Darling still not blinking on banks.

December 16th, 2009 by tom | Filed under 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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