UK MIDDAY BRIEFING: House Builders Soar As BOE Stays Calm

LONDON (Alliance News) - UK housebuilding stocks have jumped Thursday after the Bank of England made only very limited new recommendations to control the buoyant housing market, saying that household indebtedness currently poses no imminent threat to the country's economic stability.

Analysts had feared that the central bank could take big steps to try and calm the housing market, which has seen accelerating growth in prices since the start of last year, leading to concerns that the market in London and the southeast may be overheating. There have been signs of a slowdown in the rapid growth rates in the last few weeks, partly because new rules recently introduced have already forced banks to tighten mortgage lending conditions.

However, the Bank of England Thursday recommended that mortgage lenders limit the proportion of mortgages at loan-to-income multiples of 4.5 and above to no more than 15% of their new mortgages. It also said mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if the bank rate were to be 3 percentage points higher than the prevailing rate during first five years of the loan.

The recommendations, which are effectively rules for the lenders, come into effect on October 1.

Though the household indebtedness currently pose no imminent threat to stability it is "prudent to insure against the risk of a marked loosening in underwriting standards and a further significant rise in the number of highly indebted households," the BoE said in its semi-annual Financial Stability Report.

Persimmon, up 5.5%, and Barratt Developments, up 5.1%, are the second- and third-biggest gainers on the FTSE 100. In the FTSE 250, Redrow is up 6.2%, Countrywide up 5.6%, Foxtons Group up 5.0%, Taylor Wimpey up 5.4%, Galliford Try up 5.3%, Rightmove up 4.4%, Bovis Homes Group up 4.3%, and Berkeley Group Holdings is up 3.9%.

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FTSE 100: down 0.1% at 6,730.40
FTSE 250: up 1.2% at 15,635.93
AIM ALL-SHARE: up 0.4% at 781.39
GBP-USD: up at 1.7015
EUR-USD: down at 1.3598
GOLD: down at USD1,316.91 an ounce
OIL (Brent): down at USD113.47 a barrel
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Other Top UK Corporate News
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The London Stock Exchange Group has now agreed to acquire Russell Investments from Northwestern Mutual for USD2.70 billion in cash, a deal that will bring together USD5.2 trillion of assets benchmarked to Russell indexes with an estimated USD4.0 trillion of equities benchmarked to FTSE indexes and expand the LSE's scope in the US. LSE intends to fund the deal with USD1.60 billion net proceeds from a rights issue to take place in September, and the remaining USD1.10 billion through bank debt.
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New York state's top law enforcer Wednesday filed fraud charges against Barclays over its dark pool, LX Liquidity Cross, alleging that the bank has favoured high-frequency traders at the expense of other investors. Eric Schneiderman, the state attorney-general, accused Barclays of demonstrating a "disturbing disregard" for its investors in a "systematic pattern of fraud and deceit." The complaint alleges that Barclays has actively sought to attract high-frequency traders by giving them "systematic advantages" over others trading in its own dark pool.
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Standard Chartered said it expects its first-half operating profit to be down by about 20% when it reports its interim results in August, hit by a poor performance in its financial markets business. Standard Chartered, which is UK-based but makes the vast bulk of its earnings in emerging markets, said that it also expects its first-half income to be down by a mid single-digit percentage from a year before, hit by an increase in loan impairments and a tough time in India, Korea and Singapore offsetting income growth in China and Africa. Its comparisons for operating profit and income exclude the UK bank levy, own credit adjustments, and goodwill impairment in Korea.
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Electronics retailer Dixons Retail and mobile phone retailer Carphone Warehouse Group both reported higher profits for their recent financial years, driven by strong trading in the UK, results that bode well for their upcoming merger. The aim of the merger, to create Dixons Carphone, is for Dixons Retail to provide the space and product offering, with the help of its big out-of-town stores, while Carphone will provide the content and connectivity. "We both go into this merger with a significant position of strength," Dixons CEO Sebastian James said in a call with journalists. "It is a great way to get married."
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Bwin.party Digital Entertainment has released a statement responding to a Bloomberg article, citing two people familiar with the matter, that said the company is considering selling some or all of the company as part of a strategic review. Bwin.Party said it has no plans to break-up or sell the company. "Since his appointment as Chairman last month, Philip Yea has been working with the executive management team on ways in which the Group can increase shareholder value, however we can confirm that there are no plans to break-up or sell the company," said bwin.party.
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DS Smith said pretax profit jumped in its last financial year as revenues rose on organic growth and the first 12 month contribution from the SCA Packaging business it acquired in 2012. Pretax profit more than doubled to GBP167 million in the year to April 30, from GBP82 million a year eralier, as revenue rose 10% to GBP4.04 billion, from GBP3.67 billion. The company increased its dividend to 10.0 pence a share, from 8.0 pence.
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A US Food and Drug Administration advisory committee Wednesday recommended against the accelerated approval for AstraZeneca's ovarian cancer drug olaparib based on mid-stage study results. The FDA Oncologic Drugs Advisory Committee voted 11 to 2 that the current evidence from clinical studies does not support an accelerated approval for use of olaparib. The investigational drug is indicated as a maintenance treatment for women with platinum-sensitive relapsed ovarian cancer who have the germline BRCA (gBRCA) mutation, and who are in complete or partial response to platinum-based chemotherapy. The sales potential for this drug is reportedly pegged at USD2 billion.
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Petrofac has signed a USD1.25 billion energy infrastructure agreement with First Reserve to create a new business to buy new and existing energy projects. It said the new business, to be known as PetroFirst Infrastructure Partners, will buy a number of existing assets from Petrofac's Integrated Energy Services division, as well as new energy infrastructure projects that utilise Petrofac's development capability.
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AIM MOVERS
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LightwaveRF shares have jumped by more than two-thirds after it said that its live user base who are regularly connected to home devices via its app has surpassed the 20,000 mark. It has been accepted as an Apple MFi developer, allowing it to use the Apple MFi logo to promote its products for iPod, iPhone, and iPad. Hurricane Energy is also up sharply after it successfully completed testing of a horizontal appraisal well at its Lancaster fractured-basement oil discovery off the west coast of Shetland and said the well will now be put into production. Petards Group is doing well after it won an initial five-year deal worth more than GBP1.5 million to supply Siemens AG's rail division with its train products and services. The contract is renewable annually after the initial term. Petards makes systems like CCTV for trains. Pinnacle Technology Group is up after it posted a widened pretax loss in the half year to end-March, but said it is confident it will return to profitability thanks to the turnaround programme being implemented under its new chief executive. Progility is up after it said its full-year results for the year to end-June will be in line with market expectations, despite the weaker Australian dollar, as it saw "significant progress" in its second half thanks mainly to acquisitions. Tangiers Petroleum is another gainer after it said that drilling had started at the TAO-1 exploration well off the Moroccan Atlantic coast. Crawshaw Group is also up after it said like-for-like sales have risen more than 13% in the year-to-date, a particularly strong performance given that like-for-like sales were up 8% in May and June last year. It said the strong performance is widely spread across its store portfolio and its reduced-cost new store fit out has worked well. Dart Group has lost a quarter of its value after it posted higher profits for its last financial year but warned that profits for the current financial year will miss market expectations. Tyratech is another heavy faller after it posted a pretax loss of USD4.9 million in 2013, widened from a loss of USD2.9 million in 2012, as revenues declined to USD1.4 million, from USD3.6 million. The Hotel Corporation is down after it said that the owner of Puma Hotels' debt had agreed to postpone repayment of the debt until the end of September, in a further sign that the Puma business is suffering financial difficulty. LED International Holdings is also down after it said it is weighing up its options regarding the funds it was due from its March and December 2013 financing arrangements as it is yet to receive the expected cash. It is now having to consider alternative funding, and will have to take action to satisfy its creditors if funding doesn't emerge within six to eight weeks. That may result in shareholders' value being "severely reduced or becoming nil", it warned.
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Top Economics And General
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The UK energy market regulator Ofgem has now formally referred the UK energy market to the Competition and Markets Authority for a full investigation, asking it to investigate the barriers to competition inherent with the "big six" suppliers.
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British Foreign Secretary William Hague has arrived in Baghdad on a previously unannounced visit for talks on Iraq's turmoil. "He will meet with (Iraqi Prime Minister Nuri) al-Maliki and senior officials to examine the latest developments in Iraq," a government source told dpa on condition of anonymity.
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Iraq's new parliament will convene next week to start procedures for setting up a new government - despite deepening political rifts and an ongoing Islamist-led insurgency - announced President Jalal Talibini. "The presidency has issued a republican decree inviting the new House of Representatives to meet on Tuesday, July 1, to form a new government," independent news site Alsumaria News reported, citing a presidential statement. Political divisions and horse-trading are unlikely to put a new government in place any time soon. On Wednesday, Shiite Iraqi Prime Minister Nuri al-Maliki rejected calls for a "national salvation" government, saying such calls amounted to "a coup against the constitution."
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German Chancellor Angela Merkel continued to push for a diplomatic solution in Ukraine in discussions with Russian President Vladimir Putin. The two leaders talked about a possible monitoring of the ceasefire monitoring, the start of a regular contact group and the release of hostages, the Kremlin said. Putin reiterated his position that the ceasefire, which President Petro Poroshenko announced last Friday, should be prolonged.
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China's central bank will permit banks in Shanghai, beyond the city's free-trade zone, to set foreign-currency deposit rates on small accounts as the government endeavors to bring healthy competition in the banking system. The People's Bank of China will start with institutional deposit accounts tomorrow, and individual accounts will be added on at a later stage. The central bank had abolished ceiling on foreign currency interest rates on March 1 for smaller deposits in the free trade zone in Shanghai. The free trade zone was established last September. The State Administration of Foreign Exchange on Wednesday said it will increase foreign exchange derivative products to facilitate foreign trade. Further, it vowed to promote and regulate the development of the forex derivative market.
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Missing Malaysia Airlines flight MH370 may have crashed further south in the Indian Ocean than the latest search area, and was "highly likely" to have been on autopilot when it went down, Australian authorities said. Following further analysis of flight data, the search would focus on a different point of an arc where the aircraft last communicated with satellites, said Australia's Deputy Prime Minister Warren Truss. "We are now shifting our attention to an area further south along the arc based on these calculations," he told reporters. It was "highly, highly likely" that the aircraft was on autopilot when it crashed, Truss was quoted as saying by Australian media, explaining that otherwise "it could not have followed the orderly path that has been identified through the satellite sightings."
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Afternoon Watchlist (all times British Summer Time)
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15:30 US EIA Natural Gas Storage change
16:00 US Kansas Fed manufacturing activity
18:05 US Fed's Bullard speech

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Friday's Key UK Corporate Events
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Howden Joinery Group Half Year Results
Hornby Full Year Results
Keller Group Trading Statement
Serco Group Trading Statement
Berendsen Trading Statement
Stanley Gibbons Group Full Year Results
Jupiter Green Investment Trust Full Year Results

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Friday's Key Economic Events (all times British Summer Time)
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00:05 UK Gfk Consumer Confidence
00:30 Japan National Consumer Price Index
00:30 Japan Overall Household Spending
00:30 Japan Unemployment Rate
00:50 Japan Retail Trade
07:00 Germany Import Price Index
07:45 France Consumer Spending
07:45 France Gross Domestic Product
07:45 France Producer Prices
09:00 Italy Business Confidence
09:30 UK Current Account
09:30 UK Gross Domestic Product
10:00 EU Consumer Confidence
10:00 EU Economic Sentiment Indicator
13:00 Germany Consumer Price Index
14:55 US Reuters/Michigan Consumer Sentiment Index

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