UK Home Prices Fall; Nomura and Lehman Deal

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

Stocks in London fell after the U.S. lawmakers debate the merits and details of $700 billion bailout plan. Nomura of Japan is the top contender for Lehman Brothers asssets in Europe and Asia. UK home prices fel 3.3% in September from a year ago as credit markets remain tight. Oil prices surge.

[R]1:00PM New York, 6:00PM London – The U.K. home prices fall 3.3% in September.[/R]

Stocks in London plummeted after a report that showed that house prices dipped in September as mortgage conditions remain tight and inventories of unsold remains high. The U.S. bailout plan of $700 billion to purchase illiquid and riskier mortgage bonds may be delayed as lawmakers debate the conditions of bailout and trim executive pay at troubled banks.

Commodity stocks however helped trim losses after Brent crude oil futures rose 5% and prices of copper, zinc and lead closed higher.

Market Sentiment

In London trading FTSE 100 index fell 1.41% or 75.04 to 5,236.26. Of the 102 FTSE 100 stocks 25 rose, 75 declined, and 2 were unchanged. Wolseley led advancers in the index shares with a rise of 13.5% followed by BG Group increasing 4.4%. Wolseley sounded optimistic note after it released its annual earnings and said that it has adequate capital and is not in a danger to break its bank loans covenants.

House Prices Fall 3.3% in September

Rightmove Plc reported on its Web site that house prices fell 1% from the previous month and 3.3% from the same time a year ago to £227,438.

According to the report, house prices have a little chance of recovering until the bank crisis has subsided and the deteriorating environment in the financial sector will continue to burden the housing market. Analysts contend that even if the Bank of England weighs in with a rate cut that will not have much impact on mortgage availability and mortgage rates.

The report notes that there were fewer sellers on the market than ever before and those who did enter “Continued the downward trend in asking prices” and consequently put their homes on the market at 1% less than those a month ago.

Also the record level of property coming onto the market has led to a marginal fall in average stock levels per estate agency branch from 79 to 78.

Rightmove noted that with the likelihood of an increase in repossessions in the coming months the higher proportion of forced sellers will increase downward pressure on prices until they have worked their way through the system.

Miles Shipside, commercial director of Rightmove observed, “The housing market is in limbo and will remain so until financial institutions address the disastrous state of the mortgage funding markets. We are now seeing the lowest level of new sellers for years. There’s a baseline level of activity from those that have to sell, but beyond that, discretionary sellers are increasingly scarce.”

Nomura Moves Closer to Acquire Lehman’s Euro Assets

Bloomberg News reported on its Web site today the Japan’s investment bank Nomura Holdings is close to buying Lehman Brothers Holdings’ equities and investment banking units in Europe.

The report says Nomura and the court appointed administrator for Lehman Brothers, PriceWaterhouseCoopers may agree on a sale in the next two days. Japan’s biggest investment bank is also reportedly close to buying Lehman Brother’s Asian unit.

Separately, Morgan Stanley agreed to sell up to 20% stake in the newly converted bank to Mitsubishi UFJ. Morgan Stanley and Goldman Sachs sought and received the permission to covert the companies to depository institution under the supervision of Federal Reserve Bank. The overnight move marks the end of large independent investment banks who took excessive leverage using short term loans on their balance sheet to speculate and invest in the long term loans.

Earnings Review

Wolseley PLC, the world's largest specialist trade distributor of plumbing and heating products to professional contractors and a supplier of building materials and services said annual revenues increased 2% to £16.5 billion from £16.2 billion a year earlier. Net profit in the second half fell 77.1% to £145 million or 11.33 pence per diluted share compared to net profit of £634 million or 73.52 pence per share, a year earlier.

Wolseley PLC, in the last one year traded as high as 897 pence in January 2008 and as low as 256.25 pence in September 2007. Based on the Friday’s trading closing price the company has a market cap of £2.89 billion.