According to a recent survey conducted by the Confederation for British Industry (CBI), around a third of the UK financial services companies were said to be more optimistic about their situation and that of the sector in general. This makes for the third consecutive quarter that confidence has risen in the financial services industry, making for a 100% increase since the middle of 2009. The increased optimism comes despite slightly weaker volumes being recorded than forecast in the fourth quarter, coupled with some fears that business will contract in the first quarter of this year.

There were smiling faces all around as retailer House of Fraser delivered a trading update on Monday showing a new record for festive sales. Signs that the UK consumer was shrugging off the recession came as the privately-owned department store chain showed sales rising by 7.1 percent in the eight weeks to Jan. 2nd as well as Boxing Day sales figures that were up climbed 27 percent on 2008.

Less happy were the management team at, Tesco, who according to a global study has dropped to fourth place in a league table of the world’s biggest retailers. Tesco dropped one place pushed down by the German retail group, Metro. Sales figures for Tesco for the six weeks to January 9 is expected to report like-for-like sales growth of about three percent for the period.

Some good news for those UK householders whose boilers are rated at G level or lower. In addition to the two combined subsidies from the UK government and British Gas that is liable to cover around a third of the estimated cost of buying and installing a new boiler, British Gas has just added a further £452 in cost savings for those who will be replacing their boiler under the scheme which will come in two forms.

• A set of comprehensive radiator controls for the home or office valued at £248.
• Homecare 200 repairs cover for the boiler costing £204.

Anyone who is liable to receive these subsidies, which in general should include anyone who has a boiler more than 15 years old may be eligible to receive these grants and subsidies, contact British Gas on 0845 074 5991 for a free consolation or click http://www.britishgas.co.uk/yourboiler

Spanish banking group Santander has announced the launch of a marketing campaign aimed at bringing its UK brands under one name. Santander will invest around £30 million pounds refurbishing the 1,000 branches across the UK coming under their label as well as printing new product literature for the Abbey, Bradford & Bingley and Alliance & Leicester banks. To add some glamour, formula one racing driver Lewis Hamilton has been chosen to publicise the company’s new image at a Santander branch to be opened in central London.

Manchester United FC have announced their plans to mount a bond issue intended to raise £500 million in order to refinance the club’s mounting debts.

The announcement came as the club announced pre-tax profits of £48.2 million for the year to 30 June 2009, compared with a loss of £21.4 million last year. The profit was swollen by the £80 million fee received by the club from Real Madrid who purchased the services of Cristiano Ronaldo during the close season. According to information issued by the club’s holding company Red Football Ltd, group turnover rose to £278.5 million from £256.2 million in 2008. Although Red Football disclosed no total debt figure was announced, estimates have it at around £700 million.

British Land has unveiled plans to manage a £300 million pound buy-to-let fund being launched by Charles Russell, the prominent UK law firm. The fund has been established to acquire prime residential real estate in London. British Land will also take a small stake in the fund as the property group rapidly expands its residential business, marking British Land’s first residential investments since selling the majority of its portfolio in 2006.

Revenue at IT services group Computacenter remained weak for 2009, largely due to a shortage of large infrastructure projects. With this factor taken this factor into account, the company instituted a substantial cost-cutting programme which look likely to see them beat profit forecasts for 2009, which could be close to £50 million pounds. On the news shares in Computacenter rose 17.7 pence to 309 pence on Tuesday.

The pound continued its recovery above the dollar in mid week trading, while moving up slightly against the Euro.

• Dollar 1.6207
• Euro 1.118

On Tuesday the FTSE 100 Index fell 0.7 percent, to 5,498.71.

Meanwhile it has been announced that during one of the biggest turn-downs in US financial history the US Federal Reserve announce that they made a profit of $52.1 billion (£32.2 billion) in 2009, marking a rise of 47% over the previous year, allowing them to pay a record $46.1 billion to the US Treasury last year.

The $46.1 billion was the largest amount ever paid by the central bank since it was creation in 1914, and was largely thanks to the Fed’s attempts to support the financial system throughout the ongoing financial crisis.

The Dow Jones Industrial Average closed Tuesday up slightly, nine points to 10,627. The NASDAQ dropped to close on 2,282.

The recently formed US Financial Crisis Inquiry Commission (FCIC) is to hold their first public hearing on Wednesday.

The 10-member panel was established by Congress to examine the causes of the 2008 US financial crisis. The committee will examine the causes of the crisis, and are scheduled to hear testimony on the current state of the crisis from a cross section of private and public sector leaders.

Witnesses will include top executives from Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America.

Findings and the report of the panel are due to be presented to Congress and President Barack Obama by 15 December.

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Tags: Abbey, Alliance & Leicester, Bank, Bank of America, Banking, Barack Obama, boiler, Bradford & Bingley, British Economy, British Gas, British Land, British Pound, CBI, Charles Russell, Computacenter, Confederation for British Industry, Credit Crunch, Cristiano Ronaldo, Currency, Dow Jones, Economy, FCIC, Financial News, FTSE, Goldman Sachs, JPMorgan Chase, Lewis Hamilton, Manchester United, Metro, Money, Money Markets, Morgan Stanley, NASDAQ, Real Madrid, Recession, Red Football Ltd, Retail, Santander, Stock Markets, Stocks and shares, Tesco, UK Banks, UK Economy, UK government, UK Recession, UK retail, US Federal Reserve, US Financial Crisis Inquiry Commission, US Treasury

Iceland’s president has refused to sign a controversial bill to repay £3.1 billion previously promised to the UK and the Netherlands. The news came after Iceland’s President Olafur Ragnar Grimsson announced a change of a heart following public protest and instead the country will now hold a referendum on the bill, which was designed to compensate governments forced to bail out their savers with Icesave accounts following Iceland’s banking crisis.

Legislation to repay the money was approved by Iceland’s parliament in December, but the approval of the president is also required before it can be passed into law.

Things must be getting strained again between Alistair Darling and Gordon Brown who were reported to have contradicted each other once again and in public. The contradiction was on that hot potato over how to handle public spending. Darling was reported to have argued that revenue from stronger than expected growth should be used to cut borrowing in a bid to allay the concerns of bond market investors, while Brown was said to be of the view that strong recovery may help to sustain spending, warding off fears of significant cuts to public services. Government officials hastened to deny a split between Brown and the chancellor. But they would, wouldn’t they.

Kraft have announced that they expect to increase the cash proportion in their offer to Cadbury in an attempt to make their bid more attractive to shareholders. The cash will come from the sale of its North American pizza business, strangely enough bought by erstwhile takeover bid competitors, Nestle who paid over £2 billion for a slice (of the company) .Meanwhile and contrary to recent speculation, Nestle have announced that they do not intend to table a takeover bid for Cadbury,. The company having been linked to a possible offer following Kraft Food’s hostile bid for Cadbury that was announced in December.

As part of their new strategic review, the English Premier League is looking to increase its international reach by inviting companies to become an official technology partner, aimed at tapping global opportunities more successfully. With current sponsorship making up just five per cent of the Premier League’s one billion pounds annual turnover, from sponsors that including Nike, Lucozade, Wrigley, and EA Sports, Topps Merlin and Sporting iD and title sponsors Barclays Bank.

One of the companies brave enough to raise their prices to match the return of VAT to its previous 17.5 per cent rate are Apple, who have increased the prices of many products on the Apple Store, including Macs. On 1 Jan 2010 the VAT level in the UK returned to 17.5 per cent, up from the reduced rate of 15 per cent (VAT is the UK term for sales tax). The UK government temporarily reduced the rate of VAT during 2009 to add some life into the UK economy, and it was thought that many of the UK’s leading retailers would continue to subsidise the increase, at least for January.

However Apple’s move seems likely to prompt some discussion surrounding the pricing of Apple products in general, which has steadily increased in the UK over the last two years.

Encouraging evidence of better retail conditions with record sales over the Christmas and New Year period were provided by the John Lewis employee-owned department store and chain. The company reported sales strongly ahead of the last two years that in the five weeks to January 2. John Lewis’s performance offers hope to retailers as they begin to release figures on their trading in the crucial festive period on Tuesday. John Lewis said total sales rose 15.8 per cent in the five weeks to January 2, compared with the same period a year earlier, while sales based on stores open at least a year were up 12.7 per cent.

On the stock exchange, shares in partly-nationalised Royal Bank of Scotland rose 9.9%, helped by analyst’s predictions that the bank is liable to "outperform" in 2010.

The FTSE 100 brought in the New Year and new decade by closing above 5,500 for the first time since the start of September 2008 – before the Lehman Brothers collapse, coming after a 22% rise over the whole of 2009 and a 53% rally from the low last March. The FTSE 100 closed on Tuesday on 5522.5.

Britain’s currency weakened possibly due to U.K. Business Secretary Peter Mandelson hints that the pound’s devaluation aided the economy in the recession.

• Dollar 1,5967
• Euro 1.1126

The chairman of the US Federal Reserve Ben Bernanke has blamed poor financial regulation for the financial crisis and defended the record of America’s central bank, whilst calling for urgent improvements to financial oversight to prevent a repeat of an economic storm that he said could ultimately prove to be "the worst in history".

In a recent speech, Mr Bernanke argued that low interest rates in the first five years of the new millennium were "appropriate" for the time and had not caused the "bubble" in US house prices. His reaction came after the Fed has recently come under criticism by certain US economists who argue that it kept rates too low for too long, encouraging an artificial property boom. The subsequent crash led to a surge in repossessions, leaving lenders with huge losses, causing a financial contagion that spread around the world.

On Wall Street, the Dow Jones Industrial Average closed on Tuesday up 144 points to 10,572, while the NASDAQ also rose 39 points to 2,308.71.

According to expert analysts, the US public pension system faces a higher-than-expected shortfall of more than $2,000 billion that will increase pressure on many states’ strained finances and crimp economic growth. Recent estimates of aggregate funding requirement of the US pension system have ranged between $400 billion and $500 billion, however recent speculation has concluded that public funds would need to find more than $2,000 billion to meet future pension obligation

Commodities prices are set to rise further this year as the global economy expands faster, according to an International Monetary Fund forecast, following the biggest annual price increase for raw materials in nearly four decades in 2009

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Tags: Alistair Darling, Apple, Apple Store, Bank, Banking, Barclays Bank, British Economy, British Pound, Cadbury, Credit Crunch, Currency, Dow Jones, EA Sports, Economy, English Premier League, Financial News, FTSE, Gordon Brown, House Prices, International Monetary Fund, John Lewis, Kraft, Lehman Brothers, Lucozade, Money, Money Markets, NASDAQ, Nestle, Nike, North American pizza, Olafur Ragnar Grimsson, Peter Mandelson, Recession, Retail, Royal Bank of Scotland, Sporting iD, Stock Markets, Stocks and shares, Topps Merlin, UK Banks, UK Economy, UK government, UK Recession, US Federal Reserve, Wall Street, Wrigley

Mervyn King, governor of the Bank of England (BOE) has taken an about turn on his previous forecasts for economic growth in the UK in the coming two years, He tampers his newly found optimism with forecasts that any recovery in the UK economy will be both slow and unstable, largely because of the slow rate of industrial output which has been endemic since early 2008. King was quoted as saying that "Britain was facing a prolonged period of balance sheet adjustment” as households, businesses and government understandably rein in spending to levels they can afford. The BOE in its most recent quarterly inflation report has forecast growth rates of 2.1 per cent for 2010 and 4 per cent for 2011, making for a major upward revision from their own forecasts in August, of 1.9 per cent and 3 per cent for 2010 and 2011 respectively. The bank’s forecasts are also much higher than the outlook of private sector economists and even the UK Treasury’s predictions. Mervyn King.

Presenting the Bank’s latest quarterly inflation report, King predicted that the UK economy has "only just started" along its road to economic recovery, and lending by commercial banks would "probably remain weak over the next three years". The governor also predicted during his speech that inflation may "rise sharply over the next few months", triggered by VAT returning to 17.5% on 1 January 2010 as well as the effects of ever increasing fuel costs.

According to data from the Office for National Statistics, unemployment in the UK rose at its slowest rate for 18 months. Yet another signal that the UK economy may finally be on the verge of returning to growth in the fourth quarter of 2009. The level of employment in the UK is recorded through a complicated series of measures. Figures from the ILO (International Labour Organisation) showed that the number of people without a job, rose by 30,000 in the three months to September, bringing the total unemployed to 2.461 million, which was the smallest rise recorded since the second quarter of 2008. Unemployment levels in the UK now stand at 7.8%, which is 0.2% lower than most economic forecasts.

Lloyds Banking Group has announced that they plan increase the amount of fresh capital that they intend to raise by £1.5 billion, from £21 billion to £22.5 billion. The increase came in response to demands by the bank’s bondholders for a larger allocation of the contingent convertible instruments (CoCos). The news of the interested in CoCos was especially encouraging for the US Federal Reserve who is reportedly in talks with Wall Street executives over whether US financial groups should also use this method to raise capital. In the case of the Lloyds CoCos, they would be convertible if their equity strength falls from its current level of 8.6 per cent to below 5 per cent.

British Airways (BA) has announced that they are in advanced talks with and Spanish airline Iberia over some form of merger. Both companies are expected to hold separate board meetings at the earliest opportunity to discuss final details of the merger

In an official statement, representatives of BA hastened to point out that the meetings would consider the potential transaction, and that firm decisions had yet to been taken, and there were no guarantees that a deal would take place. Iberia has leaked that the deal under discussion would give it 45% and BA 55% of a new merged company. The firms have considered a tie-up for a number of years, and held talks on the issue in July 2008. BA chief executive Willie Walsh has previously said that a merger would help both firms in the current economic climate. Reports of the imminent merger sent British Airways shares higher, climbing 7.5 percent to 215 pence.

Share in telecoms operator BT Group, rose 3.7 per cent to 147 pence after they announced that they will be raising their full-year revenue outlook and dividend forecast for 2009. Thanks to a series of cost cutting measures including cutting back on 15,000 jobs, BT increased their second-quarter earnings to more than £900 million. The positive outlook for BT came as they announced along with their second quarter results that they are to raise their total cost-savings target for 2009/2010 from £1 billion to £1.5 billion.

The world’s largest owner of shopping malls Westfield Group have announced that retail sales in October at their UK centres in the U.K. have risen at the fastest pace in seven years, amounting to 3.7 percent in the three months. The company also reported that the number of stores closing in their centers has also fallen since steadily since the second quarter.

According to a recent statement, Westfield’s London shopping complex, which opened at the height of the global financial crisis last year, has attracted some 20 million visitors and has signed more than 15 new tenants.

Sterling continued to lose ground on Thursday trading falling against all the major currencies, with the notable exception of the Japanese yen.

• Pound/US dollar 1.6553
• Pound/Euro 1.1136
• Pound/Japanese Yen 150.0166
• Pound/Swiss Franc 1.6842

The FTSE 100 continues to gain strength, up 46 points to 5,276.55. The FTSE 250 also rose, up 175 points to 9,295.92.

In the US, fears continued to be voiced that, "the ‘real’ economy, as opposed to the financial one is still struggling to recover" and that if the government withdrew its stimulus spending measures, the economy could take some major steps backwards. The Dow Jones indexes erratic behaviour over the last few weeks as well as an already depressed job market seems to indicate the fact.

Meanwhile US Treasury secretary Tim Geithner, continue to voice his belief in the importance of a strong dollar, His statement came as the dollar dropped to its 15-month low. The continuing weakness of the World’s staple currency has led to some concern over the future of the dollar in its traditional role in the global economy. According to Geithner, the United States bears a special responsibility for trying to make sure that their global policies will sustain investors in the currency.

His words of comfort helped Wall Street very little, as the Dow Jones lost some of its earlier gains of this week, down 19 points to 10227.92. The NASDAQ made a minor increase, up six points 2157.17.

Warnings continue to come from the International Energy Agency (IEA) that the recent rises in oil prices "risks derailing the recovery" if they continue, whilst. Pointing out that demand for the "black gold" itself would slow down if price rises continue in 2010. The price of oil is now around $79 dollars a barrel, representing a rise of 77% so far this year. The IEA "in their monthly report, pointed their finger at China who they say are driving up demand, causing them to revised upwardly revise their forecasts. Overall the organisation predicts a 1.6% increase in demand for oil, up to 86.2 million barrels a day.

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Tags: BA, Bank, Bank of England, Banking, BOE, British airways, British Economy, BT Group, CoCos, Credit Crunch, Currency, Dow Jones, Economy, Employment, Financial News, FTSE, Iberia, IEA, International Energy Agency, International Labour Organisation, Lloyds, Lloyds Banking Group, Lloyds CoCos, Mervyn King, Money, Money Markets, NASDAQ, Office for National Statistics, Recession, Retail, UK Banks, UK Economy, UK government, UK Recession, Unemployment, US Federal Reserve, US Treasury, Wall Street, Westfield Group, Willie Walsh

Signs are growing stronger daily that the Bank of England is about to cut the umbilical cord on the UK economy, with the first stage being to cease the purchase of bonds when its current £175 billion pound plan draws to a close. News from the Confederation of British Industry (CBI) states that gross domestic product will rise 0.3 percent in the third quarter, reversing their June prediction for a drop of the same size. The CBI have forecast a 0.4 percent growth for the last quarter, and also predict that the central bank will begin to raise their benchmark interest rate during the first half of 2010.

Peer Steinbrueck, the Finance Minister of Germany has accused the UK of blocking tougher financial rules ahead of the G20 summit. According to Steinbrueck "There clearly is a lobby in London that wants to defend its competitive advantage tooth and claw. Both Germany and France have led calls for more restrictions on banks, which have been resisted by the US and UK.

JD Sports, who made their first foray into Europe with the for £7.2 million purchase of French footwear chain, Chausport in May are said to be considering further deals in Europe after increased interim profits increased its cash holdings.

The company’s focus on young shoppers, apparently less affected by the recession than the older home-owning generation , has allowed it to outperform most of its rivals, who have been beset with trading woes.

On the news that the Royal Bank of Scotland (RBS) are looking to launch a rights issue, their shares dropped 5.2 percent to 53.4 pence. Experts predict that RBS hope to rise between three to five billion pounds. Lloyds Banking Group Plc lost 2.8 percent to 107.6 pence on widespread reports that the lender is likely to participate in the U.K. government’s asset protection plan.

The U.K.’s largest shopping-center owner Liberty International Plc have announced plans to issue more than 56 million new shares in order to kick start their investment programme in shopping centers. Their shares rose 5 pence to 564 pence on the news.

National Express Group Plc, the U.K. rail company have apparently received a written undertaking from the Cosmen family to subscribe to a rights offer of at least 300 million pounds. This in the event its bidding group fail to make 500 pence a share offer for the company. National Express’s east coast franchise is to be seized by the UK government. On the news, shares in the company fell 0.2 percent, to 475 pence.

The U.K.’s largest publicly traded water supplier, United Utilities Group Plc announced that they were “on track” to deliver results in line with previously outlined expectations. Despite that encouraging news, their shares slipped 2.2 percent to close on 455.4 pence.

On the news that the Vodafone Group Plc, who are currently the world’s largest mobile phone company are about announce a whole new range of services today, their stock rose by 1 percent, to 141 pence.

The services are aimed to capitalize on the increasing popularity of Internet surfing through mobile phones.

The FTSE 100 made a minor downward adjustment, down 3.23 points to close on 5,139.37, while the FTSE 250 fell by 31.66 points to close on 9,217.01.

Sterling rallied sharply on Wednesday after the Bank of England’s monetary policy committee quashed rumours of a possible extension of its quantitative easing programme.

• Pound/US dollar 1.6345
• Pound/Euro 1.1107
• Pound/Japanese Yen 148.7512
• Pound/Swiss Franc 1.6817

A spokesman for the US Federal Reserve has suggested that despite the fact that economic activity is "picking up" interest rates will be held close to zero for an "extended time". The comments from the Fed. came as they confirmed that interest rates will remain at their current record low level current level of between 0% and 0.25%, where they have been held since December 2008. Economists continue to predict that the rate will stay at this level throughout the rest of this year, and perhaps well into 2010.

The Dow Jones Industrial Average took a tumble yesterday down 81.32 points to 9,748.55. The NASDAQ lost most of its recent gains, down 14.88 points to 2131.42

Ahead of the forthcoming G20 meeting of world leaders, the US dollar has fallen to a one-year low against the euro the dollar dropped to $1.4840 against the euro as well as against most of the leading currencies. Foreign exchange traders have been switching to rival currencies as signs of economic recovery continues to grow stronger.

Gold rose to $1,012 a troy ounce, as investors awaited the dollar’s reaction to Wednesday’s US Federal Reserve meeting.

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Tags: Bank, Bank of England, Banking, British Economy, British Pound, CBI, Chausport, Confederation of British Industry, Cosmen, Credit Crunch, Currency, Dow Jones, Economy, Financial News, FTSE, G20 summit, JD Sports, Liberty International Plc, Lloyds Banking Group, Money, Money Markets, NASDAQ, National Express Group Plc, Peer Steinbrueck, RBS, Recession, Royal Bank of Scotland, Stock Markets, Stocks and shares, U.K. government, UK Banks, UK Economy, UK government, UK Recession, United Utilities Group Plc, US Federal Reserve, Vodafone Group Plc

Royal Bank of Scotland, 70 per cent taxpayer owned, has begun to act in that manner by announcing that they will be halving some of their draconian fees for customers who find themselves overdrawn.

From the beginning of October, fees for paying an item will be cut in half to £15 a day while see the fee for returning a cheque, direct debit or standing order cut to £5 from £38.

Brian Hartzer, new chief executive of RBS’s retail bank, is believed to be behind this refreshing change in attitude from the bank.

Signs of rampant chauvinism in the UK financial sector abound with reports that female employees are not getting their fair share on pay and bonus packages, with a considerable number receiving around 80 percent less in performance-related pay than their male counterparts, according to a recent report from the Equality and Human Rights Commission.

According to the inquiry female employees in the financial sector earned an average of £2,875 in performance-related pay per year, compared to an average of £14,554 for men, making a gender pay gap of 80 percent,.

The finance sector has long been known as showing the highest overall gender pay gaps in the UK economy, with women working full-time jobs earning 55 percent less than men, compared to a pay gap of 28 percent for the general economy.

Results from a recent survey shows that the British consumer is still feeling the pressure of the recession, the survey suggest that in spite of official data to the contrary, UK households remain cautious about spending.

The survey held on behalf of the British Retail Consortium has shown that strong demand for consumer goods that was seen earlier in the summer flagged during August, with only food sales increasing

Overall, total sales rose 2.2 per cent in August from July, down from rises of 3.6 and 3.2 per cent in the two previous months.

T-Mobile and Orange plan to merge their UK businesses, creating a mobile phone giant with a client base of 28.4 million customers.

If completed, a deal between Deutsche Telekom’s T-Mobile and Orange owner France Telecom would see a firm with sales of £8.2 billion. (9.4 billion Euro)

The new company will be the UK’s largest provider of mobile phone services, with about 37% of the UK market.

Spokespeople for both Orange and T-Mobile said that the deal would "bring substantial benefits to UK customers", and promised expanded network coverage, better network quality and improved customer services.

However, it is likely that competition authorities in the UK and EU will probe the deal which is due to be signed in November.

Recession-hit customers flocking to discount clothing chain Primark helped its parent Associated British Foods lift its profit forecasts on Monday.

ABF said it expected Primark to achieve an annual like-for-like sales rise of seven percent in the second half of Primark’s financial year to September 12.

Primark’s momentum is in stark contrast to retailers in the middle price range market, who have reported declines in sales for the first half of this year.

Primark’s sales had been boosted not only by consumers being more price conscious during the recession, but also by good weather and a more fundamental shift shopping at discount retailers.

Shares in Yell, the directories group struggling under a £3.8 billion debt burden, continued on its amazing recovery on Tuesday shares in the company rose a further 21.5 per cent to 65 pence, making their gains in the past month 113 per cent.

There was a little less excitement around the FTSE 100 index as the news from Cadbury began to calm down. The index rose by 14.16 points to close on 4947.34. Meanwhile the FTSE 250 continued to climb on Tuesday, up 98.87 points to close on 9,035.33.

The pound recovered against the dollar, yet continued to fall against the Euro.

• Pound/US dollar 1.6494
• Pound/Euro 1.1382
• Pound/Japanese Yen 152.2926
• Pound/Swiss Franc 1.727

Figures released by the US Federal Reserve have shown that showed consumer debt has been reduced by a record amount in July. Reasons given ranged from rising job losses and uncertainty about the stability of the economic recovery.

Consumer credit fell by $21.6 billion (£13.1 billion) from the previous month June, considerably more than analysts expected. Debt reduction in June was also considerable, $15.5 billion from $10.3 billion in May.

Trading on Wall Street returned briskly to life after the Labour Day holiday. The Dow Jones Industrial Average looked refreshed up 56.07 points to 9497.34 while the NASDAQ Composite also climbed 18.99 points to close on 2037.77.

Due to concerns over its reserve status, the US dollar slumped to its lowest level in almost a year on Tuesday. The feeling amongst analysts was that the dollar was suffering from data suggesting the global economy was recovering.

The dollar index, which tracks its progress against a basket of six leading currencies, fell to a low of 77.093, its weakest level since September 2008.

For the first time in six months, the price of gold, which has risen 13.6% in value this year, has reached and passed the $1,000 an ounce marker. In early morning trading in London, spot bullion traded as high as $1,005, up one per cent on the day. It is the third time since March 2008 that gold has moved above the key level.

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Tags: Associated British Foods, Banking, Brian Hartzer, British Economy, British Pound, British Retail Consortium, Cadbury, Credit Crunch, Currency, Dow Jones, Economy, Equality and Human Rights Commission, Financial News, FTSE, Money, Money Markets, NASDAQ, Orange, Primark, RBS, Recession, Royal Bank of Scotland, Stock Markets, Stocks and shares, T-Mobile, UK Economy, UK government, UK Recession, US Federal Reserve, Wall Street, Yell

There were some glum faces yesterday at the Office for National Statistics on the announcement that consumer price inflation remained unchanged in July at 1.8 per cent in July, after forecasts that it would drop sharply for the month to 1.5 per cent.

Hopes were that after the Bank of England had extended its quantitative easing programme by £50 billion taking it up to £175 billion, that inflation figures would react accordingly. The fact that they didn’t points to signs that the recession is deeper than analysts have been calling till now. During the last 16 months inflation has proved higher than analysts predicted on no less than 12 occasions.

The Building Societies Association (BSA), the body appointed to represent Britain’s mutually-owned lenders, has issued a complaint to Europe’s anti-trust regulator. The complaint is regarding a planned restructuring of state-owned bank Northern Rock, that the organization claims would distort competition in the mortgage market.

BSA has requested from the European Commission to ensure that Northern Rock be made to pay financial penalties if the proposed overhaul goes ahead.

The Commission is due to deliver its verdict in the autumn, with a negative verdict liable to cause a major setback in the British government’s efforts to restore Northern Rock to financial health and sell it back into private ownership

Spiralling costs seems to be hitting home everywhere, with the news that the cost of running the Houses of Parliament has reached almost half a billion pounds in 2008-9 being another example. The costs of operating the UK seat of government is proving to be an increasingly expensive pastime, with costs up

more than £12 million from 2008 arriving at close to £400 million, a sum that includes salaries, allowances and pensions for MPs and their administrative staff. One the upside, the costs of maintaining the House of Lords dropped by almost a third from £152.5 million to £106.5 million. There must be a message there, somewhere.

The news that the Royal Bank of Scotland Group PLC is close to putting its asset management business up for sale, will be good news for most, but not for those who bank at Coutts, the private bank owned by RBS, renowned as an adviser to the Queen, that will be included in the package and may well fall into foreign hands.

On the FTSE, shares in African Minerals, the iron ore mining company, managed by Regal Petroleum founder Frank Timis, rose 1.6 per cent to 312 pence on news that the company had embarked on takeover talks with Eurasian Natural Resources Corporation (ENRC).

Shares in the Sierra Leone-based group have risen 13-fold this year amid speculation of interest from several parties including ENRC.

In the retail sector Tesco’s shares were the weakest, falling 0.5 per cent to 363 pence after industry data for July showed a poorer month.

Credit checking agency Experian inched 0.4 per cent higher to 517 ½ pence after suggestions from the US Federal Reserve that lending supply was improving.

The FTSE 100 made up for most of yesterday’s reverses rising 40.77 points to close on 4685.78. The FTSE 250 recovered after a major collapse on Monday, rising 80.39 points to close on 8,354.48

According the BOE Governor Mervyn King the pound’s biggest five-month rally in 24 years may be stuttering to an end, largely due to the Bank’s flooding the U.K. economy with newly printed cash.

Sterling soared in value by 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased. The rally appeared to be petering out and the pound has slumped 2.6 percent since Aug. 5 to last week’s $1.6543 close. However on Tuesday, the pound improved a little on figures showing inflation proving far more resistant to recession than economists had expected.

• Pound/US dollar 1.6353
• Pound/Euro 1.169
• Pound/Japanese Yen 156.3554
• Pound/Swiss Franc 1.777

In the US, news that construction starts of new homes had fallen in July, after three straight months of increases caused no little construction.

The number of new properties sold for last month fell 1% to an annual rate of 581,000.

US wholesale prices also recorded an unexpectedly large fall last month, down 0.9% from June, and by 6.8% from July 2008.

The Dow Jones Industrial Average recovered part of the previous day’s losses rising 82.6 points t to close on 9217.94. The NASDAQ moved up 25.08 points to close on 1955.92.

The ongoing weak demand for personal computers and printer ink has seen Hewlett-Packard (HP) Revenue fell by 2% to $27.5 billion, not encouraging but better than Wall Street estimates.

Like most technology firms, HP has suffered in the global downturn as consumers trim their spending.

Meanwhile that perennial optimist the International Monetary Fund (IMF) has woken up to remind us that the world has indeed begun to recover from recession, adding that the process will not be simple.

A chief economist for the IMF warned that the recession had "left deep scars, which will affect both supply and demand for many years to come"

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Tags: Bank of England, Banking, British Economy, British government, British Pound, BSA, Building Societies Association, Coutts, Credit Crunch, Currency, Dow Jones, Economics, Economy, Eurasian Natural Resources Corporation, European Commission, Experian, Financial News, FTSE, Global Credit Crisis, Hewlett-Packard, House of Lords, Houses of Parliament, HP, IMF, Inflation, International Monetary Fund, Mervyn King, Money, Money Markets, mortgage market, Mortgages, NASDAQ, Northern Rock, Office for National Statistics, RBS, Recession, Retail, Royal Bank of Scotland, Stock Markets, Stocks and shares, Tesco, Tesco's, UK Banks, UK Economy, UK government, UK Recession, US Federal Reserve, Wall Street

One of the most painful aspects of the long drawn out economic slump is the effects that it has had on UK tax revenues. In June, Britain reported its highest budget deficit for a month for sixteen years, a massive 13 billion pounds, which was an increase of almost 50% from the same month in 2008.

To support these shortfalls, the Treasury has no option but to borrow, and this they have been doing, and in some style. In the first quarter of the UK financial year, which started in April, public sector borrowing reached £41.2 billion, the highest quarterly figure since records began in 1946.

China Investment Corp, (CIC) China’s sovereign wealth fund has acquired 1.1 per cent of the Diageo drinks group for £221million, which makes the fund the UK-based groups’ ninth-largest investor. Shares in Diageo were up 2.4 per cent to 906p after the announcement

CIC manages $200 billion of the country’s $2,132bn held in foreign exchange reserves also holds a 0.5 per cent stake in Tesco, Britain’s largest retailer.

Domino’s Pizza reported a double-digit increase in sales and profits for the six months to the end of June and raised its interim dividend by almost a third.

Continuing to be one of the few consumer-facing companies to defy the recession, the Domino’s Pizza chain, the UK’s largest pizza delivery service with more than 500 outlets, said it expected to beat full-year profit forecasts thanks to unrelenting demand for their takeaways. Domino’s Pizza U.K. & Ireland advanced 7.2 percent to 235.25 pence.

On the FTSE U.K. pub owner and brewer of Old Speckled Hen ale Greene King Plc, added 3.1 percent to close on 432.75 pence.

Food retailers were also among the rising stars shares in Wm Morrison Supermarkets up 8.2 per cent to 274pence after the announcement that they expected full-year profit to exceed current guidance as it reported strong volume growth over the first half.

Sainsbury also added 3.1 per cent to 326p, while Tesco climbed 1.4 per cent to 375p.

The retail sector showed mixed results with fashion retailer Next despite raising their profit forecast for the first half, retained a cautious outlook. On the news shares in Next fell by 1.6 per cent to 1618 pence.

Shares in the Home Retail Group, owners of Argos and Homebase, gained 1.3 per cent to close on 293 pence

London equity markets overcame an early bout of profit taking on Tuesday to extend their winning run to seven sessions.

The benchmark FTSE 100 was up 38 points to 4,481.17, while the FTSE 250 gained 75.95 points to 7,742.58.

The pound lost ground on Tuesday as concerns grew over the health of the UK government’s finances.

• Pound/US dollar 1.6422
• Pound/Euro 1.1578
• Pound/Japanese Yen 153.8127
• Pound/Swiss Franc 1.7553

Testifying before the House Financial Committee in his twice-yearly report on monetary policy, chairman of the US Federal Reserve, Ben Bernanke announced that US interest rates are likely to remain "exceptionally low" for some time. He went on to explain that low interest rates and a stimulus plan had buoyed the economy.

US stocks lost some of its Monday’s impressive gains on Tuesday, after rising during the morning, but then falling back as Ben Bernanke, addressed Congress about the future of US Federal Reserve policy.

On Wall Street , the Dow Jones continued its steady rise, rising 45.05 points to 8893.2 while the NASDAQ rose 3.55 points to 1912.84.

Sharply falling tax revenues are also beginning to have their effects across the US. Of the 50 states45 reported budget shortfalls and overall tax collections dropped by 11.7 per cent, the largest fall on record.

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Tags: Argos, Bank, Banking, Ben Bernanke, Britain, British Economy, British Pound, China Investment Corp, Credit Crunch, Diageo, Domino's Pizza, Dow Jones, Economics, Economy, Financial News, FTSE, Global Credit Crisis, Greene King Plc, Homebase, House Financial Committee, Money, Money Management, Money Markets, Morrison Supermarkets, NASDAQ, Old Speckled Hen, Recession, Sainsbury, Tax, tax revenue, Tesco, Treasury, US Federal Reserve, Wall Street

Well no one really knows because this is the first time rates have hot rock bottom.

The US Federal Reserve is writing a new economic chapter by following the theory of British economist John Maynard Keynes.

Keynesian economic theory includes ‘quantitative easing’, which is what the US government is following now.

The problem is the banking system is broken and credit has dried up because the banks have lost so much money on bad investment decisions. The banks have no confidence in lending to each other as they don’t know if the loan will be repaid or if the borrowing bank will collapse, leaving the lending bank in more debt.

The solution is to encourage the banks and credit markets to free up money by creating a confidence culture. This is why the government has poured billions of taxpayers’ cash in to rescue schemes to shore up the banking system.

Traditionally, raising and lowering interest rates control money supply and spending. Even this has failed to ease the system, so in the US, the Federal Reserve wants the banks to lower interest rates and has taken the lead by underwriting bad debt.

In the UK, the Bank of England and Treasury are looking at following the same policy – dropping interest rates below 1%, which for all intents and purposes is 0%.

For businesses and consumers, this means the cost of borrowing falls even further.

The worry is if the policy fails, speculators will force down the value of the pound.

The other options are:

Do nothing. Other economists argue that shoring up a failed system is just delaying the inevitable crash and governments should let a new system rise out of the ashes of the recession.

Impose fiscal policies by public spending and cutting taxes – like the VAT cut announced recently and the public works program announced by President –elect Obama in the US.

• Alliance & Leicester
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Bank, Bank of England, Banking, Credit Crunch, Economy, Financial News, John Maynard Keynes, US Federal Reserve, US Government