UK Home Prices Fall, Stocks Rise

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

UK stocks closed higher on a rise in commoditites stocks after BHP Billiton aborted its hostile offer for Rio Tinto. A surprise rate in cut in China also lifted sentiment in the commodities markets. UK home prices fell 14% from a year ago in November.

[R]1:00PM New York, 6:00PM London - U.K. house prices fall 13.9% to £158,442 in November. Deloitte appoints administrators for Woolworth.[/R]

London stocks rose 1.8% led by commodity stocks as investor sentiment was strengthened by BHP’s aborted bid for Rio Tinto.

Crude oil prices also gained ahead of an OPEC meeting on Saturday to discuss falling oil prices. Prices have dropped 63% from the peak in mid-July. However domestic economy stocks pared gains after Woolworths filed for bankruptcy protection.

In London trading FTSE 100 index rose 1.8% or 73.41 to 4,226.10.

Of the FTSE 100 index stocks, 78 rose and 24 declined. Xstrata led gainers in the index shares with a rise of 12.2% followed by Kazakhmys rising 11.6%.

U.K. Home Prices Fall 13.9%

Nationwide Building Society reported today that the country’s house prices fell 0.4% from the previous month and 13.9% from a year earlier to £158,442 in November.

Chief economist Fionnuala Earley said despite the moderation in house price declines it is unlikely that there will be a “swift recovery” in the wake of the economic recession, weakening labor market and tight lending conditions.

The mortgage lender says the 1.5% November interest rate cut by the Bank of England will help a number of existing and potential homebuyers. Nearly one-third of borrowers on tracker mortgages are likely to benefit from base rate cuts.

In addition, Nationwide says 50% of borrowers on fixed deals will face a much less payment shock when they come to the end of their deals.

Also additional government spending, reduction in VAT and tax and national insurance contributions for those at the lower end of the income scale will have indirect effect on the housing market.

“However, this is likely to be limited unless it has a significant effect on consumers’ expectations. This seems unlikely since incomes will still be squeezed as the economy contracts,” said Earley.

Wooloworths Files for Administration

Retailer Woolworths reported today that discussions relating the potential sale of its retail business have been terminated.

The boards of Woolworths plc and Entertainment UK Ltd concluded that there is no longer any possibility of the concerned businesses being able to operate as a going concern.

Both companies last night resolved to file petitions for administration in the High Court.

However Woolworths Group plc is not in administration and remains in discussions with BBC Worldwide on the possible sale of its 40% interest in 2 Entertain Ltd.

Separately, Deloitte reported that Neville Kahn, Nick Dargan and Dan Butters have been appointed Joint Administrators to Woolworths Plc, the street retailer, and Entertainment UK Ltd and the wholesale division of Woolworths Group Plc.

Reorganisation Services partner at Deloitte, Neville Kahn said the companies have been placed under administration this morning and will continue to trade.

Kahn said stores will remain open past Christmas and employees in stores will be paid.

Deloitte says in the last 24 hours it has received expression of interest from a number of parties both for the businesses.

Furniture chain MFI also named administrators yesterday.

Gainers & Losers

Xstrata led advancers in the FTSE 100 index shares with a rise of 12.2% followed by increases in Kazakhmys of 11.6%, in Standard Chartered of 11.6%, in Wolseley of 11% and Vedanta Resources of 10.8%.

Commodity stocks rose after BHP Billiton reported that it has withdrawn its filing with authorities in the US and U.K. related to its aborted bid for Rio.

Crude oil prices increased to $53.8 per barrel. Tullow Oil gained 10.2% and Antofagasta increased 7.6%.

Centrica Plc led decliners in the FTSE 100 index shares with a fall of 3.3% followed by losses in AstraZeneca of 2.6%, in Standard Life of 2.5%, in Kingfisher of 2.4%, and British America Tobacco of 2.3%.

Kingfisher dropped as Deloitte appointed administrators for Woolworths after the company succumbed from weakening consumer demand.

Pharmaceutical companies also dropped. Smith & Nephew shed 1.5% and GlaxoSmithKline slid 1.2%.



Europe Markets Review

In London FTSE 100 Index closed higher 73.41 or 1.77% to 4,226.10, in Paris CAC 40 Index increased 80.54 or 2.54% to close at 3,250.39 and in Frankfurt DAX index higher 104.77 or 2.30% to close at 4,665.27. In Zurich trading SMI increased 142.24 or 2.59% to close at 5,640.80.