Markets move narrowly lower on earnings concerns
Markets around the world moved narrowly down as earnings concerns in the banking sector stayed at the forefront. In the US on Friday the Dow Jones Industrial Average staged a recovery during the day to close half a per cent lower, while in Asia the MSCI Asia Pacific Index lost just 0.1 per cent, with stock markets in Hong Kong and Australia shut, among others. Investors worried that building companies’ earnings would disappoint, although this was balanced by enthusiasm for the drug sector on Pfizer’s Wyeth bid. The FTSE 100 opened barely changed.
Philips posts first loss in 6 years
Royal Philips Electronics, the biggest consumer electronics company in Europe, announced its first quarterly loss in nearly six years, reported Bloomberg.com. The company was forced to write down stakes in computer-part companies LG Display and NXP and as a result lost €1.47bn in the fourth quarter, compared to a €1.39bn profit a year earlier. The loss was worse than analysts had expected and the company warned that this year’s earnings environment would be “challenging” after it worsened in December.
Corus, GKN set to cut jobs
Corus, the UK’s biggest steelmaker, is to announce 3,500 job cuts this week from its global workforce, reported the Financial Times. 2,000 employees in the UK alone are set to be let go from a total of 20,000 workers in the country. The announcement, expected to come as early as today, comes on the heels of a 30 per cent drop in orders. Meanwhile parts-maker GKN, heavily exposed to the auto-sector, is expected to reveal the loss of “several thousand jobs” following warnings late last year that 2008 profits could be as much as 40 per cent lower.
RBS to be government guinea pig
The Royal Bank of Scotland, now 70 per cent owned by the UK taxpayer, is set to become the “first test” of the next stage of the government rescue plan, reported the Independent. This involves putting £50bn-£100bn of loans into the Treasury’s new loss-insurance scheme and charging the banks for insurance on losses on unmarketable assets. The “bad bank” plan was announced a week ago and RBS will be the first bank to take advantage of it, freeing up its balance sheet for “more lending” to businesses and households.
Focus chief critical of insurers
The chief executive of home improvement chain Focus DIY has called for a “government investigation” after credit insurers withdrew “almost all” its cover for suppliers, reported the Financial Times. Less than five per cent of the stock it buys is now insured, down from a third or so last September. Bill Grimsey, the chief executive of the chain, which is owned by US private equity group Cerberus, said he has written to business secretary Peter Mandelson calling for an investigation into the credit insurers’ business model.
Moody’s warns on pension funds
Ratings agency Moody’s has warned that the UK’s biggest companies are facing “significant” pension fund deficits due to the decline in value of their assets, reported the Daily Telegraph. The value of corporate pension plans is likely to have fallen by “between 15 per cent and 20 per cent” over 2008, according to the agency, meaning a loss of almost £40bn for the 20 companies with the biggest funds. The news has important implications for the credit-worthiness of companies, due to the effect on cashflow.
...in brief..................
Pfizer nears Wyeth takeover and RBS investigated by police
Pfizer was “close to sealing” its $68bn acquisition of rival drug-maker Wyeth on Sunday night, reported Bloomberg.com. The companies’ boards met yesterday to consider the offer, a 29 per cent sharprice premium, in what would be the biggest US merger in nearly three years…………
Controversy is mounting over Merrill Lynch’s decision to pay its staff $4bn in bonuses last December, with sources indicating that the move was sanctioned by a Bank of America executive, said the Financial Times. Ex Merrill chief executive John Thain is said to have communicated with J Steele Alphin…………
The takeover of HBOS by Lloyds TSB has “released more than £1m” of shares for the top two executives at an HBOS property fund spun off at the market peak, said the Independent. The takeover triggered the vesting of share options to the Invista Real Estate Management chief exec and his deputy…………
Oil company Royal Dutch Shell is expected to have seen a drop in profits of “between 40 per cent and 60 per cent” in the fourth quarter of last year, reported the Daily Telegraph. Analysts estimate Shell’s fourth quarter profits will be around $4bn after the price of crude oil fell to $42 a barrel…………
Speculation is mounting that internet auction group eBay is “preparing to sell Skype”, said the Times. Insiders believe that it signalled its intent to divest the internet telephone company last week, when its chief executive described it as a “great stand-alone business”…………
Police are under pressure to launch an investigation into Royal Bank of Scotland’s £12bn rights issue, reported the Guardian. The Lothian and Borders force confirmed it was “conducting inquiries” into fraud after a complaint by a member of the Scottish parliament…………
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