News and comment

The news stories on this page have been written and produced by a third party and neither nor its representatives can be held responsible for the accuracy of the content/information contained within these stories.

Welcome to your on-line financial newsletter. This service is regularly updated to bring you news of important developments in financial matters.


Citywire Investment News

  • Shares tread water ahead of US jobs data
    Fri, 03 Sep 2010 11:05:29 +0100
    UK shares made gains for the sixth day in a row, but investors remain nervous ahead of today's US jobs data after recent mixed signals on the pace of growth in the world's largest economy. 

BBC Business News

  • Six million facing new tax bills
    Sat, 04 Sep 2010 12:20:07 GMT
    HM Revenue and Customs says some 1.4 million people each owe about £1,500 in tax, while 4.3 million will get an average rebate of £418.
  • Banks leave customers in 'poverty'
    Sat, 04 Sep 2010 09:29:15 GMT
    High Street banks have been accused of leaving some customers in "dire poverty" after taking money out of their accounts without permission.
  • Nigerian economy 'to grow by 10%'
    Fri, 03 Sep 2010 23:04:42 GMT
    Nigeria's economy will hit double-digit growth by the end of 2011 or early 2012, the country's finance minister says.
  • Bank customers in 'dire poverty'
    Fri, 03 Sep 2010 23:02:20 GMT
    Banks are accused of leaving some customers in "dire poverty" after taking money out of their accounts without permission.
  • Petrobras files $65bn share offer
    Fri, 03 Sep 2010 20:12:33 GMT
    The Brazilian state oil company, Petrobras, unveils plans to sell up to $64.5bn of new stock, in one of the world's largest share offers.
  • HSBC threatens to quit London HQ
    Fri, 03 Sep 2010 17:19:19 GMT
    HSBC may quit its London headquarters if the UK government decides to break up big banks, a senior executive says.

BBC News

  • Karzai sets up Taliban talks body
    Sat, 04 Sep 2010 14:08:02 GMT
    Afghan President Hamid Karzai has formed a committee to seek peace talks with the Taliban, his office says.
  • Balls enters 'phone hacking' row
    Sat, 04 Sep 2010 13:52:47 GMT
    Labour leadership hopeful Ed Balls says the home secretary should make a statement about claims of phone tapping by the News of the World.
  • Protests over French Roma policy
    Sat, 04 Sep 2010 13:43:48 GMT
    Demonstrators gather in Paris and other French cities to protest against the government's policy of deporting Roma people.
  • Blair pelted with eggs in Dublin
    Sat, 04 Sep 2010 13:23:33 GMT
    Shoes, eggs and plastic bottles are thrown at Tony Blair as he arrives at a book-shop in Dublin to sign copies of his memoirs.
  • Name released after city death
    Sat, 04 Sep 2010 12:56:01 GMT
    Police release the name of a man who was found dead at his apartment in Armagh city on Friday.

FT.com - Financial Markets News

  • Wall Street takes cheer from employment data
    Fri, 03 Sep 2010 20:38:56 GMT
    US stocks rose, extending this week?s rally, after a better-than-expected August jobs report eased fears about a slowdown in the pace of the economic recovery
  • Investors buoyed by better US jobs data
    Fri, 03 Sep 2010 20:34:06 GMT
    Traders are piling into risky bets after a better than expected US labour market report reinforced hopes that the US economy can avoid sliding back into recession.

Citywire News

  • Mortgages: cut out the middle man for the best rates
    Sat, 04 Sep 2010 00:01:00 +0100
    Increasingly, high street banks are not only by-passing brokers ? the only place a potential homebuyer can get truly impartial advice on a home loan ? but they are restricting their best offers to existing customers.

BBC: Robert Peston

  • How guilty is BP?
    Fri, 03 Sep 2010 12:15:54 +0000

    How important will be BP's report into the causes of the Deepwater Horizon oil disaster, which is due to be published in the coming week or so?

    Deepwater Horizon oil rig

    Well it certainly won't be the last word on the subject: BP faces official investigations and court cases galore on how 11 rig workers lost their lives in April and why so much oil leaked into the Gulf of Mexico.

    And some will refuse to believe any analysis by BP, on the basis that it can't help but be tendentious.

    But even if you see the report as the case for the defence, it still matters - partly because it is the first detailed evaluation of what went wrong.

    And (call me naive) but I don't see how it can be an utter whitewash. It is imperative for BP's owners - its shareholders - to understand the risks their company runs when drilling in deep waters: any attempt to disguise those risks would not be tolerated by them (surely); it would be seen as grotesque negligence on the part of BP's executives.

    So I would expect a long, detailed, technical evaluation - which, even if it's not the final word on BP's culpability, will have implications for how oil companies endeavour to extract hydrocarbons from fields deep below the ocean.

    In that sense, it should matter to more than just investors in BP. It should influence estimates of how much more tappable oil exists in the world - and what kind of price (direct financial, environmental) will have to be paid to tap it.

    The investigation for BP was carried out by Mark Bly, BP's Group Vice President for Safety and Operations, and a team of more than 70 engineers, technical specialists and business people, some from outside the company.

    For what it's worth, he has assured colleagues that he has felt no pressure from senior BP executives to cover anything up or deliver a particular verdict. And he feels he has had the resources to do the job (or so I'm told).

    That said, he hasn't had all the relevant data he requested from the important contractors, viz Transocean, which owned and operated the Deepwater rig on behalf of BP, and Halliburton, which cemented the well. So he has been forced to make some assumptions in reaching his conclusions.

    What has he found?

    Well we know he has not concluded that BP produced a shoddy design for the well or forced its contractors to cut corners in a significant way.

    How so?

    Well BP's chairman, Carl-Henric Svanberg, said in July - when BP was announcing its second quarter results - that he was confident BP won't be found guilty of gross negligence.

    Now it's impossible to know whether he'll be proved right as and when BP's culpability under the Clean Water Act is finally determined. But he couldn't possibly have made the claim if his own colleague, Mark Bly, had uncovered proof of grotesque dereliction of duty.

    That said, any report which doesn't raise questions about safety practices would not be believable.

    So as the named party on the relevant oil lease - for Mississippi Canyon Block 252 - BP (which owns 65% of property) will be embarrassed (at the very least) by its own investigation.

    Even if there turned out to be important errors by employees of Transocean as operator of the platform, that would not absolve BP of blame: regulators and BP's owners (and presumably the rest of us) would expect BP to assess, monitor and correct the quality of its contractors' performance.

    In a perverse way, the best that BP can hope for is that Bly has found systemic safety failures. Because it is unlikely those systemic problems would apply only to BP's management of this one new well.

    If questions are raised about the quality of safety kit, or the robustness of procedures for monitoring performance or about the skills of employees, these would probably be questions for the oil industry in general when drilling in deeper water, not just for BP.

    One lesson from the debacle is that the catastrophic potential of drilling in deep water is (arguably) only marginally less than what can happen when a plane falls out of the sky or a nuclear power plant goes badly wrong.

    Are the safety practices in oil on a par with standard practice in nuclear generation or the airline industry? I would be very surprised if that reassuring conclusion will be drawn from Mr Bly's report.


  • A valueless banking boom?
    Wed, 01 Sep 2010 10:16:58 +0000

    So how big has been the recent boom in some parts of the banking industry?

    Big enough, according to new figures released this morning by the Bank for International Settlements (the central bankers' central bank, as if you didn't know) and the Bank England.

    Man stands in front of an electronic boardAccording to the results of their latest triennial survey, global foreign exchange turnover rose 20% to $4trn per day on average (yes, that's each single day) in April 2010 compared with April 2007.

    Or to put it another way, a sum equivalent to the entire output of the global economy is traded around once a fortnight on currency markets.

    What's more, London's portion of this business has increased even faster, by 25%, so UK based banks' share of forex business is a market-leading 37%.

    So no evidence as yet that the reality and threat of horrid new bank taxes and heinous regulation has seriously damaged UK based banks.

    As for over-the-counter interest rate derivatives (transactions that are largely bets on the direction of interest rates), these rose 24% globally to $2.1 trn.

    And Britain's share of these trades was a striking 46%, up from 44% in 2007.

    I presume that warms your patriotic cockles.

    What is there to say about an industry that deals in numbers that boggle the typical human brain?

    Well, the first thing to point out is that a tiny fraction of this business is carried out on behalf of "non-financial" businesses - or what some would describe as "real" companies (you know the sort of thing I mean - businesses that make cars, or create music, or sell advertising, rather than trading in dematerialised, electronic money on a screen).

    These non-financial companies were responsible for just 13% of forex transactions, their lowest proportion for 12 years.

    By contrast, "other" financial institutions - such as hedge funds, insurers, mutual funds and so on - contributed a record 48% of the business.

    And there's a similar story on the origination of these massive flows of money in the OTC interest rate derivative business.

    What does that mean?

    Well some would view these statistics as evidence that the banking industry has become more than slightly detached from the "real" economy, that many of its activities are either pure speculation, or attempts to hedge speculation, or attempts to hedge the hedges.

    Also, it would be pretty difficult to argue that the net effect of all this financial business has been to reduce the volatility of markets, or to improve the stability of the global economy, or to increase the growth rate of the global economy.

    Many might well dispute that the great banking meltdown of 2008 happened because of this explosive growth in financial trading - but the trading certainly didn't prevent the crash.

    And there is a massive disconnect between a global economy that has less than doubled in size over 12 years and - on the other hand - OTC derivative transactions that have increased eight fold while foreign exchange transactions have almost trebled in value.

    What's more, as I've pointed out before, the global economy was growing quite as fast in the 1960s when much of this financial business barely existed.

    So those who can't see the point of all these financial trades may (ahem) have a point - unless, that is, you believe the enrichment of financial traders and hedge fund managers is a social good in itself.

    Which is why, some would say, it's slightly odd that when no less an authority than the chairman of the Financial Services Authority, Lord Turner, questions the social utility of much activity in financial markets, and also suggests that it might be no bad thing to levy a tiny Tobin tax on all this frenetic trading in electrons, well it's curious that the chancellor of the exchequer (who could use a bob or two) doesn't lick his chops and demand a bit of that.


  • How money talks to Labour and Tories
    Tue, 31 Aug 2010 17:50:00 +0000

    My analysis of the latest cash-flow figures for the two main political parties yields two stark conclusions:

    1) Labour is dangerously dependent on funding from a tiny number of wealthy individuals and trade unions;

    Canary Wharf2) The Tories still rely on contributions from the City of London and financial services, especially hedge funds and fund managers, to a considerable extent.

    In the crucial second quarter of this year, from 1 April to 30 June - the general election quarter - the Tories and Labour received almost identical cash donations, according to figures supplied to the Electoral Commission. The Conservatives received £10.23m and Labour £10.3m.

    The cash was much more important for Labour, because for some years now it has been lagging well behind the Tories in fund-raising. But when Labour's late surge came, some 68% or £7m of that £10.3m was provided by just four extraordinarily wealthy individuals and four trade unions.

    Lakshmi Mittal, the steel magnate, Nigel Doughty, the private-equity pioneer, Lord Sugar's private company and Lord Sainsbury collectively donated £2.75m, with Mittal and Doughty each handing over £1m.

    A further £4.2m came from the GMB, USDAW, Unite and Unison.

    Now it's very doubtful that Labour's new leader, whoever that turns out to be, will believe it is good either for Labour or for democracy that Labour's financial fate - and by extension, its political fate - is in the gift of a quartet of plutocrats and a quartet of trade unions.

    That said, it is not at all obvious how the new leader will be able to significantly broaden the party's sources of funding. And making the case for state funding would not be easy, under the long shadow of the parliamentary expenses scandal.

    The Tories, by contrast, didn't receive a single seven-figure donation. In fact, six of the gifts to Labour were bigger than the largest single contribution to the Tories, which was £750,000 from JCB Research, an arm of the Bamford family's construction equipment business.

    But the Conservatives would be considerably poorer if they hadn't received substantial financial support from City firms and individuals.

    My estimate of what the Tories were given by City interests of various sorts is £2.5m, or almost a quarter of their cash receipts.

    In that estimate, I've only included the names of donors whom I recognise. So my hunch would be that the actual amount of City money received by the Tories would be a bit more.

    Why does it matter that the City is a substantial prop of the Conservative Party?

    Well, there is an important debate taking place about whether the British economy is too dependent on the financial sector - and if it is too dependent, whether that dependence should be lessened by shrinking the relative size of the City or the absolute size of the City.

    To state the obvious, those important City donors to the Conservative Party would presumably not be pleased if the coalition government became converted to the view that the absolute size of the City is too great.

    However, it is striking that the Conservatives are not beholden in any way to the big banks. Neither an executive of a big bank nor a big bank as an institution has made a meaningful contribution to the Conservative Party.

    So if the coalition were to bash the big banks - through additional taxes or by way of breaking them up - that would not (in theory) cost the party a penny in lost donations.

    On the other hand, hedge funds and investment managers are a very important source of finance for the Tories.

    Here are some of the well-known hedge fund names who have donated in the three months to the end of June, with their donations in brackets next to them: Jon Wood (£500,000), Michael Farmer (£258,000), Moore Capital (£200,000), Michael Hintze (£123,000), David Harding (£50,000), Michael Alen-Buckley (£25,000), and Manny Roman (£15,000).

    The names of Wood and Alen-Buckley are particularly resonant, because their funds - SRM and RAB respectively - lost colossal sums as investors in Northern Rock after the previous government nationalised the Rock.

    Of course that doesn't mean that David Cameron and George Osborne will bend over backwards to help hedge funds.

    But the prime minister and chancellor do have a financial incentive to listen carefully to the hedge funds, in this the final stages of important negotiations on new European rules governing hedge fund regulation and remuneration.


  • Penury that unites old and young
    Tue, 31 Aug 2010 09:54:09 +0000

    I wish I could say I was overjoyed to be back in the supposedly real world, after a few days being revitalised by the benign winds and periodic sunshine of the Welsh coast.

    Stack of pound coinsBut everywhere I look this morning there are gloomy stories about pensions (see the front pages of the Daily Mail and Telegraph, for starters) - and, of course, there is a direct relationship between the perceived salience of pension issues and age (which is why they oppress me and my contemporaries, and why younger people can't be bothered to save for a pension at all).

    But here's the good news: the devastation of the savings of those like myself who have put money into pension pots for 20 or 30 years can be seen as healthy "natural justice".

    Readers of this blog will be well aware - if they weren't already - that the distributional impact of the economic boom and bust of the past decade has been uneven and (in the view of many) deeply unfair: younger people have suffered the most in respect of rising unemployment, and even those lucky enough to have a job still can't afford to buy a home, because house prices remain high relative to earnings (and 100% mortgage-finance is no more).

    But at least there's one less reason for impoverished youth to take to the streets to overthrow the pampered baby-boom generation, which arguably created the economic mess we're in.

    Unless you happen to be the chief executive of a FTSE 100 company (most of whom have succeeded in retaining the most lavish, platinum-plated pension arrangements), or a senior public servant (with their gold-plated pension schemes), the pensions outlook for those aged 45 and over no longer looks quite as spectacularly good as it did.

    It's mostly to do with the slashing of interest rates and the unprecedented easing of monetary conditions, engineered by the Bank of England (and other central banks) to prevent the Great Recession turning into a depression.

    The point of near-zero Bank Rate and the creation of £200bn of new money was to ease the pain of those who had borrowed too much and prevent the credit tap from being turned off completely: but, as many of you are painfully aware, in the process the thrifty have been punished, whether they had their money in a savings account (whose interest rates have fallen to derisory levels) or a pension pot.

    This has had a devastating effect on the sustainability of final salary savings schemes and on the returns for those putting cash into defined contribution schemes.

    Low interest rates and thus the low returns available from high quality government and corporate bonds means that the income available from annuities - which savers in personal pensions have to buy when they want their pensions - has dropped by more than 6% over the past year and 45% over the past decade (according to Moneyfacts).

    To translate, if you retire today with a pension pot identical to that accumulated by your older brother when he retired 10 years ago, your pension will be around half what he receives.

    And the same phenomenon of plummeting bond yields - and reductions in the so-called "discount" rate - has the effect of massively enlarging the net liabilities of final salary pension schemes (think of falling bond yields as a reduction in the return available from the supposedly safest investments, which means that companies have to invest more cash each year in their pension schemes to cover a specified quantum of pension commitments).

    According to the KPMG Pensions Monitor, the deficits of FTSE 100 companies have increased by £15bn this year to £65bn and by more than 60% since 2008.

    And - as the Institute of Consulting Actuaries has helpfully reminded us this morning - employers are soon to face an obligation to "auto-enrol" all their staff into funded pension schemes, which will introduce an additional pension burden on them.

    Here's what most of you don't need telling: more and more businesses and institutions are looking at these swelling liabilities and concluding that they're unaffordable - so many of them are devising strategies to scale back what they pay to future pensioners (a big hello to my own employer).

    This is true of both the public sector and the private sector.

    So if there's a faint smell of unrest and insurrection in the air, it may be that common cause for protest is being found by the two groups who would see themselves as the innocent victims of the Great Boom and the Great Bust: those so young that they haven't had time to build either career or savings; and those with retirement on their minds, whose savings income and pensions, they might say, have been deliberately squeezed to bail out the feckless.


  • Taxpayer to profit from insuring RBS
    Fri, 06 Aug 2010 09:35:57 +0000

    For me, the most interesting bit of RBS's 303 pages of info on its first half results (a case, I fear, of more is less - lots of duplicated and baffling detail) is the stuff on the asset protection scheme (APS).

    RBSThis is the insurance contract written by the government to protect RBS against losses greater than £60bn on more than £200bn of poor quality loans and investments.

    Now RBS accounts for the contract as though it were a credit derivative.

    What this means is that when conditions in the credit market deteriorate, it books a profit on the APS contract. And when they improve, it books a loss.

    The logic is that the contract becomes more or less valuable according to perceptions - as reflected in interest rates paid by riskier borrowers relative to those paid by risk-free borrowers - of whether life is becoming easier or tougher for borrowers.

    Because it's such a huge contract, the impact of the changing valuation of the contract is material.

    In the first quarter of 2010, RBS booked a £500m loss on the APS. But as conditions in credit markets deteriorated (a big hello to the eurozone and its woes) the value of the contract rose for RBS, so it booked a £500m profit.

    The corollary, of course, of the rise in the value of the contract for RBS is that it represented a notional loss for taxpayers.

    So the chancellor will be relieved that the public sector doesn't use mark-to-market accounting, so he doesn't have to declare this loss.

    In fact as and when the APS contract is unwound, the chances are that the public sector - the taxpayer - will be sitting on a fat profit, based on data provided by RBS today.

    The amount insured under the contract has fallen from £231bn to £216bn, due largely to "maturities, amortisation and repayments" of loans (yes, some of RBS's troubled borrowers are paying their debts).

    More relevantly though. RBS expects to incur just £20bn of losses on some £37bn of loans covered by the scheme where the borrower has gone bankrupt or cannot repay for other reasons.

    So for the taxpayer to incur any loss on this insurance contract, RBS would have to suffer more than £40bn of additional losses on the remaining insured loans and investments, which have a gross value of less than £200bn.

    Now unless we tip back into severe recession, that looks unlikely to happen.

    So the chances are that the taxpayer will pocket the handsome fee for the insurance and never pay out a penny to RBS.


  • RBS: Slow recovery
    Fri, 06 Aug 2010 07:34:14 +0000

    Assessing the health of Royal Bank of Scotland is always tricky, because of the complicated way it bought the rump of the Dutch bank ABN in 2007, its desire to shed certain low-quality assets and the eccentricities of accounting rules.

    That said, the semi-nationalised bank does appear to be on the mend - although it's a long way from full strength.

    RBSIn the first half of this year, it went from more-or-less break-even to a profit of £1.1bn - thanks to a £2.4bn drop in the charge for loans and investments going bad, and a rise in the gap between what it charges for loans and what it pays to borrow.

    That said, the bad debt charge in the operations it wants to keep, its so-called core business, hardly fell at all, and remains at £2.1bn (compared with £2.2bn last year).

    As for the rise in the so-called interest margin at most of the banks, that may be the next front in politicians' and journalists' attacks on the banks - because it's ammunition for those who complain that banks are charging households and businesses too much for credit.

    In RBS's retail operations, for example, the interest margin widened from 3.57% to 3.77% (still a long way from the 2004 peak of 4.7%).

    What of the current preoccupation of many bank critics, that they are not lending enough to small businesses? Well, RBS - like the other banks - insists that in the current climate it can't lend faster than its customers want to repay their existing debts.

    So although it provided £14.4bn of gross new loans to small business, net lending to that important part of the economy fell.

    Update 0744: On the widening of the interest margin, RBS would of course point out that regulators are forcing it to hold more capital relative to assets, which forces it to charge relatively more for loans to maintain its return on capital...


does not exercise any editorial control over the content and merely provides this information as a service to its clients, who should seek professional advice before taking any action in connection with any information provided therein.


© IFA Systems Ltd