Economics
Credit squeeze Worries over the threat to economic prospects from a
tightening of banks’ lending regimes grew after the Bank of England’s latest
survey of credit conditions showed that these had grown significantly
tougher in the three months to mid-December. Institutions expect them to
grow tougher still: 31.2 per cent more lenders said that the availability of
mortgages was worse in the latest three months than said that it had
improved, compared with a net 0.1 per cent who said that mortgage lending
was easier in the previous survey; 25.3 per cent more lenders also said that
they expected a tougher mortgage borrowing climate in the future than
believed that conditions would ease. The survey also showed tightening
lending conditions for corporate borrowers.
Company profitability for UK businesses outside the financial sector
rose to a record high in the third quarter of last year, even as the credit
crunch struck, official data showed, although there were warnings that
corporate returns may now have peaked. The net rate of return earned on
capital invested by nonfinancial companies reached an all-time high of 16
per cent in the three months to the end of September, up from 15.6 per cent
in the previous quarter. In manufacturing, the net rate of return rose to
9.7 per cent in Q3, from 8.8 per cent in Q2, while in services, the rate of
return eased a little to 21.2 per cent, from 21.4 per cent. In the North
Sea, oil companies saw their rate of return rise to 32.5 per cent, from 30.1
per cent.
House prices based on completed sales during November rose by 0.6 per
cent in the month, after a revised 0.4 per cent gain in October, according
to Land Registry figures. Although the data were more bullish than those
from other sources pointing to falling house prices, it was noted that rival
figures reflecting earlier stages in the housing buying process are
generally more timely gauges of market conditions.
The pound reached new record lows against the euro amid expectations
that the Bank of England may cut interest rates next week. Sterling’s latest
losses saw the euro climb as high as 74.81p, the highest in its nine-year
history, before closing in London at 74.68p. Against the dollar, the pound
fell 0.8 cents to finish at $1.9714, and also hit its lowest against the yen
for 18 months.
German unemployment fell by 78,000 on the month in December, in its
21st consecutive monthly decline, dropping to 3.513 million, official
figures showed.
Eurozone money supply Annual growth in money supply in the 13-nation
eurozone, gauged by the European Central Bank’s broad M3 measure, was at a
28-year high of 12.3 per cent for the second month in a row in November, the
ECB said.
US factory orders increased three times as fast as expected during
November, climbing by 1.5 per cent in the largest monthly gain since July.
Factory orders excluding transport equipment were up by 1.4 per cent, the
largest gain since September and also above expectations for the month.
US employment Private employers in the United States added only 40,000
new jobs in December, according to a report by ADP, the employment services
group.
US personal bankruptcies rose by 40 per cent in 2007 because of rising
mortgage payments, job losses and other financial pressures.
Oil futures rose yesterday to a new record of $100.09 a barrel after
the US Government reported a larger than expected decline in crude oil
inventories. The day after oil prices briefly touched $100 for the first
time, the US Energy Department said that crude oil inventories had fallen by
four million barrels last week, much more than the 1.7 million barrel
decline that had been expected.
Gold bullionrose as high as $868 per troy ounce yesterday, and platinum
followed, reaching a record $1,550 per ounce, as investors sought out safe
havens for their money. The previous high point for gold was in 1980, when
it peaked at $850 per ounce.
Banking
& finance
Icap, the world’s biggest interdealer broker, has reported record
business for 2007. Average daily electronic volumes exceeded $806 billion
(£404 billion), 27 per cent up on the 2006 average. Interdealer brokers
facilitate trades between banks and other financial institutions in bonds
and other instruments and usually benefit from turbulent conditions on other
markets.
HSBC, Europe’s biggest bank, expects its wealth management assets and
customers in Taiwan to double this year, as it embarks on a campaign to
expand the business.
State Street, one of the world's biggest fund managers, has paid $14
million to William Hunt, head of its investment business, who is leaving
after the company said it faced possible legal action from shareholders
relating to its sub-prime mortgage losses.
Construction
& property
Carillion, the construction company, has reached financial close on the
£175 million South Tyneside and Gateshead Building Schools for the Future
programme. The company said that it will invest about £2 million of equity
in the project, with all schools open to pupils by January 2012.
CRH, the building materials group, said it expects full-year pretax
profits €1.9 billion (£1.4 billion) from €1.6 billion last time. CRH also
said that it will buy back 5 per cent of its shares.
LSL Property Services, owner of the Your Move estate agents, revealed
that it has closed 12 branches and cut 315 full-time jobs across its
surveying and estate agencies businesses, after its house sales fell in a
weakening property market. Agents blame a sharp drop in transactions since
September, which may leave many of the 8,750 estate agency firms in the UK
unsustainable.
Consumer
goods
Scottish & NewcastleThe Arbitration Institute of the Stockholm
Chamber of Commerce has announced that the dispute between Scottish &
Newcastle, Britain’s biggest brewer, and Carlsberg, its Danish rival, over
the ownership of Baltic Beverages Holding would be resolved by July 3.
Engineering
Ford, the US carmaker, has chosen Tata Motors, the carmaking arm of the
Indian conglomerate, as the preferred bidder for its Jaguar and Land Rover
units, the British marques. Three bids were originally submitted which are
thought to have ranged from $1.5 billion (£751 million) to $2 billion.
Health
Acambis, the vaccine specialist, reported positive early stage trial
results for its influenza vaccine.
SkyePharma, the drug delivery company, is to receive a $2 million (£1
million) payment and “low single digit” royalties after the US Food and Drug
Administration approved a new formulation of Sular, the blood pressure
treatment of Sciele Pharma, the US group, which uses SkyePharma’s Geomatrix
technology.
GlaxoSmithKline, the UK’s biggest drugs maker, and Theravance, the US
biopharmaceuticals group, have announced the start of studies into two new
compounds to develop a combination asthma treatment. Advair, GSK’s current
asthma drug, is its best-selling product.
Industrials
Tata Steel, the Indian steel-maker, said it has signed a joint venture
agreement with the state-run Steel Authority of India to develop coal blocks
in the country.
Leisure
The Racecourse Association has called for an increase in the betting
levy, describing attempts by bookmakers to persuade the Government to
abolish the levy as “patently irresponsible and reckless”.
Media
Pearson, publisher of the Financial Times, said that it has
acquired Money-Media, the US online news and commentary business for the
fund management industry.
European online content The European Commission said that it will make
proposals aimed at creating a single European market in online content such
as music, films and computer games.
United Business Media, the London-based group, has bought HispaniMark,
the Miami-based news wire service, for up to $8.5 million (£4.26 million) to
bolster the Latin American and Hispanic coverage of its PR News-wire
service.
WPP, the advertising group, said that its JWT operating unit has
acquired a 75 per cent stake in Tagora.com, the Belgian marketing agency.
Tagora’s full-year revenues in 2006 were €3.6 million (£2.6 million).
Natural
resources
Gazprom, the state-controlled Russian gas group, wants to claim 10 per
cent of the gas market in France within four to five years as it expands in
one of its five top markets, according to La Tribune, the French
newspaper. Gazprom supplied 500 million cubic metres of gas in France last
year.
Retailing
Majestic Wine, the wine warehouse chain, said that it had achieved a
“good” sales performance in December after a “disappointing” November.
Like-for-like sales rose by 1.2 per cent for the nine weeks to December 31
and for the five weeks to December 31, like-for-like sales were up by 4.1
per cent.
DSG International, the electrical goods retailer which owns Currys and
PC World, said that its full-year results would miss expectations after poor
Christmas trading, particularly in the UK. DSG shares fell by 17.4 per cent
in early trading after it said it expected its full-year pretax profits to
be up to £50 million lower than analysts’ forecasts.
Next, the high street fashion group, said that it did not expect to see
a return to like-for-like growth during 2008. The forecast overshadowed a
trading update that showed Next had emerged from Christmas with its margins
intact. Like-for-like sales across its high street stores fell by 3.2 per
cent in the five months to December 24, but the retailer was one of only a
handful that refused to cut prices until Boxing Day.
Support
services
Allen & Overy, the UK law firm, has jumped 12 notches to take third
place in a league table of legal advisers for global mergers and
acquisitions in 2007. The law firm advised on 344 deals worth a combined
$435 billion (£217.9 billion) last year, according to data from Bloomberg.
It owes its climb up the rankings – from fifteenth place in 2006 to third in
2007 – to winning advisory roles on some of last year’s biggest deals.
Technology
Autonomy, the software group, said a global bank has placed an order
worth about $70 million (£35.1 million) to deploy Autonomy’s archiving
service.
Telecoms
LM Ericsson, the Swedish telecoms group, said that it has won an order
from Chunghwa Telecom, Taiwan’s largest telecoms operator, for
reconfigurable optical add-drop multiplexers to boost network speed and
performance.
Nokia Siemens Networks, the joint venture of Germany’s Siemens and
Finland’s Nokia, has won a contract from Bharti Airtel, the Indian group,
for the deployment of a single interactive voice response platform. In a
joint statement, the companies said that the platform will be ready for
commercial operation by April.
Safaricom, Kenya’s largest mobile phone operator which is part-owned by
Vodafone, has cancelled its planned flotation because of the postelection
violence in the country. The sale, on the Nairobi stock exchange, had been
expected to raise up to £297 million.
BT, the telecoms giant, has criticised Deutsche Telekom, its German
rival, suggesting that Telekom’s full privatisation would ensure a more
competitive market. The German Government controls 32 per cent of the shares
in Deutsche Telekom.
Transport
Silverjet, the Luton-based business airline, said that it had increased
the number of its revenue seats flown in December by 10.5 per cent
month-on-month to 8,239, and added that forward bookings remain strong for
its New York and Dubai services.
Utilities
Npower, Britain’s fourth-largest energy supplier which is owned by
Germany’s RWE, confirmed that it was preparing to announce price rises for
customers on its standard price tariffs. Industry sources claimed that the
increases could be as high as 17 per cent for gas and electricity customers.
