Economics
Economic conditions The latest survey of conditions across the economy
from the British Chambers of Commerce showed a combination of mounting price
pressures and weakening growth, adding to the quandary facing the Bank of
England. The BCC’s findings showed that more businesses planned to raise
their prices in the final quarter of last year than at any time in the past
ten years. At the same time, new orders in the services sector fell to their
lowest in 18 months, while export orders in manufacturing also slipped to an
18-month low. Confidence in profits and turnover in both sectors fell.
Interest rates Sir John Gieve, the Bank of England’s Deputy Governor,
dampened hopes of aggressive interest rate cuts as he highlighted the
dilemma facing the Monetary Policy Committee over rising inflationary
pressures and weakening growth. He said growth was “slowing quite sharply”
but added that inflation was likely to climb well above the Bank’s target
thanks to soaring fuel and food costs.
The eurozone trade surplus shrank by more than expected in November as
the euro strengthened and imports grew faster than exports. The trade
surplus fell to €2.6 billion (£1.9 billion) — half the €5.2 billion
registered a year earlier. The October surplus was revised down to €5.4
billion from a previous estimate of €6.1 billion.
US economy Ben Bernanke, Chairman of the US Federal Reserve, threw his
weight behind likely efforts by the US Government to design tax and spending
measures to shore up the American economy. His comments came as he renewed
signals last week that the US central bank is ready to take aggressive
interest rate measures to underpin growth.
US housing market The prolonged slump in the American housing market
pushed the construction of new homes in 2007 down by the largest amount in
27 years, with the expectation that the downturn has further to go. Official
figures showed that construction was started on 1.353 million new homes last
year, down by 24.8 per cent from 2006. It was the second-biggest annual
decline, exceeded only by a 26 per cent plunge in 1980, a period when the
Federal Reserve was pushing interest rates to post-Second World War records
in an effort to combat an entrenched inflation problem.
Oil prices fell below $90 a barrel as markets feared that a weakening
US economy will sap demand. The latest slide in prices extended oil’s losses
to about 10 per cent since it hit a record of more than $100 a barrel on
January 3. US light crude for February delivery fell by $1 in early
afternoon trading in New York, dropping to $89.84 a barrel. Benchmark London
Brent crude also fell by $1 to $88.50 a barrel.
Banking
& finance
Aberdeen Asset Management said that assets under management rose to
£102.9 billion in the three months to the end of December, from £95.3
billion in the previous quarter, and added that it sees “healthy” levels of
new business although it expects market conditions to remain “difficult”.
Icap, the interdealer broker, said that it has bought a 15 per cent
stake in Bolsa de Productos de Chile, the commodity exchange. The deal will
help BPC to conclude its capital raising efforts.
Lehman Brothers, the US investment bank, said that it will
“substantially” reduce its US residential mortgage lending business and cut
1,300 jobs.
Construction
& property
Barratt Developments, the housebuilder, said that its forward order
book for new homes has fallen for the first time in almost four years.
Barratt, which bought its competitor Wilson Bowden in a £2.2 billion deal
last April, added that forward sales for the first half stand at £1.26
billion, compared with £1.34 billion a year ago.
Skanska, the construction group, said it has won an order worth £53
million for an expansion to the HMP Dovegate training prison in
Staffordshire.
Consumer
goods
Associated British Foods said in a trading update that it expects
profits in the group to show good progress despite volatility in some
commodity prices and added that trading in the current year has been up to
its expectations.
SABMiller, the brewing group, said that its underlying financial
performance was in line with its expectations, with price increases
offsetting higher input costs, adding that a $19 million (£9.7 million)
charge taken by Miller Brewing during the third quarter has been treated as
an exceptional item.
Scottish & Newcastle, Britain’s biggest brewer, looked set to pass
into foreign hands after Heineken and Carlsberg, its Dutch and Danish
rivals, raised their offer for the owner of John Smith’s bitter to £7.8
billion. S&N agreed to open its books after the pair increased their bid
for the third time to £8 a share, ending a three-month stand-off.
Engineering
General Motors, the US carmaker, said that it expects to “significantly
improve” its operating results, including earnings and cash flow, over the
next two to three years and forecast that capital spending would be up
slightly from 2007 levels to about $8 billion (£4.1 billion) in 2008.
Health
Novartis, the Swiss drugs maker, reported a fourth-quarter profit of
$931 million (£474 million), down by 42 per cent, with figures depressed by
a $444 million restructuring charge. But it said that it expected to see
significant improvement in the second half.
Hikma Pharmaceuticals, the Jordan-based generic drugs company, said
that it will place 17 million new ordinary shares, or almost 10 per cent of
its issued share capital, to reduce its acquisition debts.
Industrials
Steel Strips Wheels, the Indian group which produces steel wheel rims
for vehicles and is based in Chandigarh, Punjab, said it had won an order
worth 750 million rupees (£975,000) from Peugeot Citroën, the French
carmaker.
Leisure
Enterprise Inns, the pub operator, said that pre-tax earnings for the
15 weeks to January 12 were broadly in line with last year, but it remained
cautious about consumer confidence.
Newbury Racecourse Guinness Peat, the investment company, responded to
a circular from Newbury Racecourse by saying that its premium cash offer of
£11 per share for Newbury provided an attractive alternative to the “dubious
economics” and “long-term risks” associated with the racecourse’s ten-year
development project.
Media
EMI Barney Wragg, EMI’s worldwide head of digital, has resigned from
the music group amid its restructuring plans. Mark Hodgkinson, executive
vice-president of global marketing, will take over his responsibilities.
Chrysalis Guy Hands, the chairman of EMI, has tabled a bid for
Chrysalis, one of Britain’s last big independent music groups. Analysts have
said that the group could be valued at more than £150 million.
Natural
resources
Anglo American, the mining group, is gaining control of the Minas-Rio
and Amapá Brazilian iron ore mines in a $5.5 billion (£2.8 billion) deal
that could give Anglo between 10 per cent and 12 per cent of worldwide trade
in the metal within a decade.
Retailing
Alliance Boots, the health and beauty retailer, said that it enjoyed a
4.8 per cent rise in sales in the run-up to Christmas. The group, taken
private in an £11 billion deal last year, added that cosmetics and
fragrances had driven the growth.
Primark, the discount fashion chain, reported its strongest sales
growth for a year and added that it was taking market share from all its
rivals.
Kesa Electricals saw its shares surge by 9 per cent to 201p after it
reported that sales at Comet had risen over Christmas despite weak demand
for white goods such as fridge freezers. Like-for-like growth at the chain
was 0.7 per cent.
HMV, the music, DVD and books retail group, said it expects its
full-year pre-tax profits to be close to market expectations of up to £53
million, adding that total sales rose by 9.9 per cent during the five weeks
ending January 5.
Home Retail Group, the Argos and Homebase retailer, said it is on
target for full-year profits to be towards the upper end of market forecasts
after reporting a slowdown in third-quarter underlying sales growth at
Argos, its high street catalogue retailer, but an improved performance at
Homebase, its DIY business.
Thorntons, the chocolate and confectionery group, said it had
maintained its trend of steady improvement with second-quarter sales growth
of 7.6 per cent.
Somerfield claimed to have enjoyed an “exceptional” Christmas as
Waitrose became the first rival to admit that it would be interested in
buying some of the supermarket chain’s 955 stores.
Support
services
Smiths News, the newspaper and magazine distributor, said that overall
revenues for the 19 weeks from September 1 to January 12 had increased by 1
per cent after higher cover prices helped to offset the effect of volume
declines. It added that weekly magazines had traded in line with
expectations, while declines in the monthly magazine market had eased.
Tribal Group, the consultancy and support services provider, said its
nine months profit will be substantially ahead of the year before and, given
the strength of its balance sheet, it will buy back up to 5 per cent of
issued capital in 2008.
Slaughter and May, the law firm, has appointed Christopher Saul, head
of its corporate department, as its next senior partner, replacing Tim Clark
who is leaving the group. Slaughter and May is the UK’s most profitable law
firm.
Technology
Misys, the London-based software group, said it has signed a strategic
co-operation agreement with Digital China Financial Software to deliver
software targeted at 30,000 banks in China.
Microsoft, the US software giant, named Tony Scott as its new chief
information officer. Mr Scott was most recently chief information officer at
Walt Disney, the entertainment group.
IBM, the US computer group, reported a rise in fourth-quarter profits
of 12 per cent, ahead of analysts’ forecasts.
Telecoms
Mobile phone charges The European Commission said mobile phone users in
Europe are often billed 20 per cent more than the actual time of their calls
because they are charged by the minute.
Transport
Wincanton, the road haulier which is based in Somerset, said that it is
buying the container logistics operations of Hanbury Davies, the Felixstowe
transport group, for up to £27.5 million.
Braemar Shipping Services said it expects full-year results to be
significantly ahead of the £11 million pre-tax profits reported a year ago
and added that its second-half pre-tax profits would be similar to the first
half at £7.1 million.
Utilities
Areva, the French energy group, said that it has acquired a 70 per cent
stake in Koblitz, the Brazilian maker of equipment for biomass and
hydroelectric power plants.
