UK Stocks Leap on U.S. Outlook

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

Stocks in UK surged on the optimism that lifted world markets after the U.S. proposed a plan to acquire toxic debt owned by banks. The FTSE index increased nearly 3% on a sharp rise in banking and mining stocks. Vodafone and Telefonica owned O2 are in discussion to share network infrastructure.

[R]1:00PM New York, 6:00PM London - CBI cautions against further stimulus. Vodafone and O2 are in discussion to share network infrastructure.[/R]

The benchmark stock index in U.K. rallied after a surprise 5.1% increase in U.S. home sales in the February.

Investor sentiment also heightened after the U.S. Treasury announced a $1 trillion public-private sector deal to sock up toxic assets from banks.

Market Sentiment

In London trading FTSE 100 index rose 2.9% or 109.96 to 3,952.81.

Of the FTSE 100 index stocks, 81 rose, 75 declined, and one was unchanged. Old Mutual led advancers in the index shares with a rise of 17.1% followed by Barclays gaining 15.7%.

CBI Cautions Against Further Stimulus

Chamber of British Industries reported today in its pre-Budget proposal the government should strive to build confidence through supporting jobs, investment and competitiveness.

CBI cautioned against a further stimulus package for the economy in the wake of the “alarming state of the public finances rules.”

Proposals also include the reversal of recent decision to delay the planned rise in employer National Insurance Contributions due in 2011 and the continuation of public sector building programs in schools, hospitals, transport and communications to support construction jobs and position the UK for recovery.

Temporary measures to stimulate demand for low-carbon goods and boost consumer confidence and business spending are also proposed.

The report notes that CBI is advocating freezing business rates for two years to iron out the impact of peaks and troughs in RPI inflation.

John Cridland, CBI Deputy-Director General, said, “Against this backdrop, a further significant fiscal stimulus is unaffordable and would lead to businesses and households retrenching in fear of higher tax bills in the future. Instead, the Chancellor needs to let the considerable stimulus already in the pipeline take effect and deliver a clear and credible plan for restoring the public finances to health.”

Vodafone and O2 to Share Network Infrastructure

Telefonica which owns O2 and Vodafone announced a tie up today that will see two of the world’s largest telecommunications companies share network infrastructure in Germany, Spain, Ireland and U.K.

Detailed discussions are still continuing in the Czech Republic.

The two companies are actively exploring opportunities to cooperate in areas such as the provision of transmission services.

Telefonica and Vodafone will use the agreements to leverage the roll out of their respective networks and enhance service quality for customers in the longer term.

In addition the deal is expected to deliver generate cost savings of hundreds of millions of pounds for both companies over the next 10 years.

UK has one of the highest mobile telecom rates in the world and regulators are lax in imposing tighter conditions on mobile operators.

Gainers & Losers

Old Mutual led advancers in the FTSE 100 index shares with a rise of 17.1% followed by increases in Barclays of 15.7%, in Rio Tinto of 13%, in HSBC of 12.6%, and Lonmin of 11.9%.

Thomas Cook led decliners in the FTSE 100 index shares with a decline of 2.4% followed by losses in Centrica Plc of 2%, in Hammerson of 1.8%, in National Grid of 1.6%, and Kingfisher of 1.5%.