Falling Commodites Prices; UK Stocks Down

Darlington Musarurwa
03 Jun, 2009
New York City

UK stocks fell tracking the declines in commodities prices. The rally in stocks is now ten weeks long and investors are increasingly shying away from rising valuations. British Air reported a fall in May traffic but traffic at Ryan Air rose. Service sector expanded in the last month.

[R]6:00 PM London, 1:00 PM New York – UK stocks fell tracking the declines in commodities prices. The rally in stocks is now ten weeks long and investors are increasingly shying away from rising valuations. British Air reported a fall in May traffic but traffic at Ryan Air rose. Service sector expanded in the last month.[/R]

UK stocks fell after a week of surge in a rally that has lasted more than ten weeks. Metals, mining and energy stocks closed lower.

UK benchmark index and most active stocks are generally not representative of the service sector dominated UK economy.

In London FTSE 100 Index closed lower 93.60 or 2.09% to 4,383.42. Stocks fell as investors are questioning the valuations after the recent surge and if the current market momentum can be sustained.

UK service sector expanded in May after shrinking in April according to the latest measure the PMI services index. The service sector has been shedding jobs faster than manufacturing and the latest read surprised many economists.

Gainers & Losers

Copper, zinc and precious metal prices closed lower dragging mining companies. Vedanta Resources declined 8% to 1,582 pence, Xstrata Plc dropped 6.4% to 728 pence and Anglo American declined 6% to 1,785 pence.

Chilean copper giant Antofagasta Plc dropped 4.6% to 639.50 pence and Kazakhstan based Kazakhmys Plc edged 4.1% lower to 699 pence.

Crude oil dropped 3.2% and BG Group fell after Brazil energy minister stated that the government controlled Petrobras SA will be allowed to explore the Tulip energy field regardless of the outcome of the exploration auction.

BG Group Plc declined 2.8% to 1,123 pence and Royal Dutch Shell Plc declined 2.35 to 1,681 pence.

Ryan Air added 4.5% to 3.70 euros in Dublin trading after passenger traffic in May increased 9% from a year ago to 5.5 million. In April traffic had increased 12% from a year ago.

British Airways Plc decreased 4% to 152.1 pence after it reported 6.5% decline in passenger traffic in May. The premium traffic in May declined 17.2% from a year ago after falling 17.7% in April. Non-premium traffic in May fell 4.2%.

Earnings Review

Hampson Industries PLC, the aerospace and engineering company said full-year revenues rose 62.5% to £256.65 million from £157.95 million a year ago. Net loss in the year was £11.23 million or £7.64 per diluted share compared to net profit of £5.3 million or £5.53 per share a year ago.

Hampson Industries PLC, in the last one year traded as high as 188.00 pence in September 2008 and as low as 76.00 pence in March 2009. Based on the yesterday’s closing price of 93.75 pence the company has market cap of £150.70 million.

iomart Group plc, the provider of web based managed hosting services said full-year revenues rose 45% to £11.8 million from £8.12 million a year ago. Net profit in the year was £1.2 million or £1.17 per diluted share compared to net profit of £0.4 million or £0.35 per share a year ago.

iomart Group plc, in the last one year traded as high as 53.00 pence in August 2008 and as low as 20.96 pence in January 2009. Based on the yesterday’s closing price of 39.26 pence the company has market cap of £38.06 million.

Northumbrian Water Group plc, the water and sewage services provider said full-year revenues rose 3.5% to £694.1 million from £670.4 million a year ago. Net loss in the year was £12.7 million or £2.45 per diluted share compared to net profit of £158.1 million or £30.48 per share a year ago.

Northumbrian Water Group plc, in the last one year traded as high as 337.50 pence in November 2008 and as low as 203.00 pence in March 2009. Based on the yesterday’s closing price of 246.75 pence the company has market cap of £1.28 billion.

Penna Consulting Plc, an international human resources consulting group said full-year revenues rose 30% to £63.2 million from £48.5 million a year ago. Net profit in the year rose 169.5% to £3.72 million or £14.2 per diluted share compared to net profit of £1.38 million or £5.5 per share a year ago.

Penna Consulting Plc, in the last one year traded as high as 200.00 pence in February 2009 and as low as 95.00 pence in May 2008. Based on the yesterday’s closing price of 185.00 pence the company has market cap of £46.99 million.

Ryanair Holdings plc, the discount airline said full-year revenues rose 8% to €2.9 billion from €2.7 billion a year ago. Net loss in the year was €169.2 million or €11.44 per diluted share compared to net profit of €390.7 million or €25.62 per share a year ago.

Sepura Plc, the radio maker said full-year revenues rose 9% to £74.1 million from £68.1 million a year ago. Net profit in the year rose 0.7% to £8.73 million or £6.3 per diluted share compared to net profit of £8.67 million or £6.3 per share a year ago.

Sepura Plc, in the last one year traded as high as 101.50 pence in June 2008 and as low as 42.00 pence in April 2009. Based on the yesterday’s closing price of 44.00 pence the company has market cap of £60.05 million.

Sportingbet Plc, the online gaming company said third quarter revenues rose 7.6% to £43.8 million from £40.7 million a year ago. Net profit in the quarter rose 141% to £8.2 million or £1.5 per diluted share compared to net profit of £3.4 million or £0.6 per share a year ago.

Sportingbet Plc, in the last one year traded as high as 68.00 pence in May 2009 and as low as 20.75 pence in October 2008. Based on the yesterday’s closing price of 62.00 pence the company has market cap of £298.00 million.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 28 increased, 74 declined and 0 were unchanged.

Vedanta Resources PLC decliners in the FTSE 100 index with a loss of 7.97% followed by losses in Rexam PLC, of 7.05%, in International Power PLC, 6.84%, in National Grid PLC of 6.50% and in Xstrata PLC of 6.43%.

Balfour Beatty PLC led gainers in the FTSE 100 index with a rise of 2.15% followed by increase in Smith & Nephew PLC of 2.10%, in British Sky Broadcasting Group PLC of 1.97%, in BAE Systems PLC of 1.65%, in WM Morrison Supermarkets PLC of 1.43%.

Europe Markets Review

In London FTSE 100 Index closed lower 93.60 or 2.09% to 4,383.42, in Paris CAC 40 Index decreased 68.39 or 2.02% to close at 3,309.65 and in Frankfurt DAX index lower 89.53 or 1.74% to close at 5,054.53. In Zurich trading SMI decreased 47.51 or 0.87% to close at 5,384.71.