UK Trade Deficit Swells; Fitch Debt Alarm

Mayank Mehta
09 Mar, 2010
New York City

The UK trade deficit surges in January. Rating agency Fitch called for faster budget deficit cuts. Shanks declined after it ended takeover talks with Carlyle Group. John Menzies pretax profit doubles. The rating agency Fitch urged UK government to trim deficit faster.

[R]4:00PM London, 11:00 AM New York – The UK trade deficit surges in January. Rating agency Fitch called for faster budget deficit cuts. Shanks declined after it ended takeover talks with Carlyle Group. John Menzies pretax profit doubles. The rating agency Fitch urged UK government to trim deficit faster.[/R]

UK stocks edged lower and the pound struggled after the trade deficit surged in January. Exports declined the most in the month since July 2006 as industrial chemicals and commodities sales fell despite the weakness in the pound.

In London FTSE 100 Index closed lower 8.04 or 0.14% to 5,598.68 and the pound edged lower to close at $1.498 and edged lower to close at €1.103.

The UK trade deficit in goods and services increased to £.3.8 billion in January from December deficit of £2.6 billion. The deficit on trade in goods rises to £8.0 billion in January compared to deficit of £7.0 billion in December.

Chevron Corp said today in a presentation to investors in New York that it plans to sell its only European refinery in Scotland. The 210,000 gallon a day refinery processes around 12% of the petrol consumed in the UK. The company also plans to cut 2,000 jobs and sell assets in Caribbean and Central America.

Fitch Ratings called for a faster cut in the UK budget deficit. Brian Coulton, head of global economics at the rating agency said in a presentation that the government plan to lower the deficit to 4.4% by 2015 is “too slow.” The comments were first reported by Bloomberg.

Coulton went on to say that the government should be lowering the deficit to 3% by 2015. UK still within the acceptable range of AAA rating but the rapid rise in government debt leaves the company vulnerable to future shocks.

Gainers & Losers

Antofagasta plc decreased 1.2% to 981.50 pence after the copper producer said 2009 sales fell 12% to $2.96 billion from $3.37 billion a year ago. Net profit for the year fell 61% to $667.7 million or 67.7 cents per diluted share compared to net profit of $1.71 billion or 173.1 cents per share a year ago.

Ashtead Group plc dropped 2.6% to 85.35 pence after the equipment rental group nine months underlying profit before taxation of £8.1 million in line with expectations from £87.6 million a year ago.

Gartmore Group Limited rose 3.1% to 196.00 pence after the fund manager said it had net inflows of £273 million or $410 million in the first two months of the year. The company was listed on the London Stock Exchange in December last year.

Hill & Smith Holdings PLC increased 5.4% to 358.50 pence an infrastructure and building products supplier said 2009 revenues fell 7.2% to £389.7 million from £419.8 million a year ago. Net profit for the year rose 21% to £27.5 million or 35.9 pence per diluted share compared to net profit of £22.7 million or 29.7 pence per share a year ago.

International Power plc added 1.4% to 333.50 pence an independent power generation company said 2009 sales fell 4% to £3.67 billion from £3.82 billion a year ago. Net profit for the year rose 19% to £996 million or 62.7 pence per diluted share compared to net profit of £838 million or 34.6 pence per share a year ago.

Inmarsat Plc dropped 2.2% to 757.50 pence after the provider of global mobile satellite communications said 2009 sales rose 4.2% to $1.04 billion from $996.7 million a year ago. Net profit for the year fell 57% to $152.7 million or $0.35 per diluted share compared to net profit of $355.3 million or $0.77 per share a year ago.

John Menzies plc added 5.8% to 344.00 pence after the newspaper distribution and aviation services firm said 2009 sales rose 3.6% to £1.73 billion from £1.67 billion a year ago. Net profit for the year was £15.3 million or 25.8 pence per diluted share compared to net loss of £1.2 million or 2.0 pence per share a year ago.

Johnson Service Group PLC closed unchanged at 18.75 pence after the workwear and textile firm said 2009 sales fell 6.3% to £236.4 million from £252.3 million a year ago. Net profit for the year was £11.4 million or 4.4 pence per diluted share compared to net loss of £6.1 million or 4.2 pence per share a year ago.

Liberty International PLC fell 3.5% to 488.70 pence after the shopping centre owner today announces its intention to separate into two businesses, Capital Shopping Centres and Capital & Counties.

Lookers plc fell 2.2% to 54.75 pence after the car dealer said its full-year pre-tax profit on ordinary activities was £11.5 million compared with a loss of £14.9 million in the prior year period.

Provexis plc surged 15.5% to 6.68 pence after the medical food and dietary supplement developer announced the completion of the human trial comparing the effects of its Fruitflow anti-thrombotic technology with aspirin.

Shanks Group plc plunged 13.3% to 104.50 pence after the independent waste management company ended its talks with leveraged-buyout firm Carlyle Group based in Washington, D.C.

The Weir Group PLC gained 6.4% to 914.50 pence after the pump manufacturer said 2009 sales fell 3% to £1.39 billion from £1.35 billion a year ago. Net profit for the year fell 24.6% to £128.8 million or 60.8 pence per diluted share compared to net profit of £170.8 million or 80.9 pence per share a year ago.