Economics
Financial crisis The US Treasury and lawmakers on Capitol Hill began a
frantic scramble to craft a bailout plan for Wall Street to mop up hundreds
of billions of dollars in toxic debt and eliminate the threat of a global
financial meltdown. Henry Paulson, the US Treasury Secretary, said he would
work with congressional leaders to craft the intended comprehensive rescue
scheme that will seek to purge the bad debt in mortgage-backed securities
that are plaguing the US financial system.
Markets The FTSE 100 index enjoyed its biggest one day gain as hopes of
a solution to the banking crisis swept global markets. The FTSE leapt by
431.3 points, or 8.8 per cent, to 5,311.3 at the close, adding about £103
billion to the value of Britain’s leading shares. Leading US shares also
leapt, putting the Dow Jones industrial average within striking distance of
its best two day surge since 2000. The Dow rose more than 365 points, or
3.35 per cent, while the broader-based S&P 500 index jumped by 4 per
cent.
Russia’s stock exchanges soared by more than 20 per cent in
frenetic trading that was twice interrupted by suspensions imposed by
regulators. Trading was halted within 35 minutes when the rouble-denominated
Micex exchange reopened after a two-day closure and share prices leapt 18
per cent.
The Bank of England auctioned a further $40 billion in dollars to UK
banks but saw only half the funds taken up. The European Central Bank also
auctioned a further $40 billion in three-day dollar loans to eurozone banks.
Lending rates Signs of financial stress across credit markets eased.
The overnight interest rates for lending of dollar funds between banks
dropped in London to 3.25 per cent, down from double-digit levels reached
earlier this week. Rates for three-month interbank lending in sterling edged
up while the cost of three-month interbank loans in euros hit an eight-year
high of 5 per cent.
Yields on short-term three-month US Treasury bills rebounded from lows
not seen since the 1940s to climb back above 1 per cent in a further sign
that intense financial strains in money markets are easing.
Short-selling The US Securities and Exchange Commission followed the
lead of the UK’s Financial Services Authority and imposed a temporary,
emergency ban on short-selling of financial stocks.
Fannie Mae and Freddie Mac, the US secondary mortgage lenders, are to
purchase more mortgage backed securities in an effort to put a floor under
the slumping American housing market, the US Treasury said.
US mutual funds The US Government authorised the use of $50 billion of
support for flailing US money market mutual funds after the crucial
vehicles, normally considered safe sanctuary for US savers’ money, were also
hit by financial turmoil.
Banking
& finance
Pensions Funds responsible for the pensions of 12.5 million people in
the UK are to be tapped to help to meet pension promises made to staff at
Lehman Brothers in Britain. The trustees of the scheme have taken the first
step in applying for a bailout from the Pension Protection Fund (PPF), the
industry-wide lifeboat fund that is bankrolled by all traditional
final-salary schemes.
Mortgages Homeowners have been told to expect a sharp rise in
fixed-rate mortgage rates next week as lenders react to the turmoil on
financial markets. Mortgage experts have pointed to soaring interbank
lending rates for projections of increases of up to a quarter of a point
expected from the big lenders.
Lloyds TSB took advantage of a rally in banking stocks to offload £800
million of its own shares as consumers, shareholders and unions continued to
attack the bank’s rescue takeover of rival HBOS. The share placing, in which
Lloyds sold 284 million, or about 5 per cent of its shares, to institutional
investors, was launched early yesterday afternoon and fully subscribed
within three hours.
AIG Shareholders in the American insurance group are to try to pay off
the recent federal government loan of $85 billion in an attempt to avoid
ceding an 80 per cent stake in the company, The Wall Street Journal
reported.
Standard Chartered has secured an approval to sell insurance policies
at its two branches in Vietnam. The branches in Hanoi and Ho Chi Minh City
of the UK lender, one of the first two foreign banks to open wholly owned
operations in Vietnam, would “conduct operation as insurance agents”, the
State Bank of Vietnam said.
Plus Markets has lodged a case with the High Court against the London
Stock Exchange, accusing the LSE of an “anti-competitive” trade reporting
rule. The rule requires Plus members that are also members of the LSE to
report trades in smaller companies — those listed on London’s junior AIM
market — to the LSE, creating additional costs.
Cenkos Securities reported a sharp fall in first-half pre-tax profits
on lower revenues. Profits in the half year to June 30 were £5.5 million,
down from £11.6 million for the same period last year.
IG Group, the spread betting firm, said that the Financial Services
Authority’s temporary ban on short-selling of financial stocks would have a
“negligible impact” on its business. It said than less than £150,000 of its
total £53 million revenues between June and August resulted from clients
shorting stocks.
Construction
& property
Ennstone, the concrete supplier, confirmed that it had received a
preliminary approach, which may or may not lead to an offer being made for
the company. Ennstone said that the board was considering the approach,
together with a series of other options.
Equest Balkan Properties said that it had completed and opened the
37,000 sq m Vitantis Retail Park in Bucharest, Romania.
Consumer
goods
The European Commission has asked EU nations to be on the lookout for
any Chinese milk products entering the bloc, even though none is officially
imported. China has been rocked by a contaminated milk crisis.
Engineering
Rolls-Royce Group said that Qantas Airways has ordered Trent 900
engines to power eight additional Airbus A380s, in a deal valued at more
than $575 million (£314 million). The order brings Qantas’s
Rolls-Royce-powered A380 fleet to 20 aircraft.
Enodis the British food service equipment company, said that its
acquisition by Manitowoc, of America, had received antitrust clearance from
the European Union. The deal remains conditional on approval from US
competition authorities.
Health
ReNeuron Group, the British company that is developing treatments for
diabetes and stroke based on the use of stem cells, has scaled back its
fundraising plans and is waiting for financial conditions to improve.
ReNeuron, which is based in Guildford, had expected in June to raise between
£8 million and £10 million early next year provided that it received
approval to test its ReN001 stroke therapy on humans.
Industrials
BASF, the chemicals group, is slashing production of polystyrene
plastics in Europe by 25 per cent as the business, which the chemicals group
is trying to sell, battles the economic downturn.
Norman Hay, the chemicals company that is based in Coventry, reported a
40 per cent rise in first-half pre-tax profits, boosted by an 18 per cent
rise in turnover and an asset sale, and said the second half had started
“satisfactorily”. “While we remain cautious, given current economic
conditions, we are continuing to invest in new operations around the world,”
Peter Hay, the chairman, said.
Leisure
Playtech, the gaming software provider, has expanded its presence in
the Italian market with a deal to provide its poker games portfolio to
betting group Gala Coral’s Eurobet Italia.
Pubs ’n’ Bars said that full-year pre-tax profits would be
below market expectations, dragged lower by increased finance costs and
higher operating costs. The company confirmed that it had seen reduced
consumer spending in its pubs, which it attributed to the economic downturn.
It added that cut-price alcohol sales in supermarkets had also had a
negative effect on trading.
Media
Informa The private equity consortium eyeing Informa has ended its
interest in the publishing and conferencing group. Providence Equity
Partners, Carlyle and Blackstone walked away after Informa recently rejected
the consortium’s £1.9 billion takeover proposal.
Natural
resources
Oil prices rose for a third day running, again passing $100 a barrel,
at the end of an extremely volatile week for financial markets. New York’s
main contract, light sweet crude for delivery in October, jumped $2.49 to
$100.37 a barrel.
Royal Dutch Shell was on the verge of sealing a deal with Kazakhstan
that could lead to it taking joint control of one of the world’s biggest
oilfields. The Kazakh Government revealed that it was forming a joint
venture between the Anglo-Dutch oil giant and KazMunaiGas, the national oil
company, to oversee crude production from the giant Kashagan field in the
northern part of the Caspian Sea.
Roc Oil Company said its unit Roc Oil (Cabinda) had started drilling at
the MAW-1 appraisal well, the first appraisal well in relation to the
Massambala heavy oil discovery in Angola. Roc, the operator of the well,
holds a 60 per cent interest with Force Petroleum and Sonangol owning the
rest.
Retailing
John Lewis Partnership said that department store sales rose 7.5 per
cent last week after an “excellent” showing for the group’s fashion
division. The group, which opened a store in Leicester this month, reported
total revenues of £51.4 million for the seven days to last Saturday.
Supermarkets Petrol prices fell across the UK as a price war brought a
hint of relief to motorists struggling to fill their cars. Supermarkets led
the way, with Morrisons reducing the price to 107.7p a litre for unleaded
and 119.2p for diesel. However, the AA said that as of last night a national
fall of only a fifth of a penny had been measured. On this day last year the
average price of a litre of unleaded was 95.22p.
Support
services
RPS Group said that it acquired specialist laboratory services provider
Mountainheath Services for up to £1.9 million. The environmental consultancy
services company said Mountainheath had reported revenues of £1.2 million
for the year to March 31.
Interserve, as part of a consortium, has been named preferred bidder by
the Western Health and Social Care Trust for the Private Finance Initiative
contract to create and maintain a new hospital in Enniskillen, Northern
Ireland, worth £300 million.
Chieftain Group said it had received an approach from a third party at
209.2p a share, valuing the company at about £18.3 million. Chieftain, which
is based in Newcastle upon Tyne, said discussions were at an advanced stage
and that its board was willing to recommend an offer at this level.
Technology
Filtronic, the wireless communications and electronic defence equipment
group, said it was considering paying a second special dividend of 40p a
share. The dividend would be paid at the end of October, after which
Filtronic plans to pay biannual dividends, starting with an interim payout
in January 2009. The announcement accompanied news that trading in the
company’s continuing Point to Point business during the first quarter was
“usefully” ahead year-on-year and that Hemant Mardia had been appointed
chief executive of the group.
Infoserve Group said it expects first-half revenues will be in line
with its forecast and added that talks about a possible offer for the
company were continuing. The online search-marketing specialist said it was
confident of achieving its full-year objectives.
Bango, the mobile web technology company, said that it was on track to
achieve sustained profitability and positive cashflow in the near term.
Telecoms
Cable & Wireless extended its £329 million offer for rival telecoms
provider Thus until further notice and said that it expected the offer for
the Scottish group to become unconditional on October 1. C&W said that
it had bought 29.9 per cent of Thus’s shares and received acceptances of its
offer representing a further 52 per cent of Thus’s issued shares, giving it
about 82 per cent of the company.
Telecom Italia has agreed with unions to cut 5,000 jobs. Europe’s
fifth-biggest telecoms operator by market value has €37 billion (£29
billion) of debt.
Telefónica, the Spanish telecoms company, is to lay off about 500
workers at its mobile business in Spain, which has about 4,450 employees,
according to local reports.
Transport
Alitalia Silvio Berlusconi, the Italian Prime Minister, will consider
the option of “temporary nationalisation” of Alitalia after the dramatic
collapse of a rescue bid for the troubled airline by an all-Italian
consortium.
Utilities
Renewable Power and Light reported a narrowed first-half loss, boosted
by more than doubled revenues, and said it was still looking at selling
non-core assets. The pre-tax loss narrowed to $5.37 million (£2.9 million)
from $6.27 million in the six months to June 30.
