UK Stocks Fall; Wm Morrison Surges

Darlington Musarurwa
08 Jun, 2009
New York City

The Bank of England proposed to expand the acceptable collateral in exchange of loans to corporations. Lloyds Banking to return

[R]1:00PM New York, 6:00 PM London – The Bank of England proposed to expand the acceptable collateral in exchange of loans to corporations. Lloyds Banking to return £2.3 billion of bailout funds to the UK government. Barclays is in talks with BlackRock to sell its asset management unit. William Morrison surged after same store sales gain.[/R]

The benchmark stock index declined marginally led by Lloyds Banking despite news the lender will become the first in Europe to return part of the financial bailout in received from the government last year.

In London trading the FTSE 100 Index fell 0.8% or 33.34 to 4,405.22.

BoE to Increase Asset Purchases to Commercial Paper

Bank of England reported in a consultative paper published today that it is considering extending the Asset Purchase Facility to introduce in the near future a Secured Commercial Paper Facility and provide additional liquidity to corporations. The facility will be available from June 19.

The facility is calculated to boost liquidity in credit markets that have still not returned to normal levels. According to the report, the central bank will offer to buy securities backed by assets such as trade receivables.

In addition the consultative paper sets out the proposed features of the facility, including the types of underlying assets that will be eligible in securities programs.

The BoE said, ""The Bank is also inviting consultation with interested parties on an outline proposal to offer a Supply Chain Finance Facility. This covers a potential means to provide working capital financing to the suppliers of investment-grade companies.""

Keydata Investment Services, the manager of structured investment products was forced into administration after the Financial Services Authority said the group was insolvent. The fixed income products that were highly leveraged and illiquid to trade were core products of the investment company.

Dan Schwarzmann and Mark Batten of PricewaterhouseCoopers are acting as joint administrator and could confirm what funds may be at risk of the 3 billion pounds under management.

Barclays in Discussions with Investors over iShares, BGI

Barclays announced in a statement today that after the sale of its iShares to CVC Capital Partners for $4.4 billion in April, it is in talks with U.S. money manager BlackRock and other investors about iShares and the BGI business.

Discussions have not been concluded. Barclays says it will announce the result ""upon conclusion of the go-shop process it agreed with CVC"" no later than June 19.

Market rumors note that Bank of New York Mellon is also bidding for BGI.

BlackRock is expected to bid higher for the Asset management and iShares unit.

Gainers & Losers

Lloyds Banking dropped 7.7% after announcing that it will return £2.3 billion this week it received from the government. The lender is seeking an estimated £4.4 billion to repay its higher-interest debt.

Barclays shed 0.4% on reports U.S. fund manager BlackRock is also interested in buying its iShares business and BGI.

William Morrison Supermarkets Plc surged 18% to 118 pence after it reported first quarter total sales increased 5.2% and 9.2% excluding fuel sales. Same store sales also known as like-for-like sales, increased 5% and 8.2% excluding fuel.

Commodity stocks fell as crude oil prices dropped to $68 per barrel. Eurasian Natural plunged 4.3%, Rio Tinto dipped 2.5% and BHP Billiton tumbled 3.9%.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 22 increased, 77 declined and 3 were unchanged.

Lloyds Banking Group PLC decliners in the FTSE 100 index with a loss of 7.70% followed by losses in Fresnillo PLC of 4.86%, in Royal Bank of Scotland Group PLC of 4.85%, in Anglo American PLC of 4.68% and in Vedanta Resources PLC of 4.38%.

The British Land Company PLC led gainers in the FTSE 100 index with a rise of 2.33% followed by increase in Hammerson PLC of 2.23%, in British Sky Broadcasting Group PLC of 2.06%, in Rolls-Royce Group PLC of 1.90%, in Reckitt Benckiser Group PLC of 1.42%.

Europe Markets Review

In London FTSE 100 Index closed lower 33.34 or 0.75% to 4,405.22, in Paris CAC 40 Index decreased 49.39 or 1.48% to close at 3,289.66 and in Frankfurt DAX index lower 72.31 or 1.42% to close at 5,004.72. In Zurich trading SMI decreased 7.18 or 0.13% to close at 5,391.72.