Inflation rates continue to fall in UK

Official data due to be released today is expected to show the annual rate of consumer price inflation reaching 2.6 percent in February, down 0.4 percent from the previous month and standing at the lowest rate for almost a year.—Inflation rates are expected to continue to fall and even more sharply over the coming months with the effects of considerable reductions in energy prices kicking in as well as the government’s efforts to boost the economy as well as easing deflation.

If predictions on the inflation rates prove to be factual, they would amount to the first negative reading since March. Despite government efforts to the contrary, it appears that it is only a matter of time before consumer price inflation moves into negative mode.

Bad news for the 5.5 million UK households where one tenth or more of income goes on gas and electricity bills is that the Fuel Poverty Bill has been thrown out of parliament. For those who live in “fuel poverty”, the news will be especially irksome, simply because the vote fell because there was not a sufficient number of MPs present in the Commons on Friday afternoon when the vote was to take place. Of those present, 89 voted in favour and only two against. However the vote needed a minimum of 100 “ayes”, out of a possible 648. Not too much to ask for on such a sensitive subject, but apparently not on a Friday afternoon!

Another possible victim of failing to read the small print is the British Airports Authority. (BAA). Apparently the BAA could be forced into liquidation or even worse be nationalised, if the company fails to receive “full value” offers for their forced sale of the Gatwick and Stansted Airports According to terms of the contract issued by the Monopoly’s Commission, BAA will be disallowed for accepting offers that represent less than 85 percent of either of the airports’ regulated value. In the current economic climate, the company feel that is difficult to be and bids will be much lower than the more than one billion pounds that the company will require for their assets, and the airports will have no option but to reject the offers and at the same time cease to operate the airports. A scenario that doesn’t bear thinking about. In the event that such a scenario does come to pass, the UK government might have no option but to intervene to prevent the BAA from going into administration.

Birmingham-based van maker LDV, in danger of closing, apparently has a serious suitor. The Indian car manufacturer, Mahindra & Mahindra has emerged as one of two groups competing to take over the company, with a third offer, apparently from the US also emerging. The moves came after the UK government contacted the management at Mahindra & Mahindra as well as another Asian-based company over the weekend to rescue LDV and save the workforce from unemployment. A spokesman for the Department for Business announced that further talks, due to commence this week, will hopefully see a new owner in place at LDV in the very near future. .

The FTSE started the week in a buoyant mood, reacting strongly in anticipation of the announcement from the US government of their bold plan to expand the financial rescue package, designed to revive the global economy.

Banks reacted strongly to the news with Lloyds Banking Group Plc jumping 11 percent and the RBoS following suit with a modest 4.2 percent jump. Barclays Plc also saw their shares take a major step forward, 16 percent up, not just as a result of the euphoria in the US but also fueled by speculation that a firm offer is to be forthcoming shortly for their iShares unit.

Copper surged to a four-month high in London, pacing a rally in industrial metals, after imports surged into China and on speculation the U.S. Treasury plan will spur growth and boost demand for commodities. Lead climbed to the highest since November.

Shares in the world’s third-largest platinum producer, Lonmin Plc also displayed increased confidence in the global commodities marking jumping 12 percent (180 pence 1,530 pence)

The following stocks also showed an upturn on yesterdays trading. Shares in the Daily Mail rose by 3.4 percent (8 pence to 241.75). The publisher announced that they expect to exceed their targets on revenue as well as reducing costs, providing positive full-year results to be announced shortly.

The U.K. repair-service provider, Homeserve Plc also shone on the day with their shares climbing 9.1 percent (85 pence to 1,020.)

The FTSE 100 finished the session up 3.9 per cent, or 156.5 points, higher at 4,209.The FTSE 250 index rose by 1.49% or 93.35 points to 6351.92 while

The pound also advanced versus the euro as the FTSE 100 Index climbed more than 2 percent, led by Barclays Plc and Lloyds Banking Group Plc, boosting demand for riskier assets.

The pound rose as much as 1.1 percent to $1.4626, the highest level since Feb. 23, and was at $1.4588 by 11:13 a.m. in London. The pound also strengthened against the Euro, in a day that cautious optimism appeared to raising its head on the markets.

Pound/US dollar 1.4626

Pound/Euro 1.0187

Pound/Japanese Yen 144.91

Pound/Swiss Franc 1.6580

News of the US government’s plans to buy up to $1 trillion of toxic assets has helped the Dow Jones record the fifth largest rise in its history pushing the index up a mammoth 6.84% (497.48 points ) to close at 7775.6. The NASDAQ shared in the celebrations rising 98.5 points to 1555.7.

The programme, known as Public-Private Investment, has undertaken to take up all of the “toxic” mortgages and securities that have prevented the banks from issuing fresh loans to consumers. The US Treasury as well as the private sector will both make contributions to the programme, which is hoped will generate between $500 billion to eventually $1 trillion of new business.

Despite the euphoria, there was still some scepticism over the initiative with certain leading financial analysts warning that the programme’s success would largely depend on whether the leading banks would be prepared to take a short term loss on their “toxic” assets or wait till the US economy begins to recover.

On the news, US bank shares went only one way but up with Citigroup leading the field with a 20 per cent jump followed closely by the Bank of America who gained 17 per cent.

Global markets that opened on Monday were also equally upbeat, with Asian stocks rising to a two-month high on Monday

Japan’s benchmark Nikkei stock average closed at its highest level in nearly two months, gaining 3.4 per cent higher to end at 8,215.53 – its first close about 8,000 since early February. The Hang Seng index in Hong Kong hit a five-week high, closing up 4.8 percent, while the Australian market rose by 2.4 per cent.

Related Websites

• Frugal Friday! 7 Tips to Reduce Your Grocery Bill Every Friday I publish "Frugal Friday!", an open-ended series with...
• 500 More Useless Facts [/caption] Most American car horns honk in the key of...
• Fun Facts about Chocolate "Chocolate" comes from the Aztec word, "xocolatl," which means "bitter...

Tags: Bank, Bank of America, British Economy, British Pound, Interest Rates, LDV, Money, Money Management, Money Markets, Recession, UK Banks, UK Recession