Level 2

Weekly Review

Date: Friday 22 Jun 2012

The FTSE 100 closed up 35 points on the week at 5,479 points.

Equity view

Power systems developer Rolls-Royce has bagged a bumper contract worth over £1bn with the Ministry of Defence (MoD) to supply reactor cores for the UK's nuclear-powered submarine fleet.

The Whitbread bandwagon rolls on with the Premier Inn and Costa Coffee owner reporting forecast-busting like-for-like (LFL) sales growth in its first quarter.

The life of Rio Tinto’s Kennecott Utah Copper Bingham Canyon mine in Salt Lake City is to be extended by 11 years as the diversified miner injects more funding into the project.

Accountancy software behemoth Sage Group has acquired a controlling interest in Folhamatic Group, a provider of accounting, tax and payroll and regulatory content software in Brazil.

Rio Tinto is banking on strong demand continuing from China as it announced it is investing $4.2bn in two iron ore operations.

British Gas, the utility company owned by FTSE 100 firm Centrica, has purchased a small stake in German broadband services group Power Plus Communications in an effort to bolster its roll-out of smart meters across the UK.

Sir Martin Sorrell’s WPP has made yet another acquisition: the media giant has agreed to buy the assets of AKQA Holdings, ‘the world’s leading independent and most awarded digital agency’.

The board of mining titan BHP Billiton has given the go-ahead to a massive $845m investment on its coal operations in New South Wales, Australia.

Credit ratings agency Moody's has downgraded 15 major banks and financial instiutions, including the major lenders on Britain's High Street, Royal Bank of Scotland, Barclays, Lloyds and HSBC.

Cruise ship operator Carnival unveiled sharply reduced profits before tax of $14m in the three months to the end of June, versus $206m in the corresponding period of 2011. Profits were hit by a $145m adjustment relating to fuel derivatives.


Economic news

Inflation fell unexpectedly in May to back within the government's target level, raising expectations that the Bank of England would soon ramp up its quantitative easing programme. The Consumer Prices Index (CPI) fell to 2.8% in May, from 3% in April, according to figures from the Office for National Statistics.

The number of people claiming unemployment benefits rose unexpectedly in May. The claimant count rose by 8,100, compared to consensus forecasts of a drop of 3,000.

June's vote on whether to beef up the Bank of England's asset purchasing programme (also known as quantitative easing, or QE) was closer than expected, with a 5-4 split on the Monetary Policy Committee (MPC) in favour of maintaining the status quo.

Retail sales volumes in the United Kingdom rose by 1.4% month-on-month (2.4% year-on-year) in June, following May´s 2.4% decline, according to the latest data from the Office for National Statistics (ONS). The consensus estimate was for a reading of 1.2%.


International events

The New Democracy conservative party won the Greek elections with 29.66% of the votes, followed close behind by radical left-wing coalition Syriza, with 26.89% of the votes. In third place was the Socialist Pasok at 12.3%.

International Monetary Fund (IMF) Managing Director Christine Lagarde revealed on Monday that its resources were getting an additional boost of $26bn to take its anti-crisis firewall to a total of $456bn.

French dairy products giant Danone lowered its annual profit forecast on Tuesday due to weak demand in southern Europe. The Activia yoghurt maker now expects its 2012 operating margin to be 50 basis points lower on a like-for-like basis than the prior year.

US pharmacy giant Walgreen has taken a 45% stake in Alliance Boots, operator of the Boots chemist chain, fpr $6.7bn and could be set to take over the chain completely. The US healthcare retailer has an option to buy up the rest of Alliance Boots from its private owners within the next three years.

The Group of Twenty (G20) promised to do what it can to support global growth without actually outlining any specific steps it plans to take, while Europe promises to take 'all necessary policy measures' to combat the current sovereign debt crisis.

New Democracy leader Antonis Samaras was sworn in as Greece's new Prime Minister on Wednesday afternoon.

The US Federal Open Market Committee (FOMC), the rate-setting body of that country's central bank, has announced its decision to maintain its main policy rate at between 0-0.25% while continuing through the end of the year with its programme to extend the average maturity of its holdings of securities.

The Chinese manufacturing sector purchasing managers´ index for the month of June compiled by Markit fell to 48.1 in June, from 48.4 in the month before, reaching a seven-month low.

Spain’s banks will need €51-62bn in additional capital in a worst case scenario, according to the independent consultants Oliver Wyman and Roland Berger hired by the government to perform a new round of stress tests on its financial sector.

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