UK stocks rose amid financial worries

U.K. stocks rose for the first time in three days as investors bought shares of companies whose earnings are less dependent on growth amid signs the economy is deteriorating.
The U.K.’s FTSE 100 rose 1.1 percent as Imperial Tobacco Group Plc rallied. Imperial Tobacco Group Plc, Europe’s second-largest cigarette maker, added 2.6 percent, while Diageo Plc, the world’s biggest liquor company, gained 2.5 percent.

I’m favoring “companies that aren’t completely economically insensitive but are a lot less sensitive,” Jane Coffey, head of equities at Royal London Asset Management Ltd., which manages about $10.5 billion, said in a Bloomberg television interview.

BAE Systems Plc, Europe’s biggest defense company, climbed 5 percent to 359.5 pence as the brokerage said “defense stocks offer good visibility for the next two years,” predicting “strong” earnings-per-share growth in 2009 and further growth in 2010. Goldman has a “buy” recommendation on BAE shares.

The U.K. economy shrank more than expected in the third quarter as service industries including financial companies, hotels and restaurants declined the most since 1990.

Gross domestic product dropped 0.6 percent from the second quarter, the biggest decline in almost 18 years, the Office for National Statistics said today in London. The result was lower than the previous estimate for a drop of 0.5 percent, which economists had expected would be confirmed.

Toyota feels the pinch of the world economic turmoil

TOYOTA, the world's biggest car company, yesterday laid bare the extent of the global financial crisis when it warned that it was expecting to make its first full-year loss since the Second World War- the evidence that the global economic meltdown, not strategic mistakes, is the primary reason behind turmoil in the U.S. automotive industry.

"This is not an issue where the Japanese are doing fine and the domestic automakers are struggling," said Aaron Bragman, automotive analyst for HIS Global Insight in Troy. "This is an issue where everyone is struggling."
In last financial year, Toyota had an operating profit of ¥2.27 trillion (£17 billion) but now is projecting an operating loss of $1.7 billion, 150 billion yen, for its fiscal year ending March 31, and it slashed its global vehicle sales forecast by 700,000 cars, 8.5 percent fewer than the previous year. The UK has seen even more severe falls of Toyota vehicles, down 11 per cent in a year.

According to the Times, Toyota could cut up to 800 jobs in the UK, or 15% of its workforce, adding to the 40,000 positions expected to be shed from the UK car industry's 200,000 total over the next three years.

The Times said declining demand was "likely" to trigger redundancies across Toyota's business.

The car maker has not made any of its permanent staff redundant, but it is understood to have already cut an unspecified number of temporary workers.

Toyota promised to do all it could to retain permanent British workers, but has reportedly not ruled out the possibility of redundancies.