UK Rates on Hold; Trade Deficit Unchanged

Sarla Buch
09 Jul, 2009
New York City

The Bank of England left its key lending rate unchanged at 0.5% and its plan to purchase assets at

[R]6:00 PM London, 1:00 PM New York – The Bank of England left its key lending rate unchanged at 0.5% and its plan to purchase assets at £125 billion. Trade deficit in goods declined to £6.3 billion but the deficit in goods and services was unchanged at 2.2 £billion. Associated British Foods third quarter revenues increased 15%.[/R]

The Bank of England left its key lending rate unchanged at 0.5% and did not expand its plan to purchase government bonds with £125 billion.

The central bank in the accompanying statement also noted that it will keep reducing plans to purchase government debt and increase the purchase of private sector debt.

In London FTSE 100 Index closed higher 18.43 or 0.45% to 4,158.66 and the yield on 10-year bond increased to 3.78% from 3.59%.

UK Goods Deficit Declined

Imports in the May month declined 4% and exports fell 0.8% resulting to trade deficit of £6.3 billion pounds according to the Office of National Statistics.

The surplus on trade in services was £4.1 billion, the same as in April.

The UK’s deficit on trade in goods and services was £2.2 billion in May, compared to the deficit of £3.0 billion in April which was unchanged after the revision.

Export prices in April increased half a percent compared to April and import prices fell half a percent.

Gainers & Losers

Associated British Foods edged lower by 0.3% to 763 pence after it reported revenues rise of 19% in the first 40 weeks of the current fiscal year and increased 15% in the third quarter.

Aveva, the engineering company declined 2% to 693 pence after the company said that sales in the marine sector have started declining.

Fresnillo surged 10% to 487 pence after Citigroup recommended the stocks with a ‘buy’ rating. Other mining stocks rallied in sympathy except Randgold Resources which was downgraded.

Anglo American increased 5.6% to 1,651 pence and Randgold Resources decreased 0.9% to 3,635 pence. Peter Hambro Mining surged 5.7% on “buy rating.

Barratt Development decreased 2.2% to 151 pence after the company issued a cautious outlook and said it is focused on reducing debt.

Redrow declined 5.4% to 201 pence after the company issued revenue outlook near the low end of the analysts’ views. The company completed 2,113 homes in the year to June compared to 3,925 homes in the previous year.

PartyGaming increased 1.9% to 245 pence after it indicated first quarter revenue is in line with expectations. The poker revenue yields are “softer than in the first quarter” leading to lower poker revenues compared to a year ago.

Legal & General Group increased 3% after Morgan Stanley made positive comments and Admiral Group increased 2.6% to 887 pence after Bank of America recommended the stock with ‘buy’ rating.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 58 increased, 42 declined and 2 were unchanged.

Aviva plc decliners in the FTSE 100 index with a loss of 3.96% followed by losses in Autonomy Corporation plc of 3.01%, in ICAP PLC of 2.20%, in Hammerson PLC of 2.11%, in Wolseley PLC of 1.93%.

Fresnillo Plc led gainers in the FTSE 100 index with a rise of 10.06% followed by increase in Anglo American plc of 5.60%, in Xstrata plc of 3.87%, in Rio Tinto plc of 3.77%, in Vedanta Resources plc of 3.62%.

Europe Markets Review

In London FTSE 100 Index closed higher 18.43 or 0.45% to 4,158.66, in Paris CAC 40 Index increased 16.13 or 0.54% to close at 3,025.94 and in Frankfurt DAX index higher 57.42 or 1.26% to close at 4,630.07. In Zurich trading SMI increased 16.00 or 0.30% to close at 5,305.39.