UK Manufacturing Declines; Pound Falls

123jump.com Staff
01 Oct, 2008
New York City

Manufacturing index suggested that the UK manufacturing has declined and service industry has lost its growth drive as consumer spent less and business face tighter lending. Xstrata Plc abandoned its hostile bid for Lonmin Plc and raised its stake to 25% in the company. Pound fell.

[R]1:00PM New York, 6:00PM London- U.K. manufacturing slumps the most in 16 years in September. UK stock looking for a direction to the U.S. bailout plan rose.[/R]

Stocks in U.K. rose despite a report from the Chartered Institute of Purchasing and Supply that showed that manufacturing contracted the most in 16 years as financial stocks rose on expectations that the U.S. Senate will pass the amended bailout plan.

Commodity stocks however slid after Xstrata Plc abandoned its hostile takeover bid of platinum miner Lonmin Plc citing difficult credit markets.

Market Sentiment

In London trading FTSE 100 rose 1.17% or 57.14 to 4,959.59.

Of the FTSE 100 index stocks 67 rose, 32 declined, and 3 were unchanged. HBOS Plc led advancers in the index shares with a rise of 24.18% on expectations the U.S. will pass the $700 billion bank bailout plan. France proposed a similar bailout plan for Europe with $400 billion of capital.

U.K Manufacturing Falls Most in 16 Years

The Chartered Institute of Purchasing and Supply reported on its Web site today that the survey of industrial buyers by CIPS and Markit indicated that the index of manufacturing stood at 41 from 45.3 a month earlier.

The period experienced slowing consumer demand as clients cancel or postpone orders as economy deteriorates conditions.

Output index also fell the most in 17 years to 41.2 from 47.6 a year ago, while new orders index dropped markedly to 36.1.

Backlog of work index shrank to 37.3 in September and resultantly employment index declined to 40.1, with companies resorting to cutting jobs in order to slash costs.

However output prices rose and spurred the figure to 62.6 as manufacturers factored in soaring raw material costs. Although, input prices declined to a seven-month low, they increased to 73.7 last month.

Xstrata Abandons Lonmin Takeover

Xstrata Plc abandoned its takeover of Lonmin Plc as credit markets remain tight and it seeks higher offer. Xstrata in a filing today said that it has increased its stake in the platinum miner to 24.9% after it acquired additional 14.2% of Lonmin’s shares.

Xstrata acquired 22.232 million shares at a price £19.79 a share for a total consideration of £440 million. In all, Xstrata has acquired 38.93 million shares for £991 million or $1.77 billion. The today’s purchase will be funded with debt facility that the company has with banks which were renegotiated for $5 billion.

Pound Falls

The Pound declined by more than 1% to $1.7634 and little changed at 79.06 pence against the euro as manufacturing contracted in September.

Gainers & Losers

HBOS Plc led advancers in the FTSE 100 index shares with a rise of 24.18% followed by rises in Lloyds TSB Group of 10.38%, in Standard Life of 7.08%, in Eurasian Natural of 4.55%, and Barclays of 4.44%.

Lonmin Plc led decliners in the FTSE 100 index shares with a fall of 20.27% followed by losses of Vedanta Resources of 10.23%, in Autonomy of 7.62%, in Johnson Matthey of 5.11%, and Legal & General Group of 4.90%.

Lonmin fell after Xstrata abandoned its $5 billion hostile takeover bid. Xstrata lost 1.92%.