The pound’s run ends

After a positive run that lasted almost six weeks, the pound slumped yesterday, as bank shares took a tumble. Adding to Sterling’s woes was the, Confederation of British Industry’s industry forecast that the U.K. economy is expected to shrink by more than earlier predictions from this year. It is no generally accepted, even by Chancellor Darling, that the economy will contract 3.9 percent in 2009.

All these factors combined to reduce the British currency’s value against the dollar as well as the euro, the yen and Swiss franc. The FTSE 350 Banks index fell on the day by over five percent.

The British currency finished the day’s trading in London at $1.4529 dropping from $1.4797 on Friday. Sterling also dropped to 88.81 pence per Euro.

In their continuous efforts to push the economy along as much as possible, in Wednesday’s Budget, Chancellor Alistair Darling is expected to announce a £1bn package to support housing. The package will be earmarked to provide money for private construction projects which are under way, where work has dried up due to financial constraints, as well as to fund public or council housing projects. To further stimulate the property market, it is expected that Darling will extend the stamp duty “holiday” for three months allowing it to run till the end of the year. The duty holiday applies to house costing £175,000 and under.

Supermarket chain Tesco announced that they had made underlying annual pre-tax profits of £3.13bn for 2008, an improvement of 10% on the previous year, and marking the largest ever annual profit for a UK retailer. With sales topping £59.4billion, meaning more than £1billion a week, Tesco announced that they were confident in their goals to “continue to make good progress even in the current global economic environment”.

Tesco said in its statement that in the UK the company had managed to increase both the number of customers coming into its stores and the average amount they were spending.

Rival supermarket group, Associated British Foods who operate the Primark chain have also announced that they have beaten previous forecasts by returning £275million half-year profits, with a major contribution being a 10% leap in earnings at their discount fashion chain.

Overall, the figures represent a 2% dip in profits for AB Foods, but still higher considerably higher than forecasts that saw them bringing in £262million profits for the period.

The London-based group continue to stick by their February 2009 forecast to see flat annual earnings in the year due to end in September.

It was announced that UK lottery operator, Camelot could change hands on reports that owners of 80 per cent of its equity are looking to sell their stakes in the company within the coming months.

Four of the major shareholding groups, each of them holding 20% of the shares have announced their decision to sell their shares in the lottery, The companies, Fujitsu and De La Rue, Cadbury and Thales have yet to disclose why they are interested in getting out of the lottery business. The fifth shareholder, the UK Post Office, is believed to be interested in retaining their shares in Camelot. The announcement comes only two months after Camelot began its third term running the UK national lottery.

On the FTSE share prices fell on the day, with the FTSE100 down 101.94 points to 3990.86 The FTSE 250 did a little better, rising on the day by 9.16 points to close on 7,025.84.

As reported Sterling fell against the four major currencies.

Pound/Dollar 1.4529

Pound/Euro 1.249

Pound/Japanese Yen 127.58

Pound/Swiss Franc 1.7013

On Wall Street shares had their first bad day on trading for a while

The Dow Jones Average dropped 289.6. To close at 7841.73 with NASDAQ also tumbling 64.86 points to 1608.21 Reasons given were increasing concerns regarding debt levels at the major US banks. This fact was came despite better than expected results from the Bank of America who announced s better than expected profits for the first quarter of 2009. Net income at the Bank soared to $4.2billion in the first three months, up $3 billion from the same quarter last year. However enthusiasm was immediately dimmed with the news that the bank, US’s largest, had set aside $13.4bn to cover anticipated credit losses, sending its shares down by 24% and causing a similar knock on effect with other banking stocks lower.

The big news from the hi tech sector came from business software manufacturer Oracle who announced that they are to acquire computer hardware and software maker Sun Microsystems for £5.1billion ($7.4billion).

Oracle is to pay $9.50 in cash for each Sun share, and claim that their acquisition will “transform the IT industry, combining best-in-class enterprise software and mission-critical computing systems”.

The share offer share represents a 42% premium over Sun’s closing stock price on Friday, and comes just a month after IBM abandoned its bid to buy Sun.

In Asia shares fell sharply in Tuesday trading, echoing declines in the US caused by renewed concerns about the health of the world’s banks.

In afternoon trading in Tokyo, share falls were led by banking stocks With Japan’s main Nikkei index down 2.6%, while Hong Kong’s Hang Seng losing 3.5%.

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Tags: Alastair Darling, Bank of England, British Economy, Credit Crunch, Economics, Financial News, Money Management, UK Banks, UK Recession