UK Unemployment Claims Rise, Pound Falls

123jump.com Staff
18 Mar, 2009
New York City

Stocks in London trading declined after the latest jobless report. The unemployment claims rose by 138,400 to 1.39 million on February and number of unemployed increased to above 2 million with unemployment rate of 6.5%. Total number of unemployed in UK are likely to rise above 3.3 million.

[R]10:00PM London, UK, 6:00PM New York - U.K. jobless claims counts increases to 1.39 million in February. FSA considers banning large and risky mortgages.[/R]

U.K. stocks dipped 1.4% after jobless claims soared to 1.39 million in February. Unemployment is also forecasted to reach 3.3 million by the end of 2010. Commodity stocks dropped on pessimism over the outlook of the global economy.

The Bank of England stated that its Monetary Policy Committee voted unanimously to buy £75 billion of UK government bonds. The move will increase money supply and may prove to be highly inflationary in the longer term.

In London trading FTSE 100 fell 1.4% or 52.11 to 3,804.99.

Of the FTSE 100 index stocks, 31 gained, and 72 declined. Barclays Bank led gainers in the index shares with a rise of 5.2% followed by Legal & General Group advancing 5.1%.

U.K. Jobless Claims Rises in February

Office of National Statistics reported today that the jobless claims increased 138,400 from the previous month to 1.39 million in February.

The jobless claims rose 0.4 percentage points from the previous month to 4.3%.

Working age employment rate fell 0.1 percentage points from the previous quarter to 71.4% in the three months to January.

Employment level was 29.38 million in the January quarter.

The ONS said the number of people in full-time employment dropped 48,000 from the three months to October to 21.83 million in the three months to January, while the number of people in part-time employment gained 50,000 to 7.55 million in the review period.

Number of people in public sector employment gained 15,000 from September to 5.78 million in December 2008.

Total hours worked per week fell 2.3 million from the October quarter to 935.7 million in the three months to January.

The report also notes that the unemployment rate was 6.5% in the three months to January 2009. The number of people Unemployed is expected to increase to 3.3 million by the end of 2010.

Pound fell after the release of report against the dollar and euro. Pound dropped to $1.3987 and 0.944 euros.

FSA Mulls Banning Huge Mortgages

Chairman of the Financial Services Authority Lord Turner of Ecchinswell reported today in the Turnover Review of global banking regulation that banks could be prevented from offering risky huge-sized mortgages.

The review identifies macro-economic imbalances, financial value of little social values and deficiencies in bank capital and liquidity regulations as underlying causes of the global financial crisis.

Turner recommends fundamental changes to bank capital and liquidity regulations and counter cyclical capital buffers that can be drawn down in downturns.

In addition, the review proposes tighter regulation of liquidity and regulation of shadowy banking activities on the “basis of economic substance and not legal form.”

Gainers & Losers

Barclays Bank led gainers in the FTSE 100 index shares with a rise of 5.2% followed by increases in Legal & General of 5.1%, in Hammerson Plc of 5%, in Royal Bank of Scotland of 4.1%, and 3i Group of 4%.

Rio Tinto led decliners in the FTSE 100 index shares with a fall of 6.8% followed by losses in Friends Provident of 6.7%, in Randgold Resources of 5.4%, in HSBC Holdings of 5.1%, and Prudential Plc of 4.8%.

Rio Tinto dropped on fears the offer by Chinese state-owned Chinalco bid to buy $19.5 billion of its assets might be rejected by Australian regulatory authorities.

Other commodity-related stocks fell. Vedanta shed 4.2% and Xstrata plunged 3.7%.