Business News Up Date
BOE Deputy sounds alarm on state of economy
New Bank of England Deputy Governor Charles Bean has warned that the current financial environment is as bad as the 1970s. He said that the slowdown could “drag on for some considerable time” and that the pressure on household incomes might even damage the fabric of society. Mr Bean was speaking at a central bankers’ conference in Wyoming and also voiced caution over any short-term recovery in the markets, saying every time there seemed to be an improvement “another grenade” exploded.
Fannie & Freddie claim first victim
JPMorgan Chase has warned of a $600m hole in its accounts as a result of the crisis surrounding US mortgage lenders Fannie Mae and Freddie Mac. In a sign that the problems at the latter are beginning to contaminate the rest of the financial sector, the Wall Street bank said that it would write down the value of its $1.2bn of preferred stock in the troubled lenders by half. Banks and insurers own most of the $36bn worth preferred shares in Fannie and Freddie, and JPMorgan’s announcement could be the first of many.
Rio Tinto posts record profits
The global miner reported a 55 per cent increase in underlying earnings in the first half of the year, helped by buoyant commodity prices. The record increase helps its case as it rejects a hostile takeover from BHP Billiton, claiming it undervalues the company. BHP is awaiting clearance from the European Commission, as well as Australia’s competition watchdog, due in December and October respectively, before it can launch its offer for the miner.
UK companies to slash dividends
Some of Britain’s biggest companies will “take the axe” to dividends this week, reported The Times. Amid increasing fears that the current global economic slowdown might be the worst since the Oil Shocks of the 1970s, investors in some of the UK’s largest corporates will see their payouts fall “considerably”. Bovis Homes, Taylor Wimpey, Pendragon and Johnston Press are among those expected to lead the declines as they strive to cut costs and maintain growth.
UBS to axe staff
Swiss bank UBS expects to cut its salary and bonus bill by as much as a third, said the Financial Times. “Europe’s biggest casualty of the credit crisis” has had to write off about $43bn since the start of the problems and as a result its investment banking division is being slimmed down dramatically. More than 2,600 staff have left the investment bank over the past year - 12 per cent of the total – and in the second quarter alone the headcount was down by 1,700. The bank is also “working to revise its bonus system”.
Japanese on acquisition trail
Japan’s corporations are on a “buying spree”, snapping up overseas companies in the current market rout, reported Bloomberg.com. The value of purchases this year is already 91 per cent higher than last year, as cash-rich Japanese companies like TDK and Kirin use their funds to make value-adding acquisitions overseas. Recent deals are bearing fruit – Toshiba’s 2006 acquisition of Westinghouse Electric and Japan Tobacco’s Gallaher purchase are already adding to profits.
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Pound slumps and Singapore wealth fund profits up
The pound has slumped to its lowest level against the dollar in more than two years. At $1.8436 in early trading it was weighed down by fears over the state of the UK economy. The euro also fell to a six month low against the US currency............
The number of unsold homes in the US is at a level not seen for the past 40 years, according to a survey by the National Association of Realtors. July figures showed an increase in the number of buyers, but sellers are continuing to drop their prices out of desperation............
Japan’s biggest automaker, Toyota, has announced plans to raise domestic prices of cars and trucks for the first time in 16 years. The company said that the soaring cost of steel and other raw materials involved in the manufacturing process was behind its decision............
IT services group Infosys is about to join the list of Indian companies taking over a UK rival after it agreed a deal to buy the UK’s Axon Group. The consultancy specialist joins steel group Corus, Jaguar, Land Rover and parts of Pearl Group in falling to an Indian purchaser............
Hewlett Packard, the world's biggest IT company, is expected later today to close its $13.9bn purchase of Electronic Data Systems. The acquisition will create an organisation with the power to challenge IBM, the IT services sector's dominant player............
Singaporean sovereign wealth fund – Temasek Holdings – saw its full year profits double on sales of energy and Chinese bank holdings. The fund has made some high profile purchases recently, including stakes in troubled Merrill Lynch and Barclays............
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