Economics
Bank of England The Chancellor used his inaugural Mansion House speech
to the City to unveil a shake-up of the Bank of England, including a new
financial stability committee, which will oversee the actions of Mervyn
King, the Governor, and hold him accountable if potential banking crises are
not averted. Page 42
Interest rates The Bank of England Monetary Policy Committee voted 8-1
to keep interest rates on hold at 5 per cent at its meeting in June. David
Blanchflower, the arch-dove, voted in favour of a quarter-point rate cut.
Manufacturers are rallying during the economic gloom, figures from the
CBI showed. The balance of manufacturers reporting that their business was
above normal in June rose to 1 per cent, after 10 per cent had said their
order levels were below normal in May. The balance of companies expected to
put their prices up over the next quarter fell to 28 per cent, from 30 per
cent in May.
The US economy will probably avoid a formal recession, despite the
housing downturn and a growth rate just above 1 per cent, according to a
report from UCLA Anderson Forecast. Despite interest rate cuts by the US
Federal Reserve since September to stimulate the economy, the report claimed
that the GDP growth rate would continue at about 1.2 per cent through 2009.
Japanese interest rates The Bank of Japan’s rate-setting committee
voted unanimously to keep interest rates unchanged at 0.5 per cent at both
its June and May meetings, according to the minutes, just published.
Banking
& finance
Citigroup, the American banking group, has offered early retirement to
1,350 employees of its Japanese consumer finance unit. This month the
company said that it would shut its remaining 32 consumer lending outlets
and 540 unmanned loan machines in Japan.
Morgan Stanley has become the latest financial services group to fall
victim to a rogue trader as it admitted that it had suspended a credit
trader in London for trying to hide losses of about $120 million (£61.3
million). America’s second-biggest securities group said that the Financial
Services Authority, the City regulator, was conducting a full investigation.
Morgan Stanley also reported a 60 per cent decline in second-quarter
profits, dragged down by a $955 million loss on its portfolio of mortgage-
related investments and loans to finance private equity buyouts.
HBOS, Britain’s biggest lender, has made 19 changes to two-year
fixed-rate mortgage deals in the past six months. The bank, which owns
Halifax and has a 20 per cent share of the mortgage market worth £220
billion, has changed rates almost once a week since January on the two-year
deals, according to Moneyfacts.co.uk, a price comparison service.
The Alternative Investment Management Association, the hedge fund
industry’s lobby group, mounted a last-ditch attempt to persuade the
Financial Services Authority, the City regulator, to delay its controversial
rules on short-selling, which are due to come into force tomorrow.
Northern Rock Ron Sandler, the executive chairman of Northern Rock, is
examining the conduct of the troubled bank’s former board to see whether
they could be sued for compensation. Adam Applegarth, the bank’s former
chief executive, was widely blamed for the flawed business model that
brought Rock down. Mr Applegarth has said that the Treasury and the Bank of
England were to blame for preventing a rescue bid by Lloyds TSB.
Construction
& property
Housebuilders and commercial property groups suffered a slide in shares
after Goldman Sachs, the investment bank, gave a warning about the
beleaguered housebuilding sector and Credit Suisse advised caution on
commercial property.
Carillion, the building and services group based in Wolverhampton, has
sealed a £208 million Building Schools for the Future contract in Nottingham
with the Local Education Partnership, its joint venture partner.
The National Housing Federation, which represents Britain’s social
housing industry, is in talks with the Government to free up £1 billion of
public money to help the new homes market.
Consumer
goods
Wynnstay, the Powys-based agricultural supplies and country stores
group, said that higher food prices were giving farmers more cash to spend,
helping to send its first-half sales up 46 per cent to £116.5 million, with
pre-tax profits up 51 per cent to £2.96 million.
Palm oil The futures of Malaysian crude palm oil rose by 0.6 per cent
amid fears that poor weather in the United States and farm strikes in
Argentina may tighten global stocks of the vegetable oil.
Rice Thailand’s benchmark rice prices fell by 3 per cent as Vietnam, a
rival exporter, gained an order of 600,000 tonnes from the Philippines. The
deal will secure the Philippines’ rice requirement for 2008 at an average
price of $940 (£480) per tonne.
Engineering
Trifast, the maker of industrial fasteners based in East Sussex, said
full-year underlying pre-tax profits remained flat at £8.81 million as its
sales were hit by customers closing sites across Europe.
Boeing, the US aerospace group, has won the chance to re-bid for a $35
billion (£17.9 billion) contract. In February the US Air Force had awarded a
contract to build air refuelling tankers to Northrop Grumman, owned by
Airbus, the European plane maker.
Health
Sanofi-Aventis, the French pharmaceutical company, made a counter-offer
of nearly $2.6 billion (£1.33 billion) for Zentiva, the Czech drugs maker.
Sanofi’s bid counters an existing offer from PPP, the Czech financial group.
Celsis International, the London-listed life sciences products and
laboratory services company, reported a rise in its full-year sales of 18.2
per cent to $56.1 million, driven by its rapid detection and in-vitro
technology divisions.
Pfizer, the American drugs group, will be able to sell Lipitor, the
world’s bestselling drug, at full price for five months longer than expected
after signing a deal with Ranbaxy, the Indian generic drugs manufacturer.
Pharmaceutical Price Regulation System Alan Johnson, the Health
Secretary, has approved new guidelines on drug pricing that are expected to
cut the cost of medicines. The proposals to update the Pharmaceutical Price
Regulation System include price cuts of nearly 5 per cent on average.
Industrials
RPC Group, the plastic packaging supplier, reported that its full-year
pre-tax profits had risen to £30.2 million, from £29.4 million last time,
ahead of expectations, and said that its new financial year has started
satisfactorily.
Leisure
Leisure shares sank after ABN Amro downgraded Enterprise Inns, the pub
chain, and Marston’s, the brewing and pubs business, to reflect the
heightened risk of a serious economic downturn.
Media
ITV has signed a deal with Twentieth Century Fox TV to develop scripted
co-productions using combined teams of US and British writers and producers,
it was reported last night.
The BBC has bought the rights to a Japanese game show, which uses a
moving wall to ditch contestants into a pool of water, in the corporation’s
latest effort to bring fresh ideas to its audiences.
Natural
resources
Highland Gold Mining said that it had decided to advance the Mayskoye
project in Russia’s Chukotka region at an expected cost of up to $550
million (£281 million). At full production, Mayskoye is expected to produce
between 250,000 and 275,000 ounces of gold per year, beginning in 2010.
Gazprom, the Russian gas producer and the supplier of a quarter of
Europe’s gas, said that it expected an increase of 62 per cent in export
sales this year compared with 2007, with earnings topping a record $64
billion.
Retailing
Woolworths said that Trevor Bish-Jones, its chief executive, will step
down after six years as the retailer announced that like-for-like sales had
fallen 2.2 per cent in the first 19 weeks of the year. It said that it is to
dispose of the leases of four of its London stores to Waitrose for £25.5
million.
J Sainsbury revealed the lowest first-quarter sales growth of Britain’s
four biggest supermarket chains, sending its shares down by 10½p. A trading
statement showed that like-for-like sales revenue rose by 3.4 per cent,
excluding fuel, in the 13 weeks to June 14, below City expectations and less
than the growth rate of each of its main rivals.
H&M, the fashion retailer, enjoyed a 14 per cent rise in
like-for-like sales in May, with profits up by 6 per cent to SwKr5.4 billion
(£458 million).
Online retailers said that customers’ spending in May rose to more than
£4.5 billion, an increase of 1.6 per cent on the figures for April,
according to the IMRG Capgemini e-Retail Sales Index. Growth in May was
confined to clothing, footwear and accessories, which rose by 4 per cent.
Sales fell by 10 per cent in the electrical sector and alcohol fell by 11
per cent.
Support
services
Capita Group has been selected by the Health and Safety Executive as
the preferred partner to operate a gas installer registration scheme. The
company said that the contract was expected to be valued at about £14
million a year.
Mouchel, the consulting company, said that third-quarter demand for its
services remained strong in its core markets, with its performance in the
year to date continuing in line with its hopes.
CareTech Holdings, the provider of learning disability care services,
has agreed to acquire Valeo, a care homes business based in West Yorkshire,
for up to £15.3 million. CareTech also announced a 58 per cent rise in
first-half pre-tax profits and said that it would raise £30 million in a
placing to finance further growth.
Technology
Misys, the software group, said that its full-year revenues were about
6 per cent higher and operating profits were expected to be up by about 36
per cent. The group added that the credit crunch had yet to hit its
business, with many financial firms seeking support to help to cut costs.
Eckoh, the speech-recognition technology specialist based in
Hertfordshire, has won a three-year contract together with BT to provide
TrainTracker Text, an SMS text-based journey-planner service, to National
Rail Inquiries.
Microsoft announced the purchase of Navic Networks, the private
American digital television advertising technology company. A source put the
price at between $200 million (£102.2 million) and £300 million.
Apple Sales of Apple Mac computers increased by 50 per cent in the year
to May, new figures from NPD, the market research company, suggest — well
ahead of the 37 per cent growth expected by analysts at Lehman Brothers.
Ericsson, the telecoms equipment maker, said that mobile broadband
internet subscribers could rise to 2.2 billion within five years, from 250
million, fuelled by the growth in emerging markets.
Telecoms
Tata Communications, the Indian telecoms group, has signed an equity
joint venture with shareholders to gain a 50 per cent stake in China
Enterprise Communications, the telecom services provider, for an undisclosed
amount.
Transport
OpenSkies, the subsidiary airline created by British Airways to take
advantage of the transatlantic “open skies” policy, will start its flights
today, travelling between Paris and New York.
Utilities
Renewable Energy, the Norwegian solar industry group, said that it
would invest nearly $2.5 billion (£1.27 billion) in a production complex in
Singapore.
E.ON, the German utility group, is considering making a non-binding
offer for the European wind power portfolio of Babcock & Brown, the
Australian investor, according to local reports.
Centrica, the owner of British Gas, wants to take control of SPE,
Belgium’s second-biggest electricity supplier, but will have to match a bid
from EDF, the French state energy giant, to do so. Sources in Paris
suggested that EDF could offer a premium of between 5 and 10 per cent in an
effort to knock Centrica out of the race.
