Commodities Rise Lift London Stocks

123jump.com Staff
04 Feb, 2009
New York City

Stocks in London rallied on a rise in commodities prices. A private estimate lifted its estimate of the shrink in the economy to 2.7% from 0.9% in the earlier estimate in November. A manufacturing index in January showed a decline but at a slower pace.

[R]1:00PM New York, 6:00PM – Stocks in London rallied on a rise in commodities prices. A private estimate lifted its estimate of the shrink in the economy to 2.7% from 0.9% in the earlier estimate in November. [/R]

U.K. stocks rose 1.5% despite a report that forecasted the country’s gross domestic product will drop 2.7% in 2009 as commodity stocks rallied.

Gold prices edged higher $2.40 to 903 per ounce and crude oil prices advanced to $41.6 per barrel. Investors were also encouraged by a private report that showed the decline in manufacturing activity slowed in January.

In London trading FTSE 100 index advanced 1.5% or 64.14 to 4,228.60.

Of the FTSE 100 index stocks, 84 rose, and 18 declined. Kazakhmys led gainers in the index shares with a rise of 14.9% after metal prices rallied.

U.K. Economy to Fall 2.7% in 2009

National Institute of Economic and Social Research (Niesr) estimated that UK gross domestic product may decline 2.7% in 2009, higher from the earlier forecast of 0.9% decline.

The weakness in household consumption expenditure will contribute most to the contraction.

Niesr projects that the current U.K. recession will stretch to the third quarter of the year, which is reminiscent of the last recession that dragged from 1990 until 1991.

U.K''s Decline in Manufacturing Activity Slows

Chartered Institute of Purchasing and Supply reported today the latest CIPS/Markit Purchasing Managers Index eased to 42.5 in January from 40.2 in December weighed by the decline in new orders.

A reading below 50 shows contraction, while a reading above 50 represents expansion.

The report notes that output prices dropped the most in the survey''s history and input prices advanced at the slowest rate since November 2001 on lower transport and energy costs.

Reduction in outstanding issues eased 40.1 in January from 38.4 a month earlier as the cancellation of projects and reduction in the backlog of work in industries slowed the contraction.

The CIPS said employment also dropped to a record in January as companies restructured by shedding staff in order to cut costs.

Gainers & Losers

Kazakhmys led advancers in the FTSE 100 index shares with a rise of 14.9% followed by increases in Xstrata of 14.8%, in Eurasian Natural of 14.4%, in Schroders Plc-NV of 13.4%, and Antofagasta of 12.7%.

Kazakhmys and other commodity stocks increased as gold prices rallied $2.40 to $903 per ounce and crude oil prices rose above $41 per barrel.

AstraZeneca led decliners in the FTSE 100 index shares with a decline of 5.2% followed by losses in Sage Group of 4.9%, in Unilever of 4%, in British American Tobacco of 3.1%,and Cadbury Plc of 2.5%.