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Darling still not blinking on banks.

December 16th, 2009 by tom | 0 Comments | Filed in Central banks, Daily News, Debt, Exchage Rate, Mortgages, Recession, Stocks and shares, UK Banks, UK Small Business, VAT, World Banks

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Despite threats from major banking groups that they will move key staff abroad, the signs are that Alistair Darling has no intention of watering down his plans to levy a 50 percent super tax on bank bonuses. Apparently the Financial Services Authority (FSA) has already spoken to several smaller banks telling them that they will have to curb bonus payments if they do not do enough to increase their capital holdings with the FSA’s squeeze on bonus payments extending beyond the partially-nationalised Lloyds Banking Group and Royal Bank of Scotland. A recent poll has shown that while the general public are in favour of taxing bonuses, a large percentage feel that the bankers will find a way out of their noose Many feel that the recently announced banking bonus tax is unlikely to raise any significant funds for the UK government and is being used as more of a political pawn coming up to the impending general election.

According to a recent survey from the Bank of England , British consumer spending looks likely to falter in the coming months, as around a quarter of UK households admit that they have switched their fiscal emphasis to saving more, because of growing uncertainty about the long term economic outlook for the country. In addition, the survey shows an increasing proportion of households who were having trouble keeping up to p date with bills and loan repayments has fallen slightly in 2009, in spite of the economic downturn

This little snippet of optimistic news was tempered by the announcement that the rate of inflation has risen to 1.9% in November from 1.5% in October, with the principal cause being the rising cost of petrol. Prices at the pumps rose by 2.9 pence to 108.3 pence a liter in November, compared with a record 9.3 pence fall to 95.2 pence this month last year.

The Office for National Statistics predicted that the consumer prices index (CPI), is expected to rise to 3% or more early next year when the temporary VAT cut is reversed and prices across the board will take a significant increase.

On the same somber note, predictions are that the recovery in the U.K. housing market recovery is liable to come to an end in 2010 as the supply of second hand homes on the market will increase.

Average asking prices are expected to, at best, stand still next year after rising about 2 percent in 2009. Property prices have fallen 2.2 percent this month alone to an average of £220,000 and look likely to drop again in January. What can keep property prices stable is that if the banks show “more forbearance” to consumers who are late on mortgage payments, which after the general election seems increasingly unlikely.

Strike threatened British Airways have announced that they are exploring "all options" to help it cope with the impact of the planned 12-day strike by cabin crew, to be held over the traditionally active Christmas period. Currently up to one million passengers are facing the real e prospect of having their journeys canceled as a result of the strike action by Unite members.

Cabin crew voted nine to one in favor of strikes from 22 December over job cuts and staffing level with BA insisting that they will not climb down on its decision to reduce cabin crew numbers, which is at the heart of the dispute.

Also showing that now is the season for warnings are US food giant Kraft Foods, who have warned Cadbury’s shareholders that they are "taking a risk" if they continue to support Cadbury as a standalone company. They have rushed to claim that their proposed takeover of Cadbury would deliver cost savings and deliver "substantially more value" to Cadbury’s shareholders.

Cadbury has consistently urged shareholders to reject Kraft’s hostile bid, tempting them with the prospect of rival bids, promised dividends and stronger growth. Roger Carr, Cadbury chairman has announced that both Hershey and Italy’s Ferrero had both indicated they were contemplating bids, adding serious negotiations would only start if a compelling and fully-financed offer emerged.

A seasonal rise in DIY sales has given B&Q a recent boost but not enough to prevent owner Kingfisher from issuing a warning that economic and political uncertainty will have an effect on the company in 2010.

Kingfisher shares were lifted by news its UK and Ireland sales were up 4.4% in sales in the third quarter, pushing retail profit up by almost 27%, with a 6.3% improvement in sales at B&Q. with sales of big-ticket items such as kitchens and electrical appliances jumping by 27%.

On the FTSE 100, it was reported that Advent International is offering to buy the Royal Bank of Scotland Group Plc s’ Global Merchant Services unit in a deal worth £3 billion pounds. The news caused their stock to rise 2.5 percent, to 30.56 pence.

The public transport company National Express Group Plc is to mount a £360 million pound rights issue after the Cosmen family agreed to the deal, the issue is designed to reduce company debt after a slump in rail revenue. Share values declined 1.1 percent, to 182.3 pence.

PartyGaming Plc, the online-gambling brand is reported to be in merger talks with Austria’s Bwin Interactive Gaming AG. On the news, their shares rose 2.1 percent to 256.5 pence.

Operators of the Premier Inn budget-hotel chain, Whitbread Plc are scheduled to publish a trading statement. In anticipation of positive news, shares in the company rose 3.1 percent, to close on 1,330 pence.

Vodafone Group Plc has announced plans to sell their 4.39 percent indirect holding in India’s Bharti Airtel Ltd. Shares in the World’s largest mobile phone company rose 0.4 percent, to 141.55 pence.

Standard Chartered Plc, the U.K. bank that gets most of its profit in emerging markets, rallied 4.3 percent. London Stock Exchange Group Plc, whose largest shareholder is Borse Dubai Ltd., jumped 9.9 percent. Lonmin Plc, the world’s third-biggest platinum producer, led gains in mining shares.

Sterling gained ground against the dollar and Euro in sluggish mid week trading.

  • Pound/US dollar 1.6259
  • Pound/Euro 1.1188

The FTSE 100 Index rose 17.2 points to close on 5,261.57. The index has shown a 50 percent recovery since March and looks to be heading for its biggest annual gain since 1997.

U.K. stocks climbed, led by financial shares, after Abu Dhabi provided $10 billion to avert a default by Dubai’s Nakheel PJSC. The FTSE 100 Index rose 23.77 points to 5,285. 77

US President Barack Obama speaking after a meeting, described as "candid" with executives of some of America’s top banks, announced that he has told bankers to increase loans to small and medium-size businesses.

He went on to add that US banks had received extraordinary assistance and demanded they show extraordinary commitment to rebuild the US economy.

The meeting with executives from Goldman Sachs, JP Morgan Chase and Citigroup, among others, came after the president said he had not run for office to help out "a bunch of fat cat bankers on Wall Street".

On close of trading, the Dow Jones Industrial Average had dropped just nine points to 10,462.66 while the NASDAQ raised a little to close on 2,209.82.

US bank Well Fargo has announced that they are to re pay back £15 billion emergency funding it received under the Troubled Asset Relief Program (Tarp). Following hot on the heels of a similar one by Citigroup, Wells Fargo are the last leading institution to repay Tarp funding, marking a key step towards recovery for the US financial system.

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Knees knocking in the UK as budget day approaches

April 20th, 2009 by admin | 0 Comments | Filed in Daily News, Recession, Retail, VAT

You may love him or you may hate him, but one thing is for sure, not many UK citizens would like to be in Alistair Darling’s shoes on Wednesday when he makes his eagerly awaited budget speech.

Chancellor Darling is expected to announce spending cuts of around some £15billion of over the next few years, hopefully while making the entire financial apparatus based around Whitehall much slimmer and even meaner.

Financial analysts are predicting that the Darling’s budget statement will reveal the full extent of public borrowing this year, with has a potential of reaching more than £160billion. In honest truth, there will be very few pleasant surprises around this year’s UK budget for the man in the street. Alistair Darling’s statement is expected to announce that the fiscal deficit for 2008/09 has reached the £90billion mark, which is more than six percent of the Gross Domestic Production (GDP). If that wasn’t bad enough, experts predict that the figure will have reached about £174bn by this time next year, equivalent to a staggering 12.4pc of GDP.

Needless to say, the UK public are howling for blood, with the opposition Conservative party stating that Darling’s Budget is the equivalent of a “day of reckoning” with the Labour Party having led the UK into the worst economic crisis that it has known for decades.

Yet despite the constant flow of depressing predictions that are expected to reach fever pitch by Wednesday, there are those that continue to announce that the UK economy is no longer in free fall and that the beginning of a recovery should be felt by the spring of 2010. Hiding behind that well know cliché” it has to get better worse before it can get better, the same financial analysts are more certain in their predictions that the UK economy will contract by as much as by 3.5% this year and by an encouraging 0.1% in 2010.

In his Budget statement, Alistair Darling is expected to at least agree with the more unpleasant side of the prediction, that the UK economy will contract by around about 3% this year, a rapid turnaround from his November 2008 forecast in which he announced that the economy will “only” fall between 0.75% to 1.25%.

In fact, it seems that just about every set of statistics released these days in the UK provides an opportunity for interpretation, depending on whether you are an optimist or a pessimist. The news that UK retail sales fell in March 2009 compared with figures issued by the British Retail Consortium (BRC) a year earlier, seems like a very obvious victory for the pessimist.

Like-for-like sales fell 1.2%, making for the ninth fall in sales in the past 10 months, with the explanation that due to continued economic uncertainty. Leading consumers had no option to tighten their belts. For the optimists, there was some light in the fact that fall was made worse due to the fact that Easter fell in April this year but during March in 2009, meaning that, March’s figures did not include the traditional boost from Easter sales. If they had, the figures would have been much higher, resulting in a victory for the optimist, at least until this time next month.

Another reason for optimism came with the news that UK local councils who rather unwisely invested hundreds of millions of taxpayer’ money in Icelandic banks have been given some cautious indications that they may succeed in recovering a healthy percentage of the money. The reasons being that banks in Iceland, who were taken over by the authorities when the country’s financial system collapsed in October 2008, have appointed administrators to sort out the bank’s muddled affairs. It now transpires that the administrators have indicated its creditors could get up to 80% of funds invested back with initial

payments expected towards the end of July and August.

London-listed Chesnara Plc announced on Friday that has acquired the life insurance operations of Swedish financial services company Modern Finance AB.

Chesnara, owner of Countrywide Assured Plc, paid out twenty million pounds cash in cash for Moderna Life, a sum that represents a 63% discount from the book value of the unit as calculated at the end of 2008

Moderna Finance has been under the control of Icelandic bank Islandsbanki, who were recently nationalised, following the collapsed of Icelandic investment company Milestone.

Chesnara announced that Moderna Life’s activities will complement its UK business, as well as being an opportunity to grow a new division within the group.

Equities markets saw gains Friday, helped by gains in the banking sector after US bank Citigroup (NYSE: C) said that it only lost 18 cents per share in the first quarter, a better performance than analysts had anticipated.

In London on Friday the FTSE continued its steady climb with Lloyds Banking Group and RBS both doing well

British investor in leveraged buyouts, Candover Investments were said to be discussing bids received for the group, which put itself up for sale last year. The news saw their shares rising by 5.3 percent (11.75 pence to 234.25)

The world’s second-biggest drug maker GlaxoSmithKline appeared to be drawing nearer an agreement to acquire Stiefel Laboratories Inc. for about $3 billion. The shares rose by 0.3 percent (3 pence to 1,038)

Showing that progress nearly always pays dividends was the news that the London Stock Exchange Group Plc, who operate of the London and Milan bourses may announce who will be the technology providers for its Baikal pan-European trading system sometime this week, The shares rose 1.8 percent ( 12 pence to 689) in anticipation.

The FTSE 250 closed up 65 points at 7307.63 while the FTSE 100 finished the session 3.9 per cent, or 156.5 points, higher at 4,209.

Sterling fell slightly against the dollar and the Euro and rose slightly against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4716

Pound/Euro 1.1333

Pound/Japanese Yen 127.58

Pound/Swiss Franc 1.6425

Wall Street shares had another steady day on trading before closing down for the weekend. The Dow Jones Industrial Average added 5.9 points to close at 8,133.33 while the NASDAQ crept up 2.63 points to 1,673.07

The continued optimism was largely down to Citigroup, who reported their first quarterly net profit in nearly two years, becoming the latest US bank to see an improvement in its performance.

Citigroup made a profit of £1.1billion ($1.6bn) compared with a loss of $5.1bn a year earlier. Revenues rose a commendable 99% to $24.8bn.

Shares in the bank initially rose, before falling backwards, closing 9% lower at $3.65 in New York.

Better than expected results also came from conglomerate General Electric, who reported a 40 per cent drop in first quarter earnings, beating analysts’ expectations of an even steeper decline?

Markets in the Asia-Pacific region were mixed.

In Tokyo, the Nikkei 225 added 1.74 percent to 8,907.58 while the Topix index was 1.63 percent higher to 845.57 and the Mothers market gained 1.44 percent to 319.63.

In Australia, the S&P/ASX200 was up 0.03 percent to 3,776.7 and the Sydney Ordinaries added 0.07 percent to 3,728.1, while the Hang Seng was 0.12 percent.

Crude oil prices were a bit higher but precious metals and grains declined on the session.

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Don’t let the great VAT con dupe you!

December 1st, 2008 by jamie | 0 Comments | Filed in Daily News, UK Banks, VAT

The Great VAT Con comes in to effect today – most people believe that a 2.5% cut in VAT from 17.5% to 15% means a £2.50 drop in prices for every £100 spent at the tills.

Let’s demonstrate the con with some basic maths – £100 plus 17.5% is £117.50.

A 2.5% cut in VAT to 15% is not £100 plus £15 equals £115.

Why not? Because that 2.50% cut only chops £2.10 off the price.

So the great giveaway to encourage extra spending is not so great, and worst of all, the Chancellor Alastair Darling has spun the move to make everyone feel better in a bid to loosen purse strings.

The problem is the Government is following the doctrine of Keynesian economics that put us all in this mess in the first place. The great economist John Maynard Keynes talks about the ‘paradox of thrift’.

Basically this means people stop spending and hang on to their cash in a recession because they want liquid assets handy in case they fall on bad financial luck – as if a recession wasn’t bad enough luck.

This makes the recession worse because businesses can’t sell their products, so output declines even more, making the recession worse. The economy is stuck in an ever-decreasing circle until circumstances allow people to spend again. 

That’s why the Government wants us to spend their way out of recession to counteract the paradox of thrift.

The question is, have they done enough to kick-start the economy or will the whirlpool continue to suck in jobs and businesses? One the whole, it looks like too little.

After a week of more bad news in the High Street, with Woolworth’s and MFI going in to administration and B&Q closing nine trade depot superstores, the John Lewis partnership’s weekly trading report shows a continuing downward trend.

For several weeks running, the report has showed a consistent 13% year-on-year fall in sales.

Other big names teetering on the bring are electronics conglomerate Curry’s and PC World after announcing £15 million losses, Clinton Cards, Land of Leather, and DIY giants Focus and Fads. 

The car industry worldwide is gripped by crisis as all the big carmakers in the US, Japan and Europe undertake cost-cutting exercises. 

The ‘nationalisation’ of the Royal Bank of Scotland completed last week, as the taxpayer now owns just less than 60% of the bank.

On the housing front, Nationwide Building Society released figures showing house prices had fallen only 0.4% in November – a 13.9% year-on-year drop.

The markets were a little more forgiving last week.

The FTSE100 continued a slow recovery from the five-year low of 3665 on October 27 to finish last week at 4288 – a rise of 15% over the month.

Wall Street bounced back from 18.5% from a 12-month low of 7449 the previous week to close at 8229 on Friday.

On the money markets, the Pound strengthened slightly to £1.49 against the US dollar. Against the Euro, the Pound moved slightly from £1.18 to £1.19.

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