Economics
Inflation rose to record highs in June, pushed up by the soaring cost
of oil and food. The consumer prices index measure of inflation rose to 3.8
per cent, from 3.3 per cent in May and nearly double the Bank of England’s
inflation target. Inflation on the retail prices index rose to 4.6 per cent,
up from 4.3 per cent in May. Page 34
Pay restraint Alistair Darling stepped up the Government’s pleas for
pay restraint, warning workers against the consequences of demanding
inflation-busting wage deals as the cost of living soars.
German economic sentiment A key measure of German investor sentiment
has fallen to a record low during July. The ZEW research institute’s gauge
of economic sentiment, which measures expectations for the German economy in
six months’ time, has dropped to minus 63.9, from the minus 52.4 reported in
June, well below the consensus prediction for a drop to minus 55.
US retail sales slowed more than expected during June. The Commerce
Department reported that retail sales had risen by 0.1 per cent, down from a
revised 0.8 per cent rise in May. Most economists had predicted that sales
would rise by 0.4 per cent.
US consumer confidence has failed to rise from record lows during July.
The IBD/TIPP Economic Optimism Index has remained at 37.4 this month, a
record low for the survey, which has been running for seven years, and 14.5
points, or 28 per cent, below its average.
US producer prices rose by a larger than expected 1.8 per cent during
June, pushing the annual rate up to 9.2 per cent, the biggest rise since
1981. Core prices edged up by just 0.2 per cent, the same margin as in May,
resulting in an annual rise of 3 per cent.
US economy Ben Bernanke, Chairman of the US Federal Reserve, told the
Senate Banking Committee in Washington that the US economy faced “numerous
difficulties” and he indicated that the central bank’s rate-cutting
programme was failing to contain the crisis afflicting the economy.
Japanese interest rates Japan’s central bank left interest rates
unchanged at 0.5 per cent and cut its growth forecast for the current
financial year for the second time in three months. The Bank of Japan said
that it expected the Japanese economy to grow by 1.2 per cent in the year to
next March, down from 1.5 per cent.
Banking
& finance
The Financial Services Authority, the City watchdog, defended its
regulation of the oil markets at a hearing of the Commons Treasury Select
Committee, amid criticism that its approach may be contributing to market
manipulation and prices of nearly $150 a barrel.
The Council of Mortgage Lenders, whose members provide more than £1,000
billion of mortgages in the UK, has released a private submission that it
had made to a Treasury-sponsored review of how property purchases are
financed. It wants the Treasury to push ahead with a plan that it claims
would reopen the market in residential mortgage-backed securities and
covered bonds that have closed down since the credit crunch.
Fortis, the Dutch-Belgian bank, has denied market rumours that its
customers are withdrawing their savings.
Construction
& property
Laing O’Rourke, Britain’s largest privately owned construction
group, has reported a 42 per cent rise in full-year underlying earnings to
£142.6 million. The group, which has 30,000 staff, said that orders had
grown since the year-end to more than £10 billion.
Martinsa-Fadesa, the Spanish property developer whose interests span
apartment buildings, hotels and golf courses, has filed for bankruptcy,
saying that it had been unable to secure a ¤5 billion of debt.
Consumer
goods
Premier Foods, the maker of Mr Kipling cakes and Campbell’s soup, said
that expected its struggling Hovis bread business to start winning back
market share in the second half after spending £15 million improving the
quality of its loaves. In a first-half trading update, it said that it
expected a £10 million-plus relaunch of Hovis in September to help it to
return to growth.
Engineering
General Motors, the American carmaker, wants to reduce its salaried
staff costs by about 20 per cent, planning to save $1.5 billion (£752
million), after sharp drops in its US sales. The Ellesmere Port Vauxhall
plant in Britain is unlikely to be affected.
Volkswagen, the German carmaker, said that it would invest up to $1
billion in a new plant in the US state of Tennessee. The factory will have
an annual capacity of 150,000 vehicles and will start operations in 2011.
Rolls-Royce, the engine maker, has won two orders worth a total of £84
million from Stena Drilling and Fujian Mawei Shipbuilding to supply
propulsion equipment for offshore vessels being built in China and South
Korea. Stena Drilling has also ordered Rolls-Royce thrusters for three other
ships and has reserved an option for a fifth vessel.
Health
Jerini, the German company that is focused on the discovery and
development of peptide-based drugs, has received approval from the European
Commission to sell its Firazyr treatment for acute attacks of hereditary
angioedema, a deficiency of the immune system. This month Shire
Pharmaceuticals, Britain’s third-largest drugs maker, said that it was to
buy Jerini for €328 million (£261.7 million), specifically for the Firazyr
drug portfolio.
Industrials
Evraz Group, the Russian steelmaker, said that its second-quarter crude
steel production had reached 4.69 million tonnes, up by 12.6 per cent from
the 4.16 million tonnes produced a year ago.
Leisure
Young’s, the London pub operator, reported a 3.2 per cent
increase in like-for-like sales in its managed houses and announced the
appointment of two non-executive directors — David Page, chairman of Clapham
House Group, and Roger Lambert, a former managing director at JPMorgan
Cazenove.
UK hotels have suffered a fall-off in their trading performance in the
first half, with growth in revenue per available room slowing from 6.7 per
cent to 3.5 per cent in the face of sluggish occupancy levels, according to
Deloitte.
Expedia, the online travel bookings group, is buying Venere Net, the
Italian hotel reservations website, for an undisclosed sum from Advent
International and the founding partners. The deal would add about 10,000
hotel properties in Europe, the Middle East and Africa to Expedia’s
offering.
Media
UBC Media Group, the specialist radio services company, said it had
revised the terms of the deal to sell its commercial division to the
Nasdaq-listed Global Traffic Network. It said an initial £11 million would
be paid on completion of the deal, with additional payments of up to £5.5
million to be paid depending upon the division achieving certain turnover targets.
Natural
resources
Kazakhmys, the FTSE 100-listed Kazakh copper miner that is in talks
with Metalloinvest, of Russia, has denied that the deal would involve a
reverse takeover, despite reports that it planned to create a $50 billion
(£25.1 billion) London-listed mining giant. Metalloinvest is owned by
Alisher Usmanov, the Russian oligarch who holds a stake in Arsenal Football
Club.
Royal Dutch Shell, the Anglo-Dutch oil group, and Iogen, the Canadian
biotech company, have agreed to extend their commercial alliance to
accelerate their biofuel project, which involves cellulose ethanol. The
agreement will allow Shell to make a “significant” investment in the
technology development with Iogen and to increase its 26.3 per cent stake in
the company to 50 per cent.
Opec, the oil producers’ cartel, has revised down its forecast for the
growth of world oil demand this year to 1.2 per cent, from 1.28 per cent,
citing the economic slowdown and high fuel prices.
TNK-BP Russian authorities have agreed to grant nearly 50 work permits
to the foreign staff of TNK-BP, the joint venture oil company. The decision
leaves open questions that top management, including Bob Dudley, the chief
executive, could be forced to leave Russia, as the number of permits issued
has fallen short of the total required.
Venture Production, the oil and gas exploration company based in
Aberdeen, and Encore Oil, its AIM-listed partner, said that they have found
gas in the Barbarossa appraisal well in the southern North Sea. The hole,
known as 47/9c-11x, has produced gas at a rate of up to 40 million standard
cubic feet a day, exceeding the pre-drill expectations.
Retailing
Burberry, the fashion label, said that it was pleased with its trading
over the past three months, despite a 14 per cent plunge in sales in Spain.
It added that its Spanish business had been hit by the growing economic
turmoil in the country.
Jessops, the struggling camera and photographic retailer, suffered a
fall in shares of 29 per cent to a record low 5.68p after the company
revealed an 11 per cent slide in underlying sales for the past three weeks
and said that losses for this year would be larger than expected.
The Co-operative Group is expected to unveil its long- awaited £1.6
billion takeover of Somerfield, the supermarket group. Banking sources said
that they were putting the finishing touches to the deal. The acquisition
will make the Co-op Britain’s fifth-biggest supermarket chain, with more
than 3,000 stores and annual sales of £10 billion.
Hennes & Mauritz, the Swedish fashion group, reported an 8 per cent
rise in total sales for June. Like-for-like sales — sales at stores that
have been open for more than a year — fell by 2 per cent, ahead of analysts’
expectations of a 5.6 per cent drop.
Support
services
Interior Services, the construction management services group, has been
appointed preferred contractor on a £50 million education project for
Suffolk County Council to build the South West Ipswich and South Suffolk
sixth form centre. The building is scheduled to be completed in 2010.
Speedy Hire, the equipment and tool hire company, reported a 36.4 per
cent increase in first-quarter revenues, compared with last year, but said
that it was starting to see a deterioration in spending from smaller trade
customers.
Technology
Dmatek, the Israeli electronic tagging company, said that it expected
its first-half revenues to be in excess of $26 million (£13 million), up by
28 per cent on last year’s figures and ahead of market expectations. The
company added that its law enforcement business had undergone solid organic
growth in existing accounts, topped by new deals.
Intel, the US computer chip maker, said that its second-quarter profits
had risen by 9.1 per cent to $9.47 billion (£4.75 billion) and reported that
its sales had been buoyed by demand for notebook laptop computers.
Telecoms
BT, the telecoms group, has suspended its £2.5 billion share buyback
programme to spend £1.5 billion instead on a super-fast broadband network
providing ten million homes with access within four years.
Cable & Wireless, the FTSE 100 telecoms group, is poised to decide
whether to offload about £1 billion of risks associated with its pensions
scheme. In total, C&W’s pensions scheme is worth about £2 billion, with
the portion under review covering more than 10,000 workers who have retired.
Mobile phone charges The cost of sending a text from a mobile phone
within the European Union will come down by more than 50 per cent under
proposed EU legislation that could come into effect next year. Viviane
Reding, the European Telecoms Commissioner, outlined plans that will pave
the way for the cost of sending a text while roaming in Europe to be reduced
from the existing 29 cents to between 11 and 15 cents.
Transport
British Airways Willie Walsh, chief executive of British Airways, said
that fares were likely to rise by at least 4 per cent if the airline was to
recoup some of the extra £1 billion that it will have to spend on fuel this
year.
SpiceJet Wilbur Ross, the US billionaire who made his fortune taking
over struggling steel and oil companies, has invested 3.45 billion rupees
(£40 million) in SpiceJet, the Indian cut-price airline.
Ryanair, the budget airline, announced an 18 per cent capacity
reduction at Dublin airport this winter, partly because Dublin is the
second-most expensive of its base airports and also because of the high oil
prices.
Utilities
Scottish & Southern Energy shares rose as traders cited market talk
of bid interest from Vattenfall, the Swedish-German utility group.
