UK Stocks Plunge 7%

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

UK stocks plunged after the markets in Europe fell more than 5%. Weak metals and commodities prices, a decline of 5% in crude oil futures and a rise in unemployment dragged the benchmark index down 7.2%. The copper miner, Antofagasta and BHP Billiton plunged 15%.

[R]1:00PM New York, 6:00PM – UK stocks fell sharply after the unemployment in three months rose to 5.2%.[/R]

UK stocks plunged 7% after rallying for two days in a row. The aggressive European government action to rescue banking system and UK government decision to take direct stakes in the troubled banks lifted markets in a record 2-day rally.

Commodities, shipping and mining companies stocks declined after ocean freight rate index declined to a low for the year. Weak retail sales in the U.S. also weighed on the sentiment.

Market Sentiment

In London trading FTSE 100 index fell 7.16% or 314.62 to 4,079.59.

Of the FTSE 100 index stocks 2 rose, 99 declined, and 1 was unchanged. Thomas Cook Group led advancers in the index shares with a rise of 1.18% after crude oil prices slipped.

Unemployment Rate Rises 5.2%

The Office of National Statistics reported that the unemployment rate rose and number of people in employment continued to decline in the three months ended August.

The working age employment rate dropped 0.4 percentage points from the quarter to May to 74.4% in the three months ended August, while the employment level slipped by 122,000 from the previous quarter to 29.42 million.

Full-time employment dropped 152,000 to 21.91 million in August but part-time employment gained 30,000 from a quarter ago to 7.51 million. Employees in public sector employment spiked 13,000 to 5.77 million in June 2008, while private sector employees declined 29,000 to 23.77 million in the period.

However jobs in mining, energy and water supply rose to 171,000 and those in manufacturing slumped to 2.87 million in August.

The ONS said the claimant count rose 31,800 from the previous month to 939,900 in September and 104,900 up from a year ago.

In addition, the number of economically inactive people of working age increased by 16,000 over the quarter and fell by 74,000 on the year to 7.89 million in the three months to August 2008.

U.K. Residential Prices to Fall 30%

The realtor, Knight Frank forecasted that U.K. house price declines are almost halfway through and likely to reach the bottom in late 2009 and early 2010.


Prices are forecasted to drop 30% from their peak in 2007 to September 2003 levels.

Currently development land values outside London are down 33% from peak levels and are expected to fall by a further 15%.

The real estate broker projects that London real estate prices not likely to recover till 2012 and Northern Ireland prices by 2019.

Knight Frank noted in the release, “It may be hard to stomach but opportunistic buyers are looking for distressed property sellers. They are interested in individual properties – repossessions in particular – and also development land, or even newly completed developments.”

Gainers & Losers

Thomas Cook Group led advancers in the FTSE 100 index shares with a rise of 1.18% followed by HBOS Plc increasing 0.47%.

Thomas Cook Group rose as oil prices declined 5.2% to $74.57 today.

Eurasian Natural led decliners in the FTSE 100 index shares with a fall of 25.17% followed by losses in Kazakhmys Plc of 22.27%, in Anglo America of 20.12%, in Xstrata of 19.60%, and Old Mutual of 18.11%.

Commodity stocks dropped on falling metal and energy prices. Antofagasta shed 15.01% and BHP tumbled 14.95%.

European Markets Review

In London FTSE 100 Index closed lower 314.62 or 7.16% to 4,079.59, in Paris CAC 40 Index decreased 247.45 or 6.82% to close at 3,381.07 and in Frankfurt DAX index lower 337.56 or 6.49% to close at 4,861.63. In Zurich trading SMI decreased 349.05 or 5.58% to close at 5,911.17.