Interest decision switches market mood

Jan 11 2008 by Peter McCusker, The Journal

THE FTSE 100 index gave up its early gains to decline a further 50 points, closing at 6222.7.

The decision by the Bank of England’s Monetary Policy Committee to keep interest rates at 5.5% had an immediate effect, sending a slightly positive market into negative territory.

The announcement met a mixed reaction from business leaders and trade organisations. However, it was particularly disappointing for the British Retail Consortium, whose director general said: “The worst Christmas sales growth for three years shows consumers and retailers are still feeling the effects of five previous rate rises as other bills continue to shoot up.”

In difficult times for consumers and homeowners, faced by rising fuel, energy and food costs, both they and investors will be hoping for a rate cut next month.

Sainsbury’s third-quarter update confirmed that supermarkets appeared to have a better Christmas than high street retailers, reporting like-for-like sales growth of 3.7%. The shares rose 23p to 388p on the news.

In The Journal North 40, Wellstream, the energy pipework specialist at Newcastle, continued its spectacular performance since floatation last April. The company said: “Results for 2007 are expected to be significantly ahead of analysts’ expectations.”

Wellstream said all its factories were performing well and it intended to benefit from robust market conditions with expansion, to increase production by 40% starting in early 2009. In addition to the positive news, investment bank Merrill Lynch reiterated its “buy” recommendation and 1400p per share price target. The shares gained 115p, closing at 1255p, and have risen nearly 300% in nine months.

There was another bad day for ScS Upholstery, which fell 12.25p to 44.5p, but property investor Grainger rose 13p to 330p.

John Dance John.dance@wise-speke.co.uk