Earnings Drive UK Stocks Higher

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

UK stocks closed 1.8% higher on strong earnings from BP Plc and positive outlook from Standard Chartered. The market gains were trimmed after a record drop in consumer confidence in the U.S. UK home repossessions rose 71% in the second quarter. Schroders Plc net dropped 20% in the third quarter.

[R]3:00PM New York, 8:00PM London - U.K. home repossessions rise 71% in April-June period[/R]

U.K. stocks rose 1.8% buoyed by strong earnings growth from BP and a bullish third quarter earnings assessment from Standard Chartered.

However gains were trimmed after the U.S. consumer confidence dropped the most since monthly records began in 1967.

Market Sentiment

In London trading FTSE 100 index gained 1.8% or 68.69 to 3,921.28.

Of the FTSE 100 index stocks 64 rose, 37 declined, and one was unchanged. Admiral Group led advancers in the index shares with a rise of 14% followed by a rise of 10.3% in HBOS.

U.K. Home Repossessions Rise 71%

The Financial Services Authority reported today that the number of homes repossessed in the quarter to June increased by 71% to 11,054 homes from 6,476 in the comparable period a year earlier as homeowners failed to clear their outstanding arrears.

Prices in Wales declined 5.5% in the period and 10.7% from a year earlier, while the house prices dropped by more than 2% in South West, South East, North East and East Midlands.

London recorded the smallest annual decline of 6.1% and prices fell 6.3% in the North West region.

The FSA noted that in the April through July period an estimated 57,887 properties were traded each month, which is 48% lower than a year ago. In July sales were 57% lower than a year ago at 49,784.

U.S. Consumer Confidence Drops Most Since 1967

U.S. Conference Board reported today that the consumer confidence index dropped from 61.4 in September to 38 in October, the lowest since monthly records began in 1967.

The Present Situation Index declined to 41.9 from 61.1a month ago, while the Expectations Index dropped to 35.5 from 61.5 in September.

Consumers saying business conditions are ""bad"" rose 18.3% in October from 33.4 a month ago, while those saying business conditions are ""good"" fell 9.2% from 12.8% a month ago.

Those saying jobs are “hard to get” climbed to 37.2% from 32.2% in September, while those claiming jobs are “plentiful” declined to 8.9% from 12.6%.

According to the director of the conference board consumer research centre Lynn Franco, consumers are extremely pessimistic and most of them see business and labor conditions deteriorating further.

Gainers & Losers

Admiral Group led advancers in the FTSE 100 index shares with a rise of 14% followed by increases in HBOS of 10.3%, in British American Tobacco of 8.8%, in G4S Plc of 8%, and RSA Insurance Group of 7.6%.

HBOS rose after Standard Chartered reported that losses related to specific U.S. financial institutions are not material.

Energy stocks gained after BP reported that earnings attributable to shareholders surged 83% to $8.05 billion in the third quarter ending September 30 from $4.4 billion in the same period a year ago.

Royal Dutch Shell stock advanced 6.7%.

Eurasian Natural led decliners in the FTSE 100 index shares with a fall of 11.8% followed by losses in Prudential Plc of 10.2%, in ICAP Plc of 9.1%, in Legal & General Group of 9% and Old Mutual of 8.2%.

Earnings Review

BP Plc reported that profit attributable to shareholders in the third quarter ended September 30 rose 83% to $8.1 billion from $4.4 billion a year earlier. Profit in the nine months ended September rose to $24 billion from $16 billion a year ago.

Earnings from exploration and production gained to $12.7 billion from $6.3 billion in the same period a year ago.

BP also increased its quarterly dividend 29% to 14 cents per share.

Standard Chartered reported today in its third quarter management statement that although there are losses in the wholesale banking business their impact on the portfolio “is not material”.

The carrying value in the asset backed portfolio dropped to $4.1 billion from $4.9 billion in the previous quarter.

In September the lender opened three branches in Hong Kong and shored up outlets in China to 49, including introducing internet banking in Vietnam.

Peter Sands, Group Chief Executive of Standard Chartered said, “Standard Chartered has seen continued growth in the third quarter despite the turmoil.

The Group has good momentum underpinned by our strategic focus on Asia, Africa and the Middle East.”

Money manager Schroders Plc reported third quarter pre-tax profit fell 20% to £78 million from £98.1 million as retail clients withdrew £2.9 billion from funds.

Europe Markets Review

In London FTSE 100 Index closed higher 73.79 or 1.92% to 3,926.38, in Paris CAC 40 Index increased 47.57 or 1.55% to close at 3,114.92 and in Frankfurt DAX index higher 488.81 or 11.28% to close at 4,823.45. In Zurich trading SMI increased 37.60 or 0.68% to close at 5,538.54.