Longs continue to cheer Sterling?s unrelenting strength as the British currency posted another 26-year high on the back of luring UK yields and aggressive rate speculation. The Pound surged as high as $2.0654 as BoE Deputy Governor John Gieve assured market participants that the bank “will do whatever is needed” to tame inflation and bring it back below the two-percent ceiling, which it remained above for a 14th month in June.
[B][U]UK Headlines:[/U][/B]
[B][I]U.K. Floods Cover English Heartlands; Submerge Roads[/I][/B]
The worst floods in 60 years along the U.K.'s two longest rivers covered tracts of central England, leaving 140,000 homes without drinking water and pushing damage estimates above 3 billion pounds ($6 billion).
http://www.bloomberg.com/apps/news?pid=20601102&sid=avebk.W8mmE8&refer=uk
[I]-Source: Bloomberg[/I]
[B][I]Vodafone Holders Back Executives, Reject Dissidents[/I][/B]
Vodafone Group Plc investors backed company executives and rejected a plan by a money manager to spin off Vodafone’s stake in Verizon Wireless and sell bonds to return cash to shareholders.
http://www.bloomberg.com/apps/news?pid=20601102&sid=aQicvQ6ZAFmQ&refer=uk
[I]-Source: Bloomberg[/I]
[B][I]Production Falls, Hits BP Profits[/I][/B]
BP on Tuesday reported a 13 per cent fall in second-quarter profits, on the back of a decline in oil production and operational problems at the company?s US refineries. The decline in profits - to $5.3bn from $6.1bn in the equivalent period in 2006 - underlines the energy giant?s failure to take advantage of rampant oil and gas demand at the time when the global economy is strong.
http://www.ft.com/cms/s/e534b02e-39b8-11dc-9d73-0000779fd2ac.html
[I]-Source: Financial Times[/I]
[B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBP[/B]
Longs continue to cheer Sterling?s unrelenting strength as the British currency posted another 26-year high on the back of luring UK yields and aggressive rate speculation. The Pound surged as high as $2.0654 as BoE Deputy Governor John Gieve assured market participants that the bank “will do whatever is needed” to tame inflation and bring it back below the two-percent ceiling, which it remained above for a 14th month in June. Trading marginally lower at $2.0634 in the Wall Street afternoon, Cable retreated from its multi-decade highs when then Confederation of British Industry expressed that factory orders in the UK declined in July. More notably, the survey also conveyed that sentiment among manufactures yielded the most negative results in seven months as an index of orders slide to -6, its lowest reading since January.
[I][U]Equity Markets:[/U][/I] [B]FTSE 100
[/B]Concern over US housing spilled over into FTSE trading with top London equities slumping 1.79 percent to 6505.70. Tracking US indexes lower on the session, global mining sector shares weighed heavily on the index. Lonmin and Rio Tinto skid 2.6 percent and 1.9 percent to close at 3637 and 3770 pence respectively. Also adding negative sentiment was the retailers Home Retail and Next Plc who are feeling the pressure of poor consumer demand due to increased interest rate expectations. Shares in Home Retail the owner of approximately 1000 stores in the UK, declined 3.1 percent to 428.25 and the UK?s third largest retailer Next Plc lost 1.8 percent to close at 1883 pence.
[I][U]Fixed-Income Markets:[/U][/I] [B]10-Year Long Gilt
[/B]Yielding a 35 basis point premium to that of US Treasuries compared to 4 at the start of the year, strong UK yields are inducing investment inflows thus stoking domestic expansion. Down 1 basis point to 5.31 percent, trading in the 10-year UK benchmark gilt has been choppy as traders digest the latest round of subprime apprehension. A healthy yield spread between long US government debt continues to underpin the pound?s surge to 26-year highs. Carry-traders capitalize on the growing yield disparity, borrowing lower yielding currencies such as the yen and making acquisitions in UK markets.
