UK in 2-day Record Gains, Burberry Drops

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

UK government plans to float additiional debt to pay for the cost of the latest bailout of four banking institutions. The short-term gilts and Treasurys will raise a total of

[R]1:00PM New York, 6:00PM London - U.K. inflation increases to 5.2% in September. U.K. plans to raise £37 billion more in gilts and treasurys to pay for recent bank bailout.[/R]

Market Sentiment

In London trading FTSE 100 rose 3.23% or 137.31 to 4,394.21.

Of the FTSE 100 index stocks 77 rose, 23 declined and 2 were unchanged. Barclays led advancers in the index shares with a rise of 14.29%. Standard Chartered Bank Plc, HSBC and mining companies Vedanta Resources, BHP Billiton and Kazakhmys Plc led the gainers.

UK stocks rallied for the second day in a row as markets in the closed higher after the U.S. proposed to inject $250 billion in nine large financial institutions. The 2-day rally with a gain of 11.6% in FTSE 100 index is the largest since 1984 according to the Financial Times, the keeper of the index.

U.K. Inflation Rises 5.2% in September

The Office of National Statistics reported today that the Consumer Price Index rose 5.2% in September from 4.7% from a month earlier.

The rising utility cost and household services contributed to a rise in the annualized inflation data. The prices were also on the rise for clothing and footwear costs and air and sea fares.

The largest downward pressure on the CPI annual rate came from food and non-alcoholic beverages, especially milk prices which rose 4 pence a pint a year ago. The statistics office noted that there was also a significant downward effect from fruit and smaller effects from bread and cereals, oils and fats, and mineral waters, soft drinks and juices.

There was also large downward effect from second-half cars and fuels and lubricants as the average price of petrol dipped by 1.7 pence per litre between August and September this year to 111.6 pence.

In addition diesel prices declined by 2.3 pence per litre this year compared with a fall of 0.1 pence a year earlier.

The Retail Prices Index inflation rose to 5% in September from 4.8% in August.

House Prices Fall in September

Royal Institution of Chartered Surveyors reported that both home price and number of transactions declined in September this year.

Statistics show that the net balance of surveyors reporting dropping rather than rising prices dropped from -81.8 to -84.2 in September as instructions to sell property remained negative in the period.

There was a sharp decline in transactions in East Anglia, South West, Yorkshire and Humberside and East Midlands. Though new buyer enquiries and newly agreed sales net balances are negative, they now are at their strongest since May and December 2007 correspondingly.

RICS reported that completed sales per surveyor declined to 11.5 per surveyor, a record low, with activity in London averaging 8.3 completed sales per surveyor.

Inventory of stocks on surveyor’s books tumbled to 81.5 in September, the lowest since December 2007.

According to the survey the sales to stock ratio, which gauges the future price changes, slumped to 14.1%.

U.K. to Raise £30 billion in Gilts

The Debt Management Office reported today that it will raise the £37 billion facility to recapitalize HBOS, Royal Bank of Scotland and Lloyds TSB Group. The total gilt sales for the current fiscal will soar to £110 billion.

The £7.0 billion will be raised through additional Treasury bill sales. The DMO has scheduled seven more gilt auctions, five of them will offer short term maturities and two will offer medium term maturities gilts.

Gainers & Losers

Barclays led advancers in the FTSE 100 index shares with a rise of 14.3% followed by increases in ICAP Plc of 12.54%, in 3i Group of 12.24%, in TUI Travel of 11% and Inmarsat of 10.54%.

Lloyds TSB Group led decliners in the FTSE 100 index shares with a fall of 6.60%, in HBOS Plc of 5.2%, in Xstrata of 4.7%, in Sage Group of 4.42%, and Next Plc of 4.20%.

Retailers slumped on the worries that consumer spending will fall due to rising inflation. Kingfisher dropped 2.1%, Marks & Spencer dipped 2%, and Royal Bank of Scotland declined 1.07%.

Earnings News

Whitbread PLC, the hotel and restaurant group said first-half revenues rose 12.6% to £682.2 million from £605.8 million a year earlier. Net profit in the first-half climbed 24% to £123.3 million or 49.89 pence per diluted share compared to net profit of £99.4 million, a year earlier.

Whitbread PLC, in the last one year traded as high as 1,791 pence in October 2007 and as low as 875 pence in October 2008. Based on the Friday’s trading closing price the company has a market cap of £1.75 billion.