Economics
Inflation rose to a 16-year high of 4.7 per cent during August, from
4.4 per cent in July and far above the 2 per cent target rate of inflation
on the consumer prices index. Inflation measured on the retail prices index,
which includes housing costs, fell to 4.8 per cent, from 5 per cent in July.
Interest rates The Bank of England Governor dampened hopes of an early
interest rate cut. In a letter to the Chancellor to explain why inflation
has risen, Mervyn King signalled that it would stay well above the 2 per
cent target until next year.
House prices fell by 0.3 per cent in the year to the end of July,
according to figures from the Department of Communities and Local
Government. This is the first time it has recorded negative annual growth
since the index began in 2003. The figures show that the price of an average
UK home rose by 1 per cent during August and stands at £217,171, compared
with £215,029 in June.
Eurozone inflation The European Union statistics office comfirmed its
earlier estimate that inflation on the consumer prices index had fallen to
3.8 per cent in August, from 4 per cent in July. Core inflation rose to 2.6
per cent, from 2.5 per cent.
German investor sentiment The ZEW gauge of expectations in Germany rose
to minus 41.1 in September, from minus 55.5 in August.
US consumer prices fell in August by 0.1 per cent, the first decline in
nearly two years as energy costs fell and after a 0.8 per cent rise in
inflation on the consumer prices index in July. Excluding volatile food and
energy items, core inflation rose by 0.2 per cent, after a 0.3 per cent rise
in July.
US interest rates The US Federal Reserve surprised markets with a
decision to keep its benchmark Fed Funds interest rate at 2 per cent.
US Treasury bond prices leapt as investors dumped equity in a dash for
save havens. The yield on 30-year Treasuries fell below 4 per cent for the
first time since the early 1960s.
Global money markets Overnight interest rates for dollar funds rose to
a high of 11.6 per cent at one point, while in London they were fixed at
6.4375 per cent, more than double their level on Monday and the highest
since 2001.
Central banks have injected almost $160 billion (£90.3 billion) into
the money markets. The Bank of England provided a further £20 billion in
short-term funds, after supplying £5 billion on Monday. The European Central
Bank injected another £70 billion, after supplying £30 billion on Monday.
The US Federal Reserve provided £50 billion in extra funds.
Oil prices fell below $89 a barrel, a seven-month low. Prices have
dropped more than 10 per cent in two days, the biggest slide since December
2004.
Banking
& finance
Alliance & Leicester, the mortgage lender, said that its
shareholders had approved its £1.3 billion takeover by Santander, the
Spanish banking group, after being told that the deal would provide
“certainty and stability”. The European Commission has also approved the
takeover, saying the deal would not harm competition in the sector.
Fannie Mae and Freddie Mac The Federal Housing Finance Agency, the US
group, has named two new non-executive chairmen for Fannie Mae and Freddie
Mac, the housing finance groups now controlled by the US Government, and
ordered that new boards be formed for both companies.
Micex, the rouble-denominated Russian stock exchange, suspended trading
as panic selling sent the index down almost 18 per cent to 888.17 points,
its largest percentage decline since 1998. The dollar-denominated RTS index
suspended trading for an hour, ending the day down by 11.47 per cent at
1,131.12, its lowest for two years.
National Savings & Investments is cutting the interest that it pays
to new investors in many of its fixed-rate products by up to three quarters
of a point.
Goldman Sachs, the US investment bank, announced a 70 per cent fall in
third-quarter profits to $845 million (£476 million), but said it did not
need funding from the US Federal Reserve.
Construction
& property
Berkeley Group, the housebuilder and construction company, said sales
since the start of May are 50 per cent below average, but in line with
expectations. The company added that it is confident of being able to
maintain operating margins through efficiency measures and by adding value
to its sites through new planning consents.
Consumer
goods
Diageo Paul Walsh, chief executive of Diageo, the drinks group, saw his
remuneration fall from £2.6 million to £2.3 million last year because of a
reduced performance bonus. His total pay was £5.1 million, down from £6.3
million the year before. The transfer value of his pension rose from £6.9
million to £8.3 million.
InBev, the Belgian brewer, said that its Stella Artois brand had
retained its ranking as the top lager among UK consumers in the annual
Superbrands survey.
Engineering
Solar Integrated Technologies, the maker of photovoltaic roofing
systems based in Los Angeles, said that it has won a contract from Korowatt,
to provide integrated photovoltaic roofing systems for a warehouse owned by
PP-realit in the Czech Republic. The project is expected to be completed
this year.
Health
ValiRx, the AIM-listed cancer therapeutics and diagnostics group, said
that it has developed a prototype non-invasive test for cancer detection and
ValiBio, its diagnostics division in Belgium, is moving to the next stage of
development, which will include testing patient blood samples. ValiBio
expects to launch the first predictive test within 15 months.
Industrials
Symphony Environmental Technologies, the degradable plastics and
waste-to-energy group, said that it had reduced its first-half pre-tax loss
by 84 per cent to £200,000, from £1.1 million last time, and added that
trading was in line with its expectations.
Leisure
Rangers, the Scottish Premier Leage football club, reported a full-year
pre-tax profit of £8.3 million, compared with a £5 million loss last time,
as turnover reached a record level, benefiting from its participation in
European and domestic cup competitions. Turnover rose to £64.5 million, from
£41.8 million last time.
Starbucks, the American coffee shop operator, has pledged to serve only
“110 per cent responsibly grown, ethically traded espresso” in its stores in
Europe, the Middle East and Africa.
Media
United Artists, the Hollywood film studio, is facing concerns that a
$500 million (£280 million) production facility with Merrill Lynch could be
cancelled by Bank of America, Merrill’s new owner. United had secured the
financing last year to fund up to 18 films.
Reed Elsevier, the business-to-business publisher, has received US
regulatory clearance for its proposed $4.1 billion acquisition of
ChoicePoint, the business information provider.
Natural
resources
Royal Dutch Shell Army bomb experts made safe a small explosive device
outside the Dublin offices of Royal Dutch Shell’s Irish uni. Shell operates
the Corrib natural gas field off the northwest coast of Ireland, which has
drawn some protests.
Hallin Marine, the oil and gas industry sub-sea services group, said
half-year pre-tax profits had more than trebled to $13.8 million (£7.78
million) and it had won a $10 million contract to supply saturation diving
support for an Indian pipeline replacement project.
Cambridge Mineral Resources, the exploration and production company,
said that it has been awarded three copper-gold exploration permits in
Bulgaria. The permits, issued by the Ministry of Environment and Water, are
for an initial three-year period.
Retailing
Debenhams, the department store group, said that more consumers are
switching from credit cards to paying in cash as the credit crunch bites. It
added that it would stick to its full-year targets, despite a 0.9 per cent
fall in full-year like-for-like sales.
Asda has overtaken J Sainsbury to become Britain’s second-biggest
supermarket in food and drink. Industry figures revealed that Asda’s sales
of food and drink in the four weeks to September 7 were up by 10.4 per cent
on the same period last year, compared with 6.8 per cent at Sainsbury’s.
Separately, the Advertising Standards Authority has criticised Asda for
running misleading price comparison advertisements which claimed that it was
cheaper than Tesco on hundreds of products. The ASA said the claims used
online prices rather than those in store.
Support
services
De La Rue, the bank note printing company based in Hampshire, said that
its first-half trading had met expectations and its operating cashflow
remained strong.
Michael Page, the recruitment group, saw its shares fall by more than
20 per cent after Adecco, its Swiss rival, abandoned its £1.3 billion bid
for the company. Adecco, which approached Michael Page in May, said that
although it still had ambitions to expand its operations, Michael Page’s
response had indicated that a deal was not possible on satisfactory terms.
Northgate, the van hire group based in Co Durham, said that its trading
outlook had deteriorated and added that the last time the economic
environment had been as bad was in 1990-91. The company said that it had cut
its British van numbers and did not see further growth in its Spanish fleet.
CVS Group, the veterinary services provider, reported an 84 per cent
drop in full-year pre-tax profits to £100,000 but said it was confident of
delivering good operational and financial progress.
Technology
Eleco, the software group based in Hertfordshire, reported a 40 per
cent rise in full-year pre-tax profits to £8.2 million. Revenues were up by
37 per cent to £84.9 million. It added that conditions were set to be
difficult this year but the group should make good progress.
Timestrip, the London-listed smart label technology company based in
Hertfordshire, reported a narrower first-half pre-tax loss of £697,000, from
£730,000 last year, thanks to robust sales.
ServicePower, the US scheduling software group, has entered a
technology partnership with TomTom, the satelite navigation company, to
allow customers to download work schedules and traffic information and to
get real time updates on one device.
Dell, the world’s second-largest manufacturer of personal computers,
gave warning of a further fall in demand this quarter, sending its shares
down almost 10 per cent to a seven-year low. The US group is shifting away
from desk-top computers to laptops and selling its PCs to retailers rather
than directly to consumers.
Apple, the US commputer group, announced a deal with HBO, the US
television group, which will mean that British television viewers will be
able to download US shows such as The Sopranos and Sex and the City from
iTunes and watch them on their iPods. Individual episodes will cost £1.89
each.
Samsung Electronics, the South Korean computer chip maker, said that it
is offering to buy SanDisk, the US maker of flash memeory cards, for $5.8
billion (£3.3 billion). Toshiba, the Japanese electronics group, has also
expressed interest.
Telecoms
China Unicom Shareholders in China Unicom, the Chinese mobile
operator, have approved the company’s merger with China Netcom, the fixed
line and internet operator, under a government-mandated telecoms industry
restructuring programme.
Transport
British Airways said that it will transfer more of its long-haul
services at Heathrow from Terminal 4 to Terminal 5, taking the number of
flights at Terminal 5 to 480 a day. The last batch of BA’s Heathrow
long-haul flights will be moved to Terminal 5 next month.
Utilities
E.ON, the German utility, is to cut 400 jobs in its energy services
business in Britain. The company said that the division had been hit by the
downturn in the property market and cautioned that it might have to make
more cuts.
KSK Power Ventur, the AIM- listed power development group which is
focused on India, said that its KSK Energy Ventures subsidiary has no
requirement for, nor was it contemplating, any fresh issue of equity shares.
The statement came after Lehman Brothers, the US investment bank which holds
more than 28 per cent of the company, filed for bankruptcy protection.
