UK Manufacturing, Housing Down

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

Manufacturing index declined to the lowest level in eighteen months after factory output fell 0.2% in July from a month ago. For the three months ending in July manufacturing index fell 1.1%. Average property sales per surveyor fell to the lowest level in 20 years as tight mortgage market dampen home prices and sales. BG Group abandoned its pursuit of Origin Energy based in Australia after the company attracted $8 billion from ConocoPhillips.

[R]1:00PM New York, 6:00PM London- U.K. manufacturing drops 0.2% in July. House purchase loans fall by 51% by volume in August.[/R]

Market Sentiment

In London trading FTSE 100 fell 0.56% or 30.7 to 5.415.60.

Of the 102 FTSE 100 stocks 57 rose, and 55 declined. ITV led advancers in the index shares with a rise of 4.05% followed by British Airways increasing 4.05% as crude oil prices remained depressed.

U.K. Manufacturing Fall 0.2% in July

The Office of National Statistics reported on its Web site today that in the quarter to July the seasonally adjusted chained volume index for the output of the production industries fell by 1.1% compared with the previous quarter.

Between June and July output of the manufacturing industries declined 0.2%. Electrical and optical equipment industries slumped 1.3%. In the period, mining and quarrying output declined by 0.6% and output of electricity, gas and water supply industries fell by 1.3% from the previous three months.

Real Estate Transactions Per Surveyor Drop

The Royal Institution of Chartered Surveyors reported on its Web site today that the lack of mortgage finance has continued to crimp the number of transactions per surveyor in August.

According to RICS’ UK housing market survey, 81% more Chartered Surveyors reported a fall than a rise in house prices compared with 83.1% in July.

In August the average number of transactions per surveyor stood at 12.7, with a number of regions reporting less than 1 sale per week. The balance of surveyors reporting new buyer enquiries fell slightly with 28% more Chartered Surveyors seeing a fall than a rise compared to 27% in July.

Also in June and July surveyors reported that many sellers had dropped asking prices to more realistic levels and that predatory buyers were waiting to pounce on bargains, but August has seen this interest stabilize.

In addition, new instructions to sell property rose marginally with 2% more Chartered Surveyors reporting a fall than a rise from 3% in June.

RICS spokesperson Jeremy Leaf said, “The Government’s stamp duty policy will not be enough kick start transactions and is more likely to assist buy-to-let investors with better access to finance than the first-time buyers it was aimed at. More needs to be done to reinvigorate a market whose confidence has taken a severe knock.

In the absence of much transactional activity many home owners are being forced to rent their properties while they wait for lending criteria to be loosened and demand to pick up.”

House Purchase Loans Fall 51%

Separately, the Council of Mortgage Lenders reported that there were 47,400 house purchase loans worth £7.1 billion in July, unchanged from June, reflecting a 51% fall by volume and 54% by value from the same period a year earlier.

Also, remortgage loans rose 14% by volume and 16% by value to 85,000 remortgage loans worth £11.9 billion in July. Loans for first-time buyers declined to 17,300 in July, falling 5% from June and 48% from July 2007.

The report showed that the average first-time buyer had a deposit of 15% in July, up from 13% in June, bringing the loan-to-value ratio down the most since the early 1980s.

On the overall, loans to home movers increased 3% from June and declined 53% than July last year to 30,100 loans, while total gross lending rose 5% to £24.7 billion in July from £23.6 billion in June, but this is a decline of 28% from a year ago and the ninth consecutive monthly year-on-year decline.

Earnings Review

Redrow plc, a residential and commercial property developer said full year revenues fell 28.33% to £650.1 million from £834.3 million a year earlier. Net loss in the full year was £193.9 million or 86.3 pence per diluted share compared to net income of £121.1 million or 53.3 pence per share, a year earlier.

Redrow plc ((RDW)) in the last one year traded as high as 517p in September 2007 and as low as 89.00p in July 2008. Based on the yesterday’s closing price the company has a market cap of £316.02 million.

Gainers & Losers

ITV led advancers in the FTSE 100 index shares with a rise of 4.09% followed by increases in British Airways of 4.05%, in Carnival of 4.01%, in Barclays of 3.03%, and TUI Travel of 3.02%.

TUI Travel and British Airways increased as oil prices remained at relatively low levels.

Kazakhmys led decliners in the FTSE 100 index shares with a fall of 9.28% followed by losses in Eurasian Natural of 8.69%, in Xstrata of 8.03%, in Cairn Energy of 7.78%, and Wood Group of 7.62%.

Kazakhmys fell as copper prices fell markedly in today’s trading. Other commodity also fell in tandem with falling metal prices. Antofagasta shed 6.91%, Anglo America slumped 5.97%, Tullow Oil slid 5.56% and BHP Billiton lost 5.39%.

Europe Markets Review

In London FTSE 100 Index closed lower 30.70 or 0.56% to 5,415.60, in Paris CAC 40 Index decreased 46.84 or 1.08% to close at 4,293.34 and in Frankfurt DAX index lower 30.33 or 0.48% to close at 6,233.41. In Zurich trading SMI increased 12.03 or 0.17% to close at 7,189.45.