UK Inflation Falls; Energy Stocks Gain

123jump.com Staff
16 Dec, 2008
New York City

UK inflation drops to 4.1% in November on a decline in energy prices. But, volatile food and produce prices jumped. Energy stocks rose after Iran and Venezuela favored production cut to support oil prices. Mining companies declined after Xstrata suspended production at a mine in Australia.

[R]1:00PM New York, 6:00PM London - U.K. inflation drops 4.1% in November. A rise in crude oil futures prices lifted stocks in the energy sector. Miners fell after Xstrata cut its output at an Australian mine.[/R]

London stock indexes rose marginally on soaring crude oil prices after Iran and Venezuela said OPEC may need to cut its production by 2 million barrels a day to the further erosion in oil prices.

However coal miners pared gains after Xstrata announced that it will suspend mining at an underground coking coal mine in Queensland, Australia on declining demand.

In London trading FTSE 100 Index rose 0.7% or 31.52 to 4,309.08.

Of the FTSE 100 index stocks, 72 rose, 27 declined, and 3 were unchanged. Tullow Oil led gainers in the index shares after crude oil prices soared $1 to $45.50 per barrel as Iran and Venezuela urged the OPEC to cut production.

U.K. Inflation Falls to 4.1% in November

Office of National Statistics reported today that the consumer price index annual inflation declined 4.1% in November from 4.5% the previous month.

Transport prices dropped to 1.3% in November from 4.3% a month earlier, contributing the largest decline for the second straight month.

The ONS noted that the average price of petrol fell by 9.3 pence per liter between October and November to 95.2 pence from an increase of 3.5 pence recorded in the same period a year ago.

Diesel prices dropped 7.5 pence per litre this year to 108.8 pence from an increase of 5 pence last year.

Air fares contributed the biggest upward movement for inflation in the review period as there were smaller seasonal price reductions from last year.

Housing and household services exerted upward pressures.

The statistics office also said that the largest upward pressure on the CPI annual rate came from food and alcoholic beverages, which increased from 10.1% in October to 10.6% in November.

Fruit inflation soared from 5.4% in October to 10.8% in November, and vegetables prices rose from 9.9% in October to 13.9%.

Additional Government Measures Required to Underpin Lending

Bank of England Governor Mervyn King said in a letter addressed to Chancellor of the Exchequer Alistair Darling that additional measures, building on the government''s rescue package to banks in October are needed to sustain home purchase lending.

King said it is likely that inflation will drop to the target in the first half of 2009 and move further downwards afterwards.

Gainers & Losers

Tullow Oil led gainers in the FTSE 100 index shares with a rise of 8.5% followed by increases in Aviva Plc of 6%, in First Group of 4.9%, in Drx Group of 4.6%, and Next Plc of 4.4%.

Tullow Oil increased after oil prices increased $1 to $45.50 per barrel.

3i Group led decliners in the FTSE 100 index shares with a fall of 12.8% followed by losses in Admiral Group of 11.7%, in Man Group Plc of 5.4%, in London Stock Exchange of 4.3%, and ICAP Plc of 3.7%.

Commodity stocks slid after Xstrata announced that it will suspend longwall mining at the Oaky No 1 underground coking coal mine in Queensland, Australia on falling demand. Xstrata lost 3.6%, Vedanta Resources shed 3.4% and Antofagasta slipped 1.9%.