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Last week in London

28 June 2004 Angelo Coppola

Quentin Smith at Old Mutual UK reports that investors continued to remain concerned by the lack of a resolution to the Middle East situation.

The minutes of the May meeting of the UK Monetary Policy Committee showed that Bank of England policymakers voted unanimously to raise interest rates, saying the outlook for the world economy had improved while employment and wages in the UK were rising.

All nine members voted to raise rates by a quarter point to 4.5%, the second increase in as many months. Rates have risen a whole percentage point since November.

Data from the British Bankers' Association showed an increase in mortgage loan approvals in May, further suggesting that higher interest rates have yet to curb demand for debt.

The number of mortgages approved in May was 88,022, a 2.2% increase on the previous month and 12% higher than the same month last year. The value of approvals rose 40% from a year ago to £10.2bn.

The All-Share Index ended the week unchanged, with the FTSE 100 down 0.3%, midcaps recovering the previous week’s losses to end 1.5% higher and smallcaps finishing 1% ahead.

Technology was among the best performing areas over the week, recouping the losses of the previous week. Mining stocks were also higher on waning concerns of a slowdown in Chinese demand, while telecoms was the weakest performer among the major sectors.

Construction and building materials group Hanson (-6.6% to 383½p) warned of a decline in first half earnings due to a slowdown in the UK and parts of the US and higher pension costs.

Lower demand for road building hurt sales of asphalt and ready-mix concrete, while pension costs rose by £5m. Hanson has been trying to cut expenses to counter sluggish orders from the UK commercial construction and road building markets.

It has also been hurt by heavy rains that delayed recent shipments in Texas and a slowdown in construction in the western US earlier this year caused by poor weather.

Abbey National (+4.0% to 497p) rose sharply in intra-day trading at the end of the week on rumours of a bid from Banco Santander Central Hispano.

BSCH was rumoured to be selling its stake in Royal Bank of Scotland (-2.6% to 1615p) in order to buy Abbey, having tried earlier this year to buy Abbey, only to shelve its plans after news leaked out. Neither Abbey nor BSCH would comment.

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