U.S. President Barack Obama has celebrated his first year in office by showing a more brittle side to his personality, and in recent statements has been particularly vehement in his comments regarding the US banking system. Obama has stated his intention to raise legislation that would force around 50 banks, insurance companies and large broker-dealers to pay a tax of 0.15 percent on all of their U.S. assets, less their capital and deposits. Falling into that category will be the Royal Bank of Scotland (RBS), Barclays Banks and HSBC who, if the legislation is passed, could be forced to pay more than $10 billion to the U.S. government over the next 10 years. Analysts have already calculated that HSBC could be forced to pay around $3.8 billion dollars and Barclays could face a total bill of around $5.6 billion dollars over ten years. While the RBS will only be paying out around one and half billion dollars, they appear to be already in the process of raising capital to meet the bill, when it comes. They have announced that the Grosvenor House hotel, , is to be put up for sale by the part-nationalised RBS and proceeds for the sale is expected to raise between £600 and £700 million as part of RBS’s unwinding of its property portfolio. The Grosvenor House hotel, which has previously hosted events such as the CBI annual dinner, could be on the market as early as this month.

Meanwhile the Bank of England (BOE) are still feeling the effects of their quantitative easing programme, with the news of the loss of £3.6 billion s on its purchases of government bonds, whilst projecting that capital losses from the purchase, so far of £192 billion pounds in gilts would be £8 billion if these were sold today. The reason for the shortfall is the steep drop in government bond prices as a result of the strengthening economic recovery felt the past month. On the upside, losses will be offset by £4.4 billion pounds, which is the interest payment the BOE has received from the securities.

Construction companies made up more than 20 percent of UK business failures in 2009, a recent survey has disclosed. While the number of companies involved in the construction sector that closed their doors in 2009,

decreased slightly from 2008, there were still 683 who fell into administration during 2009, compared with 716 in 2008. The fourth quarter of 2009 saw a 17 percent decline in construction administrations according to Deloitte with 129 compared with 155 in the third quarter.

Shares in Premier Foods have fallen by more than ten percent after the food manufacturer announced that full-year pre-tax profits would be lower than expected, at around £165 million pounds for the financial year to February 16. Total sales increased by 1.5 percent during the fourth-quarter with sales of the company’s branded goods increasing to around £1.7 billion, making up to two thirds of the total turnover for 2009, compared with 61 percent the previous year.

The bus operator FirstGroup has reported a drop in turnover of around 20 percent for the company’s U.S. Greyhound operation during the first half of their financial year. A little ray of sunshine was that revenue for the third quarter was only down by 11.4 percent and passenger revenue for the group’s UK bus business grew by 0.7 percent during the three months to December 31. On the upside, FirstGroup announced that they remain on course to achieve earnings targets for the year and that trading, was in line with management expectations.

The European electrical groups DSGi, who own and operate the Currys and PC World chains in the UK, have announced trading figures that are in excess of most City analyst’s projections. Group sales rose by eight percent during the 12 weeks to January 9, much higher figure than the three percent expected by most analysts, with the reason attributed to an upturn in consumer sales.

Home Retail Group (HRG) have also updated their predictions for its full-year profits, which they now expect to be around £20 million higher than the £265 million initially forecast, following a four percent improvement in sales at HRG’s DIY chain Homebase.

One of Cadbury’s major shareholders has indicated that US food giant Kraft will have to increase their hostile takeover offer if it wishes to win support.

Legal & General Investment Management, which owns 5% of Cadbury shares, said Kraft’s current offer did not meet "the long term value" of the UK firm. Legal & General’s comments come ahead of Tuesday’s eagerly anticipated deadline for Kraft to increase its offer to Cadbury shareholders.

Reports continue to gather strength that Hershey is also planning a rival bid for Cadbury which may be announced as early as this week. The current state of affairs is that Kraft is currently offering £10.5 billion or 761 pence per Cadbury share, which was rejected by the chocolate-maker’s shareholders. .

Kraft’s current bid is worth less than Cadbury’s share price which closed on Friday at 793.5 pence.

British Telecom (BT) announced their intentions to enter a price war with Sky over the price charged for fans to watch premium sports events on TV, including football and cricket.

The telecoms firm is awaiting the outcome of an Ofcom probe, which will be known in March, examining whether Sky must drop the wholesale price it charges rivals for content.

BT Vision has leaked their intentions to charge about £15 a month for Sky Sports 1, about £10 cheaper than Sky currently charges. A spokesman for BT projected that there would be benefits to the viewing public for choosing BT as they would be getting more choice

Vodafone UK has launched a new online business centre, bringing information and insight on its full range of capabilities in mobile, fixed and unified communications together in one place. The site, www.vodafone.co.uk. Has been designed to make it even easier for private and business customers to find the information they need and the solutions that best suit them. Meanwhile Vodafone (has become the third mobile phone operator in Britain to begin to market the Apple iPhone in the UK. Results are encouraging with a total of 50,000 units delivered on the first day of sales. Until recently, Vodafone had been disallowed from marketing the premier smartphone due to exclusivity rights brokered between Apple and O2.

Vodafone is now the fourth company in the U.K. to carry the iPhone, following O2, Orange and Tesco. While O2 once enjoyed a two-year exclusive deal with Apple to offer the iPhone in the U.K., that exclusivity ended last year and Orange and Tesco began offering the Apple smartphone in November and December, respectively.

Orange sold 30,000 iPhones on its first day of its launch in November 2009 while Tesco has not disclosed any sales figures.

Also enjoying some good trading on the back of the iPhone launch is the Carphone Warehouse. Their trading update for the last quarter of 2009 is expected to show a four percent increase in the number of phone connections compared to the same period in 2008. Sales of the most expensive products, such as the Apple iPhone and BlackBerry, are believed to contribute considerably to sales and profits, while the company’s fixed-line division TalkTalk is reported to have added 46,000 new subscribers during the last three months of last year.

The pound improved a little against the dollar before the weekend, closing at 1.6301, while the Euro being traded at 1.321

The FTSE 100 Index dropped 43 points before closing on Friday finishing on 5,455.37.

Wall Street bank JP Morgan Chase has reported profits of $3.3 billion (£2 billion) for the last three months of 2009, compared with profits of $702 million for the same period in 2008, which was the height of the financial crisis. Total profits for the bank for year were $11.7 billion, with investment banking providing the bulk of the profit.

The Dow Jones Industrial Average took a tumble before closing on Friday down 81 points to 10,609.65. The NASDAQ Composite was also down. 23 points to close on 2287.99

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Tags: Apple iPhone, Bank of England, Banking, Barack Obama, Barclays Banks, BlackBerry, British Economy, British Telecom, BT Vision, Cadbury, Carphone Warehouse, Currys, Deloitte, Dow Jones, DSGi, Economy, Employment, Financial News, FirstGroup, Grosvenor House hotel, Home Retail Group, Homebase, HSBC, JP Morgan Chase, Kraft, Legal & General, Money, NASDAQ, O2, Ofcom, Orange, PC World, Premier Foods, Recession, Retail, Royal Bank of Scotland, Sky, Stock Markets, Stocks and shares, Tesco, UK Banks, UK business, UK Economy, UK government, UK Recession, Vodafone UK, Wall Street

UK Chancellor Alistair Darling in an interview released over the weekend announced that an entirely new banking system is needed for the UK, to prevent a recurrence of financial institutions behaving in a “kamikaze” manner.

He went on to add that the UK government needed to learn lessons from the financial crisis in which banks behaved in a kamikaze manner causing the regulatory system to fail
The interview came as proposals on financial reform are due to be published this week. The proposals will be designed to prevent a repeat of the crisis that plunged Britain into recession.

Meanwhile it has been announced that UK’s business secretary Peter Mandelson has apparently postponed the part-privatisation of Royal Mail, with little or no prospect of the privitisation going ahead for the time being.

The proposed Royal Mail privitisation bill was to allow the sale of 30 per cent of Royal Mail, The bill has already been approved by through the House of Lords, despite being opposed by over 140 Labour MPs. Lord Mandelson was reported to have conceded that that now is not the time for privitisation although it a vital step in the Royal Mail’s modernisation program.

London-based private equity firm CVC Capital Partners was in the lead to take the 30 per cent stake in Royal Mail.

Newspaper group Trinity Mirror, owners of the Daily Mirror among others, is to close nine local newspapers in the Midlands according to a recent report. The closure, which will result in job losses for up to 120 of the papers’ employees, comes amid a severe downturn in advertising revenue. During the past year Trinity have closed 27 units and sold of four major newspapers.

On the FTSE Friday, Barclays increased 2.8 percent to 297 pence as the cost of three-month loans in dollars between banks fell for a 10th day

Europe’s largest bank, HSBC climbed 1.7 percent to 509 pence, while Lloyds Banking Group Plc, Britain’s biggest mortgage lender, added 2.4 percent to 67.5 pence.

News was good for the media sector. Magazine publishers Reed Elsevier, whose covers include the Variety and New Scientist magazines, rose 3.9 percent to 457.25 pence? BSkyB, the U.K.’s biggest pay-television provider, advanced 2.1 percent to 464.5 pence.

Daily Mail and General Trust Plc, which publishes Britain’s Daily Mail newspaper, increased 1.4 percent to 294.25 pence.

Europe’s third-largest airline, British Airways Plc rallied 5.5 percent to 125.5 pence on the announcement of a reduction of proposed 2009/10 capital expenditure by 20 percent/

The FTSE 100 Index closed for the weekend little changed as a rally in banks and media companies offset a sell-off in raw material and energy producers.

The benchmark FTSE 100 Index added 2.01, to 4,236.28 in London, bringing a total decline for this week’s off 0.1 percent. The FTSE 250 closed on 7,285.83 down 91.15 to end a topsy turvey week.

Sterling had another bad day against the leading currencies, falling heavily on all four fronts.
Pound/US dollar 1.6121
Pound/Euro 1.1572
Pound/Japanese Yen 153.6112
Pound/Swiss Franc 1.7583

Wall Street is gearing itself up to buying up some of cash strapped California’s registered warrants. The state and its obviously financially challenged Governor, Arnold Schwarzenegger, declared a fiscal emergency after announcing that they were unable close their $24 billion budget shortfall. Hedge funds, municipal bond investors and other institutions reportedly interested in taking a piece of the action, as the warrants pay an annual rate of 3.75 per cent, a prime rate these days.

On Wall Street, the Dow Jones took a further tumble in the wake of Thursday’s announcement of higher than expected unemployment figure. The index closed for the weekend down 43 points to 8280.74, while the NASDAQ closed down six points on 1796.52

In order to reduce their $38 billion debt burden, mining giant Rio Tinto has agreed to sell its food distribution wing, Alcan Food Americas division for around 800 million pounds. The move comes after the Rio Tinto raised $15.2 billion in a rights issue, after falling into heavy debt on the buyout of Canadian aluminium group Alcan in 2007.

According to a recent study Europe is likely to suffer a permanent loss in potential economic output as a result of the global crisis.
The report, commissioned by the European Economic Community (EEC) stated that the current market disruption in financial markets can be expected to have a permanent negative effect on potential growth, e.g. through reduced availability of capital for R&D and innovation activities.

There were reminisces of Nick Gleason on the oil markets this week as oil prices began to shoot through the roof. Later oil traders both in London and New York hastened to explain that “unauthorised trading” had caused an exceptional rise in business activity on Tuesday According to a leading New York oil trader “Trading volumes rose overnight and prices jumped more than $2 a barrel without apparent justification,”.

Oil futures contracts for more than 16 million barrels of oil changed hands in one hour, when the average is around 500,000 barrels.
A particular broker has been implicated for sparking off the rally, with other brokers racing to follow.

After the furore, oil prices on Thursday fell to $66.5 a barrel, down almost 10 per cent from Tuesday’s artificially induced peak. Brent crude for August settlement fell as much as 1.3 percent to $65.77 a barrel on London’s ICE Futures Europe exchange.

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Tags: Alcan Food, Arnold Schwarzenegger, Bank, Bank of England, Banking, BskyB, Daily Mail, Financial News, Mirror, Nick Gleason, Recession, Retail, Rio Tinto, Sky, UK Banks, UK Recession, Wall Street Journal