Economics
Wall Street stocks dived after the US House of Representatives rejected
the proposed $700 billion (£380 billion) bailout. The Dow Jones industrial
average was down 777.70 at 10,365.40 at the close, a record fall. It also
suffered its biggest percentage loss since the October 19, 1987 Black Monday
crash, dropping by 6.9 per cent. The S&P 500 index fell by a massive 8.6
per cent, its worst loss for 21 years.
Mortgage lending barely rose at all last month, with the net increase
in the amount issued in new home loans shrivelling to a meagre £100 million,
down from £3 billion in July, in much worse than expected Bank of England
figures. Annual growth in net mortgage lending dropped to 6 per cent, its
lowest since February 1999, from 6.9 per cent.
Mortgage approvals also fell to another low since present records began
in 1999, with new loans for house purchase dropping to 32,000 last month
from 33,000 in July. Approvals for remortgaging fell to 64,000, down by
5,000 to the lowest since October 2001. The cash value of total approvals
also fell to £13.6 billion in August, the lowest since September 2001, from
July’s £14.6 billion.
Unsecured personal lending rose last month by £1.24 billion, up from an
increase of £1.05 billion in July. Total lending to individuals, secured and
unsecured, rose by a net £1.4 billion in August, down from £4 billion in
July. This fall cut the growth rate of overall lending to an annual 6.2 per
cent, the lowest figure since September 1996.
The pound Sterling came close to suffering its sharpest one-day
percentage fall against the dollar since 1993. In London trading, the pound
dropped by as much as 2.5 per cent, to below $1.80, before closing at
$1.8094.
Global money markets remained close to total seizure. The Libor rate
for three-month lending between banks in euros climbed to a record 5.22250
per cent, while the spread of three-month euro rates over expected future
eurozone official rates also hit a record of 113 basis points. Three-month
interbank loan rates in sterling and dollars also rose. Overnight interbank
rates rose for sterling and dollar funds, but fell for euros.
Central banks continued their actions to ease money markets. The Bank
of England injected £40 billion of three-month sterling funds into the UK
banking system. The European Central Bank lent €120 billion (£96 billion) of
38-day funds to eurozone banks in its latest auction.
US Federal Reserve said it would provide a further $620 billion (£344
billion) to European central banks through a swap facility, allowing them to
lend in dollars. The Fed announced a big expansion of funding injections
into US markets, taking its total supply on an ongoing basis to $480
billion.
Eurozone economic sentiment among consumers and businesses sank to its
lowest for almost seven years this month, the latest barometer of confidence
from the European Commission showed. The survey’s headline index fell to
87.7 for September, from August’s reading of 88.5.
US consumer spending was unchanged last month, despite a surprise
increase in Americans’ incomes, official data showed. Spending growth for
August was zero, after barely increasing by a revised 0.1 per cent in July.
Incomes rose by 0.5 per cent last month, reversing a 0.6 per cent July
decline.
Banking
& finance
Bank bailout The $700 billion (£380 billion) US bank bailout was left
in chaos after the House of Representatives voted down the plans. In a shock
vote, the measures were rejected by 228 votes to 205.
Citigroup agreed a deal to buy the banking operations of Wachovia for
$2.16 billion, after the US Government promised to backstop billions of
dollars of potential losses.
Lehman Brothers agreed its third major asset sale since filing for
bankruptcy, announcing the sale of its investment management unit to Bain
Capital and Hellman & Friedman, the private equity companies, for $2.15
billion.
Mitsubishi UFJ Financial Group, Japan’s biggest banking group, has
injected $9 billion into Morgan Stanley. This will give it a 21 per cent
stake in the American group.
Glitnir The Government of Iceland took control of its third-largest
bank, injecting €600 million (£478 million) into the institution, in an
effort to prevent its collapse as depositors fled.
Dexia The Belgian authorities are to intervene to prop up the ailing
institution through a capital increase, likely to involve a €7 billion
injection of funds.
Fannie Mae and Freddie Mac, the US mortgage finance giants, said they
were subpoenaed for documents as part of a federal grand jury investigation
into their accounting. Both companies said they will cooperate.
Man Group, the listed hedge fund manager, said sales were 25 per cent
higher in the six months to September 30, but added that funds under
management fell by $5 billion in the six months to the end of September.
Icap, the world’s biggest interdealer broker, said it expected
full-year profit to be ahead of the previous year and that, if market
developments and exchange rates were favourable, it could be well ahead.
Close Brothers Colin Keogh, chief executive of the investment bank,
announced he was quitting after the board said it was looking for a
different style of leadership.
Construction
& property
Michelmersh Brick Holdings is to cut up to 50 jobs at its brickmaking
plants as part of a move to cut costs and restore profitability after it
reported a first-half loss. Britain’s fourth-largest brickmaker reported a
pre-tax loss of £483,000 for the six months to the end of June, against a
profit of £93,000 last year.
Consumer
goods
InBev, the Belgian-Brazilian brewer behind Stella Artois and Beck’s,
said its shareholders had overwhelmingly voted in favour of the $60 billion
(£33 billion) takeover of Anheuser-Busch, the Budweiser maker. It expects to
complete the deal by the end of the year.
Beer sales Cask ale sales are bucking the wider decline, according to
Rule Beertania, a new report, with real volumes down by just 0.3 per cent
over the past year compared with an 8 per cent fall in the overall beer
market.
Cadbury, the confectionery group, said it was withdrawing all of its 11
chocolate products made in Beijing amid concern over the possibility of
melamine contamination. The products were sold in China and exported to
Taiwan, Hong Kong and Australia.
PZ Cussons, the soap and shampoo maker, said its performance in the
past four months had been in line with its own expectations and the trading
outlook for the full year remains positive.
Engineering
Corac Group said it is in an “excellent” position to take advantage of
market opportunities as energy price increases have strengthened the case
for downhole gas compressor (DGC) technology in gas fields. Its comments
came as it reported a pre-tax loss of £1.5 million for the six months to
June.
Health
Arthro Kinetics, the orthopaedics company, gave warning that its cash balance
of ¤3.5 million (£2.7 million) was not enough to fund its needs and said it
was in talks which may lead to a takeover bid.
Industrials
Akzo Nobel, the Dutch owner of paint and chemicals company ICI, plans
to cut 3,500 jobs in an effort to save more than €100 million (£80 million).
Akzo, which bought the maker of Dulux paints for £8 billion in January, said
that it was taking “aggressive action” to cope with a collapse in consumer
demand.
Leisure
TUI Travel and Thomas Cook, Britain’s two biggest tour operators, have
reported a surge in bookings, after the collapse of XL Leisure as
holidaymakers seek out firms offering consumer protection.
Holidaybreak, the camping and school holiday operator, said it expected
current-year trading to be broadly in line with expectations, despite a
fall-off in hotel breaks and fuel increases.
Online Travel Group, a privately owned company that operated websites
providing travel insurance and bookings for ferry crossings and holidays,
has been placed in administration with Leonard Curtis. This will result in
the loss of 16 call centre jobs.
Media
BSkyB could be forced to cut its holding in ITV to below 7.5 per cent
after it suffered a defeat in a tribunal hearing.The Competition Appeal
Tribunal ruled that John Hutton, the Business Secretary, and the Competition
Commission were wrong to conclude that its purchase of a stake in ITV did
not impact on media plurality.
ITN Mark Wood, the news broadcaster’s chief executive, has announced
plans to step down after six years. Mr Wood will leave early next year to
“pursue opportunities outside the company” although he will remain in his
dual role of ITN chairman “for a period”, the company said.
WPP, the advertising giant, has extended its £1.2 billion offer for
TNS, the market research company, until October 3. TNS said it recommended
that shareholders reject the bid. WPP said it had received acceptances in
respect of about 33.8 per cent of TNS for its bid. WPP is to move its
headquarters to Ireland from the UK.
Natural
resources
Lamprell, the oil services group, reported first-half net profit of
$47.8 million (£26.5 million), up 32 per cent, and said its strong order
book and pipeline gives it confidence that it will meet expectations for the
second half.
Circle Oil said first-half pre-tax losses widened to $2.15 million from
$1.23 million, which it attributed mainly to net financing costs. It said it
remains well funded, with cash of $12.25 million at June 30.
Retailing
MFI Up to a hundred MFI stores could close within days despite the
eleventh-hour management buyout of the struggling furniture retailer at the
weekend.
Tesco is losing customers to Asda, Wm Morrison and discounters such as
Aldi and Lidl in the UK, according to data collated by TNS, the market
researcher. Tesco is expected to report an 11 per cent rise in half-year
profits to £1.4 billion after strong sales overseas.
Jessops HSBC is to raise its stake in the camera retailer by a further
5 per cent as part of a deal that extends the retailer’s current loan
facility with the bank until 2011. HSBC will now have a 15 per cent
shareholding in the business.
Wal-Mart The Japanese subsidiary of the retailer is closing 20 stores
and cutting 350 jobs as it battles a slump in consumer spending. Seiyu is
one of Japan’s biggest chains, but has lost ground to rivals.
Support
services
Compass Group, the world’s biggest caterer, said it expects full-year
revenues to be higher than last year by more than 5 per cent on strong
full-year trading.
Jarvis, the rail and plant services group, said its year-to-date
trading has been in line with its expectations. Volumes in its rail business
increased in the second quarter as it secured new contracts from Network
Rail.
Homeserve, the home emergency repair group, said current market
conditions were not having a material impact on its customer-facing
businesses. New policy sales for the six months to September 30 have risen
to 700,000.
Technology
Phorm, the targeted advertising technology company, said BT Group, its
internet service provider partner, will start its trial of “BT Webwise”,
Phorm’s platform. This platform should then be rolled-out across BT’s
network after the successful completion of these trials.
Telecoms
Nokia, the world’s largest mobile phone maker, said it is to focus its
services development on consumers rather than businesses and that it was in
advanced talks to sell its security appliances business to a financial
investor.
Transport
Alitalia An Italian investor bailout of the airline has won the support
of the last two unions, ending talks that at one point appeared to doom
Italy’s national airline to liquidation. SDL and Avia — which represent
cabin crew and ground staff — agreed to back a deal with CAI, the Italian
consortium.
Utilities
Centrica, the British Gas owner, has bought Solar Technologies Group
for £2.8 million in cash. Solar Technologies Group is a British Gas
contractor which has installed solar panels at well-known sites, including
London’s City Hall.
