UK Inflation Slows, BoE Holds Rate

123jump.com Staff
09 Apr, 2009
New York City

Bank of England keeps rate at 0.5% and will continue

[R]1:00PM New York, 6:00PM London - Bank of England keeps rate at 0.5% and will continue £75 billion asset purchase program. U.K. producer prices index rises at 2% in March. While the economy is shrinking prices are still rising, though at a slower pace. Barclays sell 80% stake in iShares unit for $4.4 billion and provide $3.1 billion in financing.[/R]

Stocks in London gained 1.5% after Wells Fargo reported better than expected first quarter earnings that lifted banks in New York trading. Investors surmised that banks and mortgage markets are likely to stabilize sooner than anticipated.

In London trading FTSE 100 index increased 1.5% or 58.19 to 3,983.71.

Of the FTSE 100 index stocks, 71 gained, 69 dropped, and 33 were unchanged. Vedanta Resources led gainers in the index shares with a rise of 13% after crude oil prices rose 83 cents to $51.1 per barrel.

Other commodity stocks gained. Kazakhmys and Xstrata jumped 9.3% each.

Bank of England Keeps Rates Unchanged at 0.5%

Bank of England elected to keep its benchmark rate unchanged at 0.5%, while the committee also voted to continue its £75 billion asset purchase program, which was announced on March 5.

A total of £26 billion of asset purchases have been made since the last meeting by the monetary policy committee.

Minutes of the meeting were published on April 22.

U.K. Producer Prices Index Rises at 2% Rate in March

Office of National Statistics reported today the output price index rose at slower pace in March. The increase in the index, also known as factory gate index for home sales of manufactured products increased at 2% in March from a year ago and increased only 0.1% from March.

The index gained 0.1% in March from a month earlier on increases of transport equipment. But the increase was trimmed by falling petroleum products.

Output price index, excluding excise duties, increased 1.7% in March from a year earlier month and rose 0.1% from a month ago.

In addition, the output price index excluding food, beverages, tobacco and petroleum advanced 3.3% in the year to March and jumped 0.2% between February and March.

The input price index for materials and fuels purchased by manufacturing industry declined 0.4% in the March from the same period a year ago and rose 1% from a month earlier on rising crude oil.

On the overall, prices of imported materials increased 1.4% between February and March.

Also, the input price index for manufacturing industry excluding the food, beverages, tobacco and petroleum industries rose 7.4% in March from a year ago.

Barclays iShares Unit Sale Raise £3 billion

Barclays Plc agreed to sell its popular exchange traded fund index operation with the name iShares to CVC Capital Partners. The 80% state sale will generate $4.4 billion and Barclays will book capital gain of $2.2 billion.

The gains will enhance the capital ratio by 54 basis points and pro forma Tier 1 capital ratio at the end of December 2008 would have been 10.3% and pro forma Tier 1 equity ratio of 7.2%.

The deal values the iShares unit at 10.1 times 2008 operating earnings and Barclays will provide $3.1 billion in financing for the purchase.

Barclays manage 1.04 trillion pounds in assets. The exchange traded funds business has grown in five years organically and assets under management increased to $260 billion in the period.

Barclays ((BCS)) share surged 19.50 pence to close at 177.50 pence.

Gainers & Losers

Vedanta Resources led advancers in the FTSE 100 index shares with a rise of 13% followed by increases in Barclays of 12.5%, in Royal Bank of Scotland of 11.1%, in Lloyds Banking of 10.9%, and Eurasian Natural of 10.7%.

Vedanta Resources and other commodity stocks gained after crude oil prices fell 83 cents to $51.1 per barrel.

Financial stocks increased after Wells Fargo reported earnings of 55 pence per share, which is more than double than previous analyst forecasts. Revenues also increased to $20 billion buoyed by rising mortgage lending and the integration of recently acquired Wachovia.

Imperial Tobacco led decliners in the FTSE 100 index shares with a fall of 3.6% followed by losses in Cadbury of 3.4%, in Associated British Foods of 3.3%, WM Morrison of 3.1%, and Randgold Resources of 3%.