UK Stocks 5-year Low, Pound Declines

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

UK stocks recovered from 6% loss in the day but closed at 5-year low. The pound dropped nearly 2% against euro and dollar. Home price declined 7% in October. Persimmons, the home builder takes a charge for its land portfolio of 600 million.

[R]3:00PM New York, 8:00PM London - U.K. house prices fall 7.3% in October. The pound declined 1.7% against dollar and fell near record low against euro.[/R]

London market averages dropped marginally led by retailers as oil prices dropped to $62 a barrel. The weak housing market report dragged the currency near lows against dollar and euro.

The British pound fell to $1.562 from $1.59 and dropped against euro to 80.33 pence from 79.31 pence. The pound may test $1.50 level as the U.K. enters into a recession ahead of most European nations.

Market Sentiment

In London trading FTSE 100 fell 0.79% or 30.37 to 3,852.59.

Of the FTSE 100 index stocks, 33 rose and 69 declined. Antofagasta led advancers in the index shares with a rise of 8.50% followed by increase of 7.2% in British America Tobacco.

House Prices Fall 7.3% in England and Wales in October

Home price research company Hometrack reported today that the price of residential property in England and Wales declined 7.3% from a year earlier to £163,200.

The survey notes that property values are now at the same level as in March 2006.

London prices dropped 1.6% from a year ago and also plummeted in Yorkshire and Humberside in northern England.

In addition, the percentage of asking price meeting sale price declined to 89.2% in October from 90% the previous month.

Hometrack director of research Richard Donnell said, """"The expectation of a forthcoming recession and rising unemployment will further undermine demand for housing. Continued price falls are inevitable.""""

Home Prices to Fall 10%

Persimmon Plc reported today in its third quarter management statement that house prices will fall 10% in the second half from the earlier projected 5% as credit market conditions continue to deteriorate.

The report released earlier than scheduled on November 18 because of the deteriorating conditions on the housing market.

The homebuilder forecasts the value of its landholdings will fall by a further £600 million on continued price weaknesses.

About 10,000 homes will be legally completed by December 31, 2008, while social housing sale volumes will be increased by 25%.

Sales for this year including legal completions stand at £1.8 billion and £250 million of sales has been booked for next year. Cancellation rates are expected to rise by 35%.

Persimmon noted in a statement, """"We are fully supportive of the Government''s initiatives to increase mortgage availability to 2007 levels. Until this begins to take effect we do not expect to see any improvement in trading conditions.

In the meantime our focus remains on generating cash and reducing overall working capital levels to maintain a strong balance sheet for the future.""""

Gainers & Losers

Antofagasta led advancers in the FTSE 100 index shares with a rise of 8.50% followed increased in British American Tobacco of 8.50%, in British Sky Broadcasting of 7%, in GlaxoSmithKline of 5.1%, and Tesco of 4.9%.

Other retailers rose as well. Marks & Spencer soared 4.42%.

Standard Chartered led decliners in the FTSE 100 index shares with a fall of 10.3% followed by losses in Xstrata of 8.8%, in Petrofac Ltd. of 8.7%, Wood Group of 8.5%, and Amec of 7.80%.

Standard Chartered dropped on rating downgrade.

Xstrata dropped as crude oil prices for December delivery fell 4.4% to $61.30 and copper declined to 1,667 pounds per ton.

BG Group Finalizes $5.3 billion Takeover of Queensland Gas Corp

The Australian reported today that BG Group is finalizing its $5.3 billion takeover of Queensland Gas Corporation in a deal that is expected to contain """"break fees and """"no-shop"""" provisions to discourage competing bids.

BG is awaiting approval from Foreign Investment Review Board before announcing the deal.

Europe Markets Review

In London FTSE 100 Index closed lower 30.77 or 0.79% to 3,852.59, in Paris CAC 40 Index decreased 126.44 or 3.96% to close at 3,067.35 and in Frankfurt DAX index lower 9.66 or 0.22% to close at 4,286.01. In Zurich trading SMI decreased 174.15 or 3.07% to close at 5,500.94.