Economics
Leading shares worldwide fell further into the grip of a global bear
market last night as fretful investors took flight from equities, fearing a
combination of surging inflationary pressures and faltering growth. Fears
among dealers, analysts and investors that losses in the leading equity
markets could mount rapidly under a barrage of profits warnings and grim
economic news sent shares tumbling in Europe and Asia. American markets were
closed for the July 4 holiday.
Record oil prices are set to dominate the agenda at the G8 summit in
Hokkaido, Japan’s northern island, on Monday and Tuesday. Oil prices in
Asian trade held steady near record highs yesterday. New York light sweet
crude for August delivery eased three cents to $145.26 a barrel from its
record close of $145.29 on Thursday.
Spain Economic activity in Spain continued to decline in the second
quarter, while growth in the first quarter was only 0.3 per cent over the
previous three months, the Bank of Spain said. The central bank did not
release growth estimates for the second quarter. An official figure will
published by the National Statistics Institute on August 14.
German manufacturing orders fell by 0.9 per cent in May, the sixth drop
in a row, as domestic demand deteriorated sharply, the German Economy
Ministry said. The mid-range forecast in a Reuters poll of 38 economists
last week was for a monthly gain of 0.7 per cent after April’s revised
decline of 1.7 per cent.
Banking
& finance
TPG David Bonderman, the American privaty equity firm’s chief
executive, was given an ultimatum by the City’s chief regulator to back
Bradford & Bingley or pull out, The Times has learnt. Details of the
telephone conversation on Thursday night between the TPG boss and Hector
Sants, chief executive of the Financial Services Authority, emerged as the
City surveyed the wreckage of the TPG deal.
Bradford & Bingley investors who expected Clive Cowdery, the
would-be suitor, to ride immediately to the bank’s aid might like to think
again. After walking away from a possible deal with the mortgage lender via
his Resolution takeover vehicle last week, he is in no rush to re-enter the
fray.
UBS The Swiss banking giant UBS said that it would, at best, break even
in second-quarter results as financial turmoil continues to rock the firm.
The news comes after further writedowns on investments hit by the credit
crunch. The figures would have been worse were it not for a SwFr3 billion
(£1.5 billion) tax break on its losses to date. The group has written off
more than £19 billion since the crisis began last summer.
Société Générale France’s Banking Commission fined
Société Générale €4 million (£3.16 million) for serious breaches in internal
controls revealed by the French bank’s €4.9 billion rogue trading loss. The
Commission said that SocGen’s monitoring staff were insufficiently sensitive
to fraud issues.
Construction
& property
Hochtief , the German construction group, said that it had won several
contracts in Poland worth more than €180 million. The company’s Polish unit
is to build three new office complexes in Warsaw, Krakow and Katowice, a
complete glass production facility and a timber sheet factory. The unit will
also extend a refinery and modern-ise and extend a sewage treatment
facility.
Consumer
goods
Food standards An international standard for tomatoes has been adopted,
ending about seven years of intense debates between countries on what
qualifies as a proper tomato. According to the new standard, tomatoes may
come in one of four varieties: round, ribbed, oblong or elongated, or cherry
tomatoes and cocktail tomatoes. A commission called Codex Alimentarius was
created in 1963 by the Food and Agricultural Organisation and the World
Health Organisation to come up with food standards and guidelines on food
products.
Engineering
EADS , the parent company of Airbus, and GKN, the British aerospace
group, are close to a deal for GKN to take control of an Airbus wings
factory at Filton, near Bristol, sources said. The two companies have been
in negotiations for months over the sale of the plant, which is part of
restructuring efforts by Airbus triggered by a weak dollar and its need to
bring in investors to help build to the A350. An official announcement could
come around the time of the July 14-20. A similar effort to sell Airbus
factories in France and Germany flopped last month thanks in part to the
credit crisis.
Volkswagen’s lorry unit, VW Nutzfahrzeuge, said that it had stopped
plans to build a pick-up truck for the European market, given the high oil
prices and prospects that such a model would not sell well. A VW
Nutzfahrzeuge spokesman said that analysis showed that there was no
sufficient market for such a vehicle with a huge loading space and, given
the high oil prices, the overall conditions for such a vehicle had
“radically changed”.
Health
GlaxoSmithKline and Novartis, the pharmaceutical companies, said that
they would appeal against a jury verdict ordering them to pay more than $114
million (£57.5 million) for overcharging Alabamas Medicaid, a health
insurance programme, for prescription drugs. GSK and Novartis announced
plans to appeal to the Alabama Supreme Court as the state sent letters to 69
other drug companies telling them that they had 30 days to settle
drug-pricing lawsuits against them.
Industrials
ArcelorMittal has signed a production agreement with Kremikovtzi, of
Bulgaria, as part of the steel group’s bid to take over the Balkan country’s
troubled steel mill. Under the deal ArcelorMittal will provide raw materials
to Kremikovtzi to produce steel and allow for urgent environmental and
equipment upgrades, the mill said.
Leisure
FishWorks, the AIM-listed restaurant operator, announced the
resignation from the board of Mitch Tonks, its founder and former chief
executive, and the sale of its struggling Notting Hill outlet. The chain
said that his departure was “a natural progression”, given Mr Tonks’s
increasing focus on independent projects and his media career, although he
would retain an “ambassadorial role” with FishWorks.
Media
Trinity Mirror hit back against City concerns that the publisher may
have to make subtantial payments to help to prop up its £1.5 billion pension
fund. The newspaper group issued a statement to The Times saying that it had
no liquidity issues with its pension fund.
Taylor Nelson Sofres (TNS) fired a fresh salvo in its increasingly
bitter war of words with WPP, the advertising giant that is trying to buy
it. Hard on the heels of rejecting WPP’s latest £1 billion approach, TNS,
the world’s third-largest market research and market information provider,
accused its suitor of circulating misleading comments about it.
Natural
resources
Rio Tinto The European Union has begun a full investigation into BHP
Billiton’s proposed $170 billion (£85.8 billion) takeover of Rio Tinto, its
rival. The EU’s competition watchdog said that there were sufficient
concerns about the integration of the world’s largest and second-largest
miners for further study to be needed.
BHP Billiton has won a near- 100 per cent price rise for iron ore sold
to Baosteel, of China, matching an earlier deal reached by Rio Tinto, its
rival, with customers in Asia, BHP said.
Retailing
John Lewis reported its worst weekly sales fall for three years.
Patrick Lewis, director of retail operations, echoed the bleak comments made
by Marks & Spencer on Wednesday and said that he feared that the economy
was at a delicate point and that there appeared to have been a notable fall
in consumer confidence in recent weeks.
J Sainsbury The Qatar Investment Authority (QIA) has raised its stake
in J Sainsbury, Britain’s third-biggest supermarket group, to 26 per cent. A
notification to the London Stock Exchange revealed that QIA owns 454.52
million J Sainsbury shares, up from 442.2 million. Last year QIA made a
600p-a-share indicative approach for the retailer but talks collapsed in
November. It is free to make a fresh approach.
Marks & Spencer is turning to Comfort and Elastoplast as it looks
to kick-start a sales revival by pressing ahead with a trial in which it
will stock consumer brands for the first time since the late 1950s. The
retailer reiterated that it would test the scheme in 19 stores in the North
East from Monday, despite the dismissal of Steven Esom as head of food on
Wednesday.
Support
services
Linklaters capped an extraordinary year for the City’s leading law
firms by announcing a record turnover of £1.29 billion, but it failed to
overtake Clifford Chance as the world’s largest firm. Spurred by its
involvement in some of the biggest deals of the past year, including BHP’s
proposed takeover of Rio Tinto and the €80 billion acquisition of ABN Amro
by the Royal Bank of Scotland, Linklaters increased fee income by 15 per
cent in 2007-08.
Nord Anglia Education, the training company, said that it had agreed a
£190 million private equity takeover. The company is recommending a
460p-a-share offer from Baring Private Equity Asia after rejecting a lower
approach from the suitor in June. Baring is eyeing the healthy growth
prospects for Nor’s international schools in emerging markets such as China.
Technology
Atlas, the consortium led by Electronic Data Systems, the American
computer company, will build a new computer system for the British Armed
Forces. The £7 billion system is 18 months behind schedule and £180 million
over budget, a government spending watchdog said.
Telecoms
Vodafone, the world’s largest telecoms group, has won a £2 billion tax
battle with HM Revenue & Customs (HMRC) that could lead to billions of
pounds of savings for other British-based multinationals. The High Court
ruled that it was illegal for HMRC to impose UK rates of corporation tax on
a Vodafone subsidiary in Luxembourg, where taxes are lower. Vodafone, which
set up the subsidiary as part of its takeover of Mannessman, of Germany, in
2000, had set aside £2.2 billion were it to lose the case.
BCE Shares of BCE jumped after news that buyers were sticking with the
agreed C$42.75-per-share purchase price for the buyout of the
telecommunications company. Shares of BCE rose 12.4 per cent to C$39.50 on
the S&P/TSX composite index.
Transport
British Airways The US courts will invite millions of Britons who flew
with British Airways and Virgin Atlantic between August 2004 and March 2006
to share more than £70 million after a settlement of a court challenge in
which it was claimed that they had been overcharged as a result of the
airlines conspiring to fix fuel surcharges on transatlantic flights.
New car sales in Britain fell last month at their fastest rate this
year as the drop in consumer confidence reached the showrooms. The Society
of Motor Manufacturers and Traders said that new registrations fell 6.1 per
cent in June compared with the same month last year, with 209,190 vehicles
sold.
Stagecoach and Go-Ahead are among bus operators who are at loggerheads
with local authorities over a government scheme that gives pensioners free
bus travel amid fears that ministers have seriously underestimated the costs
of the £1 billion programme.
Airlines Moody’s, the credit ratings agency, said that the business
models of many carriers were “unsustainable”. Its analysts said that US
airlines were particularly vulnerable to high oil prices and even large
carriers could be forced into bankruptcy.
Utilities
Origin Energy rejected a $13 billion (£6.55 billion) bid from BG Group,
urging its shareholders to hold out for better value for the Australian
company’s coal seam gas resource. Origin said that it would pursue separate
deals with joint-venture partners to generate value from its coal seam gas.
including partnerships with liquefied natural gas companies.
GDF Suez The first board meeting of the newly merged group GDF Suez
will be on July 22, the same day that the new company’s stocks and that of
the Suez water and waste unit will begin trading, Gerard Mestrallet, the new
group’s future president, said yesterday.
