Economics
The services sector shrank for the second month in a row in June, with
its activity falling to the lowest levels since October 2001, the latest
CIPS purchasing managers’ survey showed. Its headline index fell to 47.1, on
a scale where any figure below 50 indicates contraction. The level of new
business in the sector fell to its lowest levels for at least 12 years,
since the survey began, but worries over inflationary pressures were fuelled
as services companies’ set a record and their prices charged to customers
remained just below record highs.
Credit conditions The credit crunch is set to bite still harder, the
Bank of England’s latest quarterly survey of credit conditions in the
economy indicated. A net 47 per cent of lenders said that the availability
of secured loans had fallen in the past three months, while a net 22 per
cent expected loan conditions to tighten still further. Unsecured lending
conditions were also expected to get more difficult. The tighter squeeze by
banks comes against a backdrop of rising defaults on loans by borrowers.
Eurozone interest rates The European Central Bank has raised eurozone
interest rates to their highest for almost seven years with a quarter-point
increase to 4.25 per cent. The increase was the first for a year and took
rates to a level last seen in September 2001.
The eurozone services sector shrank faster in June than previously
reported, according to an updated purchasing managers’ survey. Its headline
reading was revised down to 49.3, from 49.5.
The US services sector shrank unexpectedly in June, the latest snapshot
of conditions from the Institute of Supply Management indicated. Its
headline index suffered a surprise fall to 48.2, from a May reading of 51.7.
The survey’s index of services sector employment hit a record low, while its
measure of prices charged hit the highest level since 1997.
US unemployment Jobs in America were cut in June for the sixth
consecutive month, with 62,000 posts lost, official data showed. The latest
losses took the total of jobs cut so far this year to 438,000.
Oil prices MPs are to investigate the role of speculators in driving
oil prices to their current high levels. The Commons Treasury Select
Committee is to examine the issue later this month. News of the meeting
emerged as the price of a barrel of crude oil touched a fresh record high of
$146.69.
Banking
& finance
IKB, the German bank which is being sold after becoming a casualty of
US sub-prime mortgage investments, rose by 4.5 per cent in Frankfurt trading
after it reported a full-year loss of ¤of a ¤and thanks to lower deferred
taxes.
The US Internal Revenue Service is calling on accountants such as Ernst &
Young and PricewaterhouseCoopers to agree ways in which their auditing
departments can aid the US Government’s quest to clamp down on tax evasion
by American citizens. The US Government believes that tax dodgers are
costing the country hundreds of millions of dollars a year in lost revenues.
Société Générale Paris prosecutors are seeking
criminal charges against the assistant of Jérôme Kerviel, the Société
Générale rogue trader who is accused of losing the French bank €4.9 billion
(£3.8 billion) earlier this year.
Household debt More than four million households have resorted to
personal loans or credit cards to cover mortgage or rent payments in the
past year, according to Moneysupermarket.com, the financial comparison
website.
Bradford & Bingley, the troubled mortgage lender, is expected to
see its credit rating cut by Moody’s, the ratings agency, adding fresh risk
to its £400 million capital raising.
Construction
& property
Barratt Developments, the housebuilder, is about to make about 1,000
staff redundant, taking job losses in the construction industry to nearly
2,500 in just two days. Barratt’s shares have plunged by 97 per cent since
their peak in February 2007.
Galliford Try, the property developer, said it expects its full-year
pre-tax profits to be in line with the previous forecast of at least £60
million but said low volumes of private housebuilding sales and higher costs
would continue to affect its margins.
Marshalls, the paving stone maker, could shed 140 staff as it looks to
cut costs in “increasingly uncertain” markets. The Huddersfield company is
in talks with unions and staff over closing its concrete manufacturing bases
at Cannock, Staffordshire, and Sawley, Nottinghamshire.
Consumer
goods
Robert Wiseman Dairies, the Scottish milk producer, said it expects
full-year results to be in line with expectations on improving revenues from
cream and the anticipated recoveries of higher input costs from customers.
Engineering
Armour Group, the distributor of car hi-fi systems, said that it
expects its full-year results will be 20 per cent to 30 per cent below
current market forecasts, after “challenging market conditions” in the third
quarter led to lower than expected sales volumes across its operations.
Health
Phoqus Pharmaceuticals, the pioneer of drug delivery systems which is
based in Kent, said trading in its shares on AIM has been suspended, after
talks with several parties to seek a commercial partner for its Chronocort
treatment ended. The company said it is considering its financial position
and all of the options available to it.
Shire Pharmaceuticals, the FTSE 100 drugs maker which is based in
Hampshire, is set to acquire Jerini, the Berlin biotech-nology company, in a
deal worth €328 million (£260 million).
Industrials
BASF, the German chemicals company, said it will acquire the 50 per
cent of shares that it does not already own in the Yasar BASF Automotive
Coatings joint venture from Yasar, its Turkish partner, to benefit from
growth in the country’s car industry. The joint venture, which sells
coatings and refinishing coatings to car-makers and components suppliers,
had sales of €45 million (£35.6 million) last year.
Leisure
Greene King, the pub operator and brewer, reported resilient full-year
results and said that it had received approval in principle from HM Revenue &
Customs to convert to a real estate investment trust without having to
demerge its brewing or managed pub divisions.
Mitchells & Butlers Robert Tchenguiz, the property entrepreneur,
announced that he had converted the majority of his 29.74 per cent holding
in Mitchells & Butlers, the pub company, from contracts for difference
into ordinary shares.
Goals Soccer Centres said it remains confident of reporting excellent
full-year results after it announced that its first-half trading had been in
line with management expectations. The operator of five-a-side football
centres said it has a strong pipeline of sites and does not see any
softening in demand for its products.
Media
Taylor Nelson Sofres Leading shareholders in Taylor Nelson Sofres have
called on WPP, the advertising group, to increase its £1 billion offer after
the market research group rejected a third approach at 260p per share. WPP
wants to merge TNS with Kantar, its own market research unit. The combined
group would have estimated revenues of $4 billion (£2 billion).
Natural
resources
Gazprom, the Russian energy group, said gas export prices for its
European clients could reach $500 per thousand cubic metres (mcm) by the end
of this year and added that should oil prices surge to $250 per barrel,
natural gas will cost $1,000 per mcm.
Regal Petroleum, the AIM- listed oil and gas group, said that it had
raised £20.5 million from an equity issue involving 8.4 million new shares.
The shares, which represent 4.1 per cent of the group’s enlarged capital,
were priced at 245p each.
BHP Billiton America’s antitrust regulators have given partial approval
to BHP Billiton’s $38 billion (£19 billion) offer for Rio Tinto, its rival
Australian mining group, but the deal is still awaiting the opinion of the
European Commission, which is expected to prove a more difficult hurdle.
Retailing
Marks & Spencer Sir David Michels, deputy chairman of Marks &
Spencer, has urged investors to get behind the high street retailer after
its unexpected profit warning on Wednesday.
Game Group, the video games retailer, lifted its first-half profit
forecasts after the success of blockbuster releases such as Grand Theft Auto
IV, Wii Fit and Mario Kart increased its sales by 54 per cent.
Ocado will become the first grocery home shopping business to publish
“best before” dates on food sold over the internet from September. Sales at
the group, which generates full-year revenue of nearly £370 million, are
running 22 per cent ahead of a year ago.
ScS Upholstery More than 1,300 jobs were saved at ScS Upholstery as
administrators appointed to the struggling furniture retailer sold its sole
trading subsidiary to Sun European Partners, the European arm of Sun Capital
Partners, the US investment group. The deal safeguards jobs at ScS
Upholstery’s 96 stores.
Instore The independent directors of Instore, the retail group that
owns Poundstretcher, have rejected an £11.4 million takeover offer from
Seaham Investments, a company controlled by Abdul Aziz Tayub, a
non-executive director, sending its shares down 9 per cent.
Flying Brands, the Jersey-based home shopping group, said that it is
closing down its US Greetings Direct business after an extremely
disappointing test run.
Baugur, the Icelandic retail investor, is to sell Bonus, the Icelandic
supermarket business that formed the foundation of its European retail
empire, as it confirms plans to relocate to the UK.
Support
services
Eaga, the energy efficiency company, has agreed a contract with
ScottishPower to help the utility to meet its carbon emissions reduction
target obligation. The contract is worth more than £200 million.
Amec, the engineering services group, said it is continuing to make
“excellent progress” and has raised its margin expectation for 2008 to 6.5
per cent.
Allen & Overy, the law firm, announced a 15 per cent increase in
full-year revenues to £1.02 billion. Clifford Chance and Freshfields
Bruckhaus Deringer, its fellow law firms, also reported increased profits
recently and Linklaters is expected to match them when it releases its
financial results. This means that four of the world’s six largest law firms
are based in London.
Technology
Google, the internet search engine, has been ordered to hand over
details of the viewing habits of users of YouTube, its video sharing site,
by a US judge presiding over a copyright infringement case against the site.
Telecoms
Vodafone, the mobile phone group, has bought a 70 per cent stake in
Ghana Telecom, the state-controlled fixed-line and mobile operator, for $900
million (£454 million).
Ofcom, the communications regulator, called for an acceleration of the
launch of superfast broadband across Britain as it outlined its investment
plans for the networks.
Transport
British Airways said that its passenger traffic fell by 3.7 per cent in
June, as both premium and economy numbers weakened compared with last year.
BA’s load factor — a measure of how well it fills planes — fell by 3.8 per
cent to 76.7 per cent.
American Airlines, which is close to seeking a merger with British
Airways, has told staff that it will cut 7,000 jobs by the end of the year,
as it grounds aircraft in an effort to soften the effect of soaring fuel
prices. American said in a regulatory filing that it expected to record a
second-quarter charge of up to $1.3 billion (£656 million) to account for
the job reductions.
Arriva, the bus and train operator, said it has acquired Empresa de
Blas y Cia, the Spanish transport group, as well as its subsidiaries and
investments, for €99.25 million (£78.6 million).
Utilities
Scottish & Southern Energy said that Airtricity, its renewables
unit, has entered into a joint venture with Entropya, the Italian wind farm
developer, to develop more than 2,000 megawatts of electricity in Italy.
Centrica, the owner of British Gas, has secured three licences to
explore for gas in coal beds in South Wales under the Government’s
thirteenth onshore licensing round. Centrica will hold a 100 per cent
interest in two of the licences, with a shared interest in a third.
Pre-development studies will begin later this year with possible development
expected to begin by 2014.
