Business headlines
Asian markets, US futures, down
The FTSE 100 opened two per cent lower after Asian markets slid on deteriorating corporate profits. US futures also declined on concern over Argentina’s current troubles. In Japan NEC Electronics had its worst fall ever after forecasting a loss and Mitsubishi UFJ Financial, the country’s biggest bank, lost nearly nine per cent on media reports of its earnings halving. The MSCI Asia Pacific Index declined 4.8 per cent in Tokyo afternoon trade after recent gains on the global decline in money market rates.
Argentina slumps on pension plan
Bond yields leapt above 24 per cent and stocks slumped on news the government was planning to take over private pension funds, reported Bloomberg.com. President Cristina Fernandez de Kirchner has “struggled” to match financing needs, particularly since commodity prices have collapsed and reduced the country’s exports. The yield on the 2033 government bond jumped to 24.69 per cent and the country’s Merval stock index closed down 11 per cent as analysts warned the government was trying to seize and cancel government bonds.
BOE governor says UK in recession
Bank of England governor Mervyn King said on Tuesday that Britain was “entering a recession”, in his most downbeat assessment of the country’s economic prospects yet. In what will be seen as a signal that he is planning further cuts in interest rates, he warned of further declines in sterling amid a worsening economy. Until the speech on Tuesday night he had avoided the description, but the worsening situation, amid the global financial crisis and slowdown in world economies led him to make the warning.
Fed to rescue money-market funds
The Federal Reserve is to provide as much as $540bn in loans to help money-market funds hit by customer redemptions, said Bloomberg.com. It is the third time that the government has had to step in, as $500bn has left the industry, and it will channel the funds though JPMorgan Chase, which will buy certificates of deposit, bank notes and commercial paper. Analysts said that the new plan, named the Money Market Investor Funding Facility, should free up the system and “take a lot of pressure off the Fed”.
Insurers impose exit fees
Insurance companies Norwich Union and Friends Provident have announced “controversial” plans to reintroduce exit penalties of as much as 22 per cent on with-profits polices, reported the Independent. The decision comes in the wake of market volatility, “sparking speculation” that other companies will follow suit. Market value reductions, or adjustments, are designed to reduce the effects of withdrawals in difficult markets, but there has been criticism that these moves do nothing to protect investors.
New gas cartel mooted
Western concerns about global energy supplies hit new levels yesterday, as Russia, Iran and Qatar announced that they were forming an OPEC-style gas cartel, reported the Guardian. The three countries control 60 per cent of the world’s gas reserves, leading Alexey Miller, chairman of Russian company Gazprom, to say that “the era of cheap hydrocarbons” had come to an end. The comments were likely to increase pressure on the west to increase the speed at which renewable energy alternatives are being investigated.
...in brief..................
Home Retail Group reports loss and Nissan goes to three day week
Home Retail Group, owner of Argos and Homebase, reported a £437m loss in the first half and warned that profits will be at the low end of forecasts. Homebase saw like-for-like sales drop more than 10 per cent and Argos suffered a three per cent decline, as the company warned of worse to come…………
Debenhams announced a sharp decline in profits as trading deteriorated ahead of the key Christmas period. The company halved its dividend and told investors that it plans to cut its near-£1bn of debt. It reduced the amount it owes from £1.02bn to £994m in the year to August 2008…………
Billionaire investor Kirk Kerkorian is “abandoning” his $1bn investment in Ford as the automaker’s share price continues to collapse, said the Independent. His investment vehicle Tracinda gave notice that it had sold a first tranche of shares and was planning more sales…………
Apple became the latest technology company to cut its earnings forecasts for the current quarter on Tuesday. The company may see a drop in year on year sales, even though iPhones have been selling well until now. Founder Steve jobs pointed to Apple’s zero debt and $25bn cash pile…………
Samsung Electronics, the second-biggest memory chipmaker in the world, has abandoned its $5.85bn takeover of SanDisk. The decision came as protracted negotiations failed to yield any results and SanDisk announced a second straight quarterly operating loss. The decision should help partner Toshiba…………
Nissan has become the latest carmaker to enforce a three-day week, as the “spectre of 1970s austerity” returns to British industry, reported the Daily Telegraph. It will operate the system until December and follows rivals Honda, Ford and Bentley in reducing production…………
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