Economics
The Bank of England must guard against keeping interest rates too high
for too long and tipping Britain’s economy into a slump as it fights to curb
inflation, one of its most influential senior officials said.
UK inflation data due to be published tomorrow is forecast to show that
the Consumer Price Index, the official measure of inflation, rose to 3.6 per
cent in June, from 3.3 per cent in May. The Retail Price Index is tipped to
have fallen slightly to 4.2 per cent, from 4.3 per cent.
The housing market is tipped to have weakened further in June. Figures
from the Royal Institution of Chartered Surveyors (RICS) out tomorrow are
expected to show that 93.8 per cent more surveyors reported that house
prices fell rather than rose in June, up from 92.9 per cent in May.
Unemployment is forecast to have risen again in June. Data due out on
Wednesday is expected to show that the number of people claiming
unemployment benefit rose by 10,000 last month, after a 9,000 increase in
May, taking the claimant rate to 2.6 per cent, from 2.5 per cent. The ILO
measure of unemployment is tipped to have stayed at 5.3 per cent in May.
British manufacturing is generally outperforming the rest of the
economy and looks set to see off the wider economic downturn, according to
research by the EEF, Britain’s main manufacturing industry organisation.
Average earnings are predicted to have remained steady during May in
figures due for release on Wednesday. The headline rate is tipped to have
edged down slightly to 3.7 per cent in the three months to May, from 3.8 per
cent in April, but the rate excluding bonuses is expected to have remained
at 3.9 per cent.
Government borrowing is expected to have fallen in June. Figures out on
Friday are tipped to show that Public Sector Net Borrowing fell to £7.4
billion, from £11 billion in May. The Public Sector Net Cash Requirement is
expected to have risen to £12.6 billion, from £11 billion in May.
Producer prices are tipped to have risen further in June. Figures being
released today are expected to show that input prices rose by 2.4 per cent
last month, compared with a 3.8 per cent rise in May, pushing the annual
increase to 28.4 per cent, up from 27.9 per cent. Output prices are tipped
to have risen by 9.7 per cent year-on-year, against 8.9 per cent in May.
Industrial production in the eurozone is expected to have fallen in
May. Data out today is forecast to show that production fell by 2.7 per
cent, after a 0.9 per cent increase in April, taking the annual increase to
0.1 per cent, down from 3.9 per cent in April.
US producer prices are tipped to have edged up again in June. Figures
due out tomorrow are expected to show that headline prices rose at 1.4 per
cent, the same rate as in May, pushing the annual increase to 8.6 per cent,
up from 7.2 per cent. Core PPI is expected to have risen by 0.3 per cent, up
from 0.2 per cent in May, taking the annual increase to 3.2 per cent, up
from 3 per cent.
US inflation is expected to have picked up again in June. Figures due
out on Wednesday are expected to show that headline inflation in America
rose 0.7 per cent in the month, pushing the annual increase to 4.5 per cent,
up from 4.2 per cent in May. Core inflation is tipped to have stayed
unchanged at 2.3 per cent.
Housing starts in the US are tipped to have fallen again in June.
Figures due on Thursday are expected to show that 968,000 new houses were
started in June, down from 975,000 in May. Building permits are forecast to
have slipped from 978,000 in May to 970,000 in June.
Retail sales in America are expected to have levelled off in June. Data
published tomorrow is tipped to show that sales rose by 0.4 per cent in the
month, down from 1 per cent in May.
French inflation is expected to have risen in June. Figures are due for
release tomorrow and the Consumer Price Index is expected to have risen by
0.4 per cent in the month, taking the annual rise to 3.6 per cent, up from
3.3 per cent.
Producer prices in China are forecast to have risen in June. Data due
out on Friday is set to show that year-on-year prices rose by 8.5 per cent
in June, up from an 8.2 per cent increase in May.
Retail sales in China are expected to have slowed slightly in June.
Figures published on Friday are set to show that sales rose by 21.3 per cent
year-on-year in June, down from 21.6 per cent.
Banking
& finance
US mortgage system The US Government last night acted to prop up
America’s housing market by saying it was prepared to pump billions of
dollars into the US mortgage system in a desperate measure to prevent the
economy going into a tailspin.
Bradford & Bingley The Financial Services Authority will accelerate
efforts to broker a potential takeover of the bank once the mortgage
lender’s crisis-hit rights issue is completed. (The Sunday Telegraph)
Dawnay Day, the £2 billion financial conglomerate has brought in
administrators to restructure some of its businesses after falling victim to
the credit crunch.
Construction
& property
Wolseley, which operates Build Center and Plumb Center, will outline
plans this week to cut hundreds of jobs as a result of the housing market
crisis.
Moscow rents are on the up. The Russian capital is now the second most
expensive place to have an office in Europe after the West End of London,
according to research by NB Real Estate, the property agency. Last year
office rents there rose by 46 per cent.
Consumer
goods
L’Occitane, the French cosmetics and toiletries company, is
planning a Hong Kong flotation and share offer that are intended to raise
$300 million (£151 million) and exploit the company’s success in Asian
markets.
Premier Foods should reveal tomorrow how its revamped Hovis Bread
brand. Sales of one of the group’s biggest-selling products fell last year
amid competition from Warburtons and Kingsmill, as well as quality problems
with the white bread. But a new recipe for white bread launched earlier this
year saw sales stabilise and bosses announced plans for similar revamps for
the rest of the Hovis portfolio.
Engineering
QinetiQ A solar-powered, unmanned aircraft has helped the British
defence research company to win a key contract with Boeing to develop
pilotless planes for the US Government for use in military and civil tasks.
Aircraft orders worth more than $100 billion (£50.2 billion) could be
cancelled or postponed in the next couple of years as the high price of fuel
drives airlines into bankruptcy or forces them to cut their expenditure,
analysts say. It could affect suppliers such as Rolls-Royce, the engine
maker.
Ferrari is gearing up for another record year despite declining overall
car sales in Europe and North America as it prepares for the release of the
California, its first retractable hardtop convertible, which is intended to
attract drivers who have not previously bought from the Italian carmaker.
Health
Novartis, the Swiss drugs group, is expected to report second-quarter
net profits up 9 per cent to $2.1 billion (£1.05 billion) on Thursday.
Industrials
Posco, the world’s fourth-biggest steelmaker, has reported a 34 per
cent rise in quarterly profits and increased its earnings targets to reflect
a sharp rise in steel prices. The company also raised its 2008 sales target
by 11 per cent to about $31 billion (£15.5 billion).
Leisure
JD Wetherspoon, the pub group, will give the latest snapshot from the
embattled pubs sector when it issues a pre-close trading update on
Wednesday. The company has been suffering from the English smoking ban,
rising costs and falling consumer confidence.
Media
ITV has talked to strategic investors who want to buy BSkyB’s 17.9 per
cent stake as a prelude to a possible bid. The satellite television company
will soon find out whether it has won an appeal against a Competition
Commission ruling that it must reduce its stake in ITV. (The Observer)
Bertelsmann, the German media group, has agreed to sell its North
American book clubs to Najafi Companies. an American private investment
company.
Reed Elsevier, the media group, has begun searching for a successor to
Sir Crispin Davis, its chief executive. (The Sunday Telegraph)
Natural
resources
Petrobras workers are today due to start a five-day strike in Brazil’s
state-run oil group in a move likely to put further pressure on world oil
prices. The main union covering workers in the Campos offshore area said
that there would be a near-total stoppage.
Retailing
Co-operative Group, the ethical retail chain, is poised to jump back
into the supermarket big league by completing its long-awaited £1.6 billion
takeover of Somerfield. Sources close to both groups said that terms had
been agreed after months of talks and that an announcement should come this
week.
Tesco is developing a new range of own-brand products to tackle the
so-called Aldi effect as consumers flock to the German discount retailer.
(The Sunday Times)
Floors-2-Go, the struggling retailer, is understood to be looking for
new investors, just 18 months after being taken private in a £52.4 million
private equity deal. (The Observer)
Blacks Leisure, the outdoor clothing retailer, will give an update on
its turnaround on Thursday at its annual meeting.
Support
services
Viking Moorings, the Scottish oil services company, may come under
Norwegian control. HitecVision, the Norwegian private equity group, has
emerged as a front-runner in the £200 million auction of the company. (The
Independent on Sunday)
Technology
Yahoo!, the internet search group, announced that it had received and
rejected a new takeover proposal from Microsoft and Carl Icahn, the
billionaire investor. It described the proposal as absurd and irresponsible.
This is the first time that the pair have formally made a joint proposal for
Yahoo!.
Telecoms
Nokia, the world’s biggest mobile phone handset maker, is to report its
second-quarter earnings on Thursday, with analysts expecting a 16 per cent
rise in earnings per share, boosted by demand in emerging markets.
Transport
BAA, the airports operator, has unveiled details of the £4.5 billion of
new bonds that it hopes to persuade a majority of bondholders to accept in
place of their existing unsecured holdings. The new bonds are backed by
income from the three leading London airports and Heathrow Express.
Utilities
Britain’s energy security could be at risk, along with the £100
billion of commercial money needed to deliver it, should the Planning Bill
fail to become law, the CBI has said.
Scottish & Southern Energy is in the early stages of evaluating a
takeover bid for Energia, Ireland’s largest independent power company.
Dresdner Kleinwort will kick-start the auction this week. (The Sunday Times)
Share tips
The Mail on Sunday: buy Telecom Plus (telecoms), Carrs Milling
(consumer goods)
The Sunday Telegraph: buy NCC Group (technology), Avocet Mining
(natural resources); avoid London Stock Exchange (banking and
finance)
