Economics
World stock markets Shares suffered further sharp losses in London as
investors remained fearful of a US recession and a worsening outlook for the
global economy. The FTSE 100 index fell by a further 1.4 per cent after
Tuesday’s slump of 3 per cent, adding to losses that have left the London
market facing its rockiest start to the trading year since the end of the
1970s. The FTSE closed down 82.7 points at 5,942.9.
Unemployment The claimant count of numbers out of work and receiving
benefits fell by a further 6,400 in December, keeping the unemployment rate
on this measure unchanged at 2.5 per cent. On the Government’s preferred
survey-based measure, the jobless total fell by 13,000 in the three months
to November, while employment rose by 175,000, its sharpest increase since
February 1997.
Average earnings growth The headline growth of pay was unchanged at 4
per cent in the three months to November, while the annual pace of increase
in November alone edged up to 4.2 per cent, from 3.7 per cent in October.
Excluding bonuses, headline earnings growth was also steady at 3.6 per cent.
Eurozone inflation remained at a six-year high of 3.1 per cent in
December, thanks to increases in the costs of food and petrol, official data
confirmed.
US inflation data showed that American consumer prices last year rose
at their sharpest annual rate for 17 years, rising by 4.1 per cent — the
worst figure since a 6.1 per cent increase in 1990.
Japanese consumer sentiment fell to its lowest levels in nearly five
years, according to the Bank of Japan.
Chinese economy Beijing ordered China’s banks to further raise the
proportion of deposits held in reserves for the eleventh time since the
start of 2007 as it stepped up its efforts to cool runaway growth in the
Asian powerhouse economy.
Banking
& finance
JPMorgan Chase, the investment bank, said that it had set aside $1.1
billion (£560 million) to cover losses on its high-risk sub-prime mortgages
and home equity loans, which use the borrower’s house as collateral. The
bank also disclosed a $1.3 billion loss relating to bonds and other
investments in sub-prime mortgages in the fourth quarter.
Ambac, America’s second-biggest bond insurer, issued a profit warning
as it reduced the value of the securities it guarantees, ousted its chief
executive, cut its dividend by two thirds and announced plans to raise $1
billion.
HFC Bank, a subsidiary of HSBC, the high street bank, was hit with a
record £1 million fine after the Financial Services Authority, the City
watchdog, uncovered a series of flaws in its insurance sales. HFC Bank,
which operates in Britain under the names Household Bank and Beneficial
Finance, sold payment protection insurance to more than 160,000 people
between January 2005 and December 2007 without checking whether customers
needed the cover.
Personal insolvency legislation Borrowers would be allowed to stop
repaying debts by taking out a court order under radical plans outlined by
the Government. The proposals would mark the biggest shake-up of personal
insolvency legislation in years and come at a sensitive time for the
financial services industry, which is bracing itself for an increase in
consumer bad debts.
Deutsche Bank said that it would lose up to 300 staff in its global
markets business as part of a reorganisation.
Northern Rock Pressure was mounting on Goldman Sachs to produce a
financing package to push through a sale of Northern Rock and stave off
nationalisation of the stricken bank.
Construction
& property
GRDC, the property developer based in Georgia, the former Soviet state,
said that it aimed to raise up to $200 million (£102 million) through an
initial public offering in London this year, when it hopes that the
political situation in Georgia will have settled.
The Institution of Civil Engineers said that it believed that
spiralling construction costs could jeopardise some of the country’s biggest
infrastructure improvements unless action is taken to improve long-term
planning and procurement in the UK.
Centro Properties, the Australian shopping centre owner, which is
struggling to refinance A$3.9 billion (£1.7 billion) of debt, saw one of its
subsidiaries suffer a credit downgrade of four notches below investment
grade by Moody’s, affecting A$830 million of securities.
Consumer
goods
C&C Group, the Magners cider producer based in Ireland, said that
third-quarter revenues had fallen by 15 per cent, compared with the year
before, and added that it expected a 10 per cent fall in its full-year
revenues.
Procter & Gamble, the consumer products group, is expected to
announce plans to spin off its Folgers coffee brand by the end of January,
according to a report.
Nike The Office of Fair Trading cleared Nike’s £285 million acquisition
of Umbro, despite the overlap in sportswear equipment and a combined 45 per
cent share of the market for replica football shirts.
Character Group, the maker of toys, games and giftware, said that it
sees poor trading results for the first half of the current financial year,
but expects substantial revenue growth for the second half.
Engineering
Cobham, the American aerospace and defence group, said that it had
agreed to acquire Sparta, the US defence company, for $416 million (£212
million).
Airbus, the European aircraft maker and unit of EADS, the aerospace
group, said that it had booked a “record” net 1,341 aircraft orders in 2007,
with a total value at catalogue prices of $157.1 billion. Boeing had
reported a net total of 1,413 orders during 2007.
Health
Sanofi-Aventis and GlaxoSmithKline have confirmed that they have
already been examined, and AstraZeneca said it has been approached, in
unannounced inspections by the European Commission of pharmaceutical
companies across the 27 member states in a general anti-trust inquiry into
the sector.
Industrials
The German steel industry has given warning of huge job losses if the
European Commission goes ahead with a new emissions trading scheme in its
climate protection strategy.
Leisure
Punch Taverns, the pub operator, blamed declining consumer confidence
and the impact of the smoking ban for a downturn in trading over the
Christmas period. The company, which runs 8,450 pubs, most of them leased,
said that trading over the past eight weeks had become “more subdued in what
has been widely acknowledged as a challenging period for the sector”.
Media
Press Association, the news and information business, told the House of
Lords Communications Committee that it had created a trust to help to
protect the group’s editorial independence if its ownership structure
changes.
Natural
resources
Rio Tinto, the mining group, saw its shares fall despite reporting
record iron-ore output up 9 per cent to 179 million tonnes, which analysts
said would reduce the chances of a takeover. The record iron-ore production
came as the group continues to resist a takeover proposal from BHP Billiton,
the world’s largest diversified mining group. BHP has until February 6 to
make a formal offer or walk away for at least six months. I
UK Coal said that it expected a near-fourfold increase in full-year
pre-tax profits to about £69 million, in line with overall expectations,
adding that it is well placed to deliver further growth in shareholder
value. However, it added that total output for 2007 had fallen to 8.1
million tonnes, from 9.5 million tonnes in 2006, mainly because of lower
production from its four deep mines.
Total, the French oil giant, has been ordered to pay hundreds of
millions of euros in damages after being found guilty of negligence over a
1999 oil spill that affected 400km (248 miles) of coastline in northern
France.
BP, the oil group, admitted that it had fallen short of safety
standards after the death of another worker at its Texas City refinery
earlier this week. Ronnie Chappell, a BP spokesman, said that the group’s
safety standards were “not where we want to be”, despite a $1 billion (£510
million) programme of safety improvements, including a six-month shutdown.
Retailing
Woolworths, the high street retail group, has vowed that it will move
back into profit despite a sales slide over Christmas. Trevor Bish-Jones,
chief executive, said that a rumoured £400 million refinancing could be
sealed in a “couple of weeks”.
Somerfield, the grocery chain part-owned by Robert Tchenguiz, the
property tycoon, is up for sale and could change hands for as much as £2.5
billion in an auction being conducted by Citigroup. There have been at least
three expressions of interest for the 955-store group.
Mothercare, the specialist chain, is stepping up its international
expansion plans after raising its profit forecast for the year after a
successful Christmas. The retailer has 483 franchise stores in 48 countries
outside Britain, including Kazakhstan, New Zealand and Saudi Arabia. It
wiill launch in China shortly.
Clinton Cards, the retail group, reported a 1.7 per cent increase in
like-for-like sales across its stores in the five weeks to Christmas Eve.
Underlying sales at Birthdays, the chain that it bought four years ago, rose
by 5.7 per cent.
Support
services
Delling Group, the marketing support services company, said that James
Robinson, its finance director, had resigned to pursue other business
interests and named Svante Goden to replace him.
Experian Group, the world’s largest credit-checking company, reported a
22 per cent increase in third-quarter revenue growth and added that while
trading conditions are not expected to improve in the fourth quarter, it had
initiated a programme of efficiency measures.
Technology
Blinkx, the American video search engine, has agreed a partnership with
13 new independent content providers to bring users thousands of hours of
film, television and music programming. The company said that it would place
advertising against the videos and would share the resulting revenue with
its partners.
Sun Microsystems, the technology group, plans to buy MySQL, the
open-source software maker, for $1 billion (£510 million). Sun said that its
second-quarter revenue would narrowly exceed Wall Street estimates. I
Telecoms
Sony Ericsson, the mobile phone maker, reported a better than expected
fourth-quarter pre-tax profit of €501million (£376million) against
€502million last time and said that it had gained market share over the year
as a whole.
Transport
Clarkson, the shipping services group, said that it expected its
second-half trading results to be substantially ahead of the board’s
original expectations as the majority of its business had performed well,
despite a weak US dollar. It added that it expected its full-year pre-tax
profit to be in line with analysts’ expectations.
British Airways said that it would fly daily to Buenos Aires and would
start non-stop flights to Rio de Janeiro next winter.
Utilities
Scottish & Southern Energy, the utility group, has been granted
planning permission by the Highland Council to develop a 40MW wind farm at
Fairburn in Ross-shire, which will have 20 turbines and will require
investment of about £45 million.
Thames Water is expected to tender for tunnelling and engineering
companies to build a giant sewer pipe near the 2012 Olympic Games site in
East London. The deal could be worth about £600 million.
Ofgem Energy companies were threatened with a windfall tax after Ofgem,
the energy markets regulator, advised the Treasury that suppliers will
receive a £9 billion benefit from “free” tradeable emissions permits. The
proposal was made during talks between the regulator and Alistair Darling,
the Chancellor, about the soaring cost of household fuel bills. The
regulator said that energy producers should be obliged to use some of that
£9 billion benefit to help their poorest customers.
