Weak UK Pound; Talks of Debt Downgrade

Mayank Mehta
15 Mar, 2010
New York City

UK stocks closed lower on a weakness in copper and metal prices. Moody

[R]4:00 PM London, 11:00 AM New York – UK stocks closed lower on a weakness in copper and metal prices. Moody’s cautioned that UK debt rating could face a downgrade if economic conditions worsen and debt burden rises. French Connection Group closes most of its U.S. stores and announced a sharply higher loss.[/R]

UK government debt rating could face a downgrade if economic conditions worsen and government spending spins out of control, according to a report released by Moody’s Investors Services in London quoted by Bloomberg.

But, Moody’s stressed that UK, France, US and Germany are not in imminent danger of losing their cherished rating.

UK is expected to spend 7% of its revenue in servicing debt and that spending is expected to increase to 9% in 2013 and could jump to 12% if the economic growth is slower by 0.5 percentage point lower than the government estimate.

In London FTSE 100 Index closed lower 35.36 or 0.63% to 5,590.29 and the pound edged lower to close at $1.516 and edged higher to close at €1.103. The pound has been battling election jitters and the Moody’s cautious outlook and raising the prospect of UK losing its AAA rating.

Gainers & Losers

Aurelian Oil & Gas PLC rose 1.3% to 37.75 pence after the Eastern Europe focused oil and gas explorer appointed John Conlin as a non-executive director and Chairman-elect.

Bunzl plc rose 0.2% to 719.00 pence after the distribution and outsourcing group today announced the acquisition of Weita Holding AG and its subsidiaries from Christoph Huber.

DTZ Holdings plc increased 1.8% to 81.75 pence after the property adviser reiterated that fiscal 2010 earnings are in line with market expectations.

French Connection UK soared 11% to 46.75 pence after the fashion retailer said it plans to trim its retail stores from 23 to six in the U.S. The retailer last year closed all of its 21 stores in Japan and select stores in Northern Europe. The upscale retailer plans to sell its Nicole Farhi brand to Los Angeles based private equity group OpenGate Capital LLC for as much as £7.5 million based on certain earnings milestones.

For the fiscal year ended in January, sales were £214.3 million and a net loss of £24.9 million.

Gulf Keystone Petroleum Limited fell 3.1% to 84.50 pence.

Ingenious Media Active Capital Limited rose 1.3% to 41.55 pence.

Netcall plc decreased 4.4% to 16.00 pence after the callback and auto-messaging solutions provider said first half sales fell 7% to £1.86 million from £2.01 million a year ago. Net profit for the first half fell 76% to £105.9 million or 0.17 pence per diluted share compared to net profit of £438.6 million or 0.67 pence per share a year ago.

Punch Taverns plc the pub chain operator fell 0.2% to 85.30 pence.

Raven Russia Limited fell 0.9% to 52.00 pence after the property investment company said 2009 revenues rose 57% to $112.2 million from $71.3 million a year ago. Net loss for the year was $139.3 million or 7.04 cents per diluted share compared to net loss of $170.3 million or 3.04 cents per share a year ago.

Rio Tinto plc declined 1.5% to 3,651 pence and several analysts in Australia raised their estimate of iron ore price increase for the current year beginning April to between 60% and 80% from the previous estimate of an increase between 20% and 40%.

TT electronics plc fell 2.3% to 85.00 pence an electronic components supplier said 2009 sales fell 14.5% to £499.6 million from £584.3 million a year ago. Net loss for the year was £19.6 million or 12.6 pence per diluted share compared to net profit of £11.6 million or 7.5 pence per share a year ago.

Witan Investment Trust plc climbed 0.8% to 477.50 pence after the investment trust reported a profit in its fiscal year 2009 compared to prior year''s loss on gains on investments.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 32 increased, 68 declined and 2 were unchanged.

Eurasian Natural Resources Corporation Plc decliners in the FTSE 100 index with a loss of 3.15% followed by losses in Wolseley Plc of 3.10%, in Xstrata Plc of 3.10%, in Antofagasta Plc of 2.90%, and in Fresnillo Plc of 2.72%.

BT Group Plc led gainers in the FTSE 100 index with a rise of 1.38% followed by increase in Centrica Plc of 1.34%, in Shire Plc of 1.24%, in Admiral Group Plc of 1.13%, and in Old Mutual Plc of 1.05%.