London – last week (12 August 05)
Oil prices hit new record highs throughout the week as robust US economic growth ensures that refiners struggle to meet demand and concerns mount over Iran's nuclear programme.
Quentin Smith at Old Mutual in London, reprots that in its quarterly inflation report, the Bank of England downgraded expectations for growth in 2005, but said that economic activity was likely to pick up during the next two years.
The BoE cut its forecast from 2.5% to around 2%, before rising to above 3% in 2007.
The Bank also expects inflation to rise above the government's 2% target in the near term, before easing and then rising again by the end of the two year forecast period.
Over the week the All-Share rose 0.5%, led by a 0.6% gain from the FTSE 100, with midcaps (+0.3%) and smaller companies (+0.4%) ) also making positive progress. The strongest sector performances came from the resources area, with oil & gas continuing to buoyed by strong underlying prices, while the weakest areas were utilities and consumer staples.
Standard Chartered reported a 28% rise in first half profit, helped by acquisitions and rising revenue at its consumer and corporate banking units. The bank is benefiting as it speeds up the pace of acquisitions.
The $3.3bn takeover of Korea First Bank in April was a record acquisition for the bank, which has announced seven transactions this year, compared with four in the whole of 2004.
Mortgage bank Bradford & Bingley (-3.5% to 325p) reported a 6% rise in first half profit as it cut costs to counter slowing lending. Rising bad debts and a slowdown in mortgage lending have prompted B&B to sell units such as estate agencies and mortgage broker Charcol in order to focus on its core business.
B&B reported a slowdown in new mortgage lending to £2.5bn pounds, from £4.1bn a year earlier, as a weaker housing market trimmed demand and tightened credit criteria, although the bank noted a pick-up in the second quarter.
Aviva (-0.9% to 636p), the UK's largest insurer, said first half profit almost quadrupled, as rising sales of life insurance in continental Europe helped outweigh stagnant business in the company's home market.
Aviva has entered into agreements with banks including UniCredito Italiano in Italy and Credit du Nord in France to sell more life policies in countries where demand has outpaced Aviva's home market.
Aviva, which is expanding non-life businesses, also bought roadside assistance company RAC for £1.1bn this year to expand its UK car insurance business.
Royal & Sun Alliance (+1.4% to 92p), the UK’s second largest non-life insurer, said first half profit more than doubled after it sold several businesses.
RSA is trying to reverse five years of losses related to asbestos claims, US workers' compensation payments and investments by selling assets to concentrate on the UK, Scandinavia and Canada and withdraw from the US.
