 100 Index closed lower 137.60 or 2.50% to 5,362.10, in Paris CAC 40 Index decreased 143.12 or 3.22% to close at 4,304.01 and in Frankfurt DAX index lower 187.92 or 2.91% to close at 6,279.57. In Zurich trading SMI decreased 171.98 or 2.37% to close at 7,084.65.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 131.93 or 1.04% to 12,557.66, Hang Seng index in Hong Kong decreased 195.58 or 0.95% closed to 20,389.48.ASX 200 index in Australia decreased 80.50 or 1.59% to close 4,979.50. The KL Composite index in Malaysia decreased 0.32 or 0.03% closed to 1,085.06.

The Kospi Index in South Korea decreased 0.46 or 0.03% to close at 1,426.43, SET index in Thailand closed higher 4.92 or 0.76% to 654.85 and JSE Index in Indonesia decreased 40.77 or 1.93% to 2,075.23. The Sensex index in India decreased 150.76 or 1.00% closed to 14,899.10.