the main headlines..........
Markets rise on rescue hopes
Stocks rose as hopes grew that the financial crisis can be managed by nationalisation, lessening the risk of bank failures. After a 1.1 per cent drop in the Standard & Poor’s 500 Index, futures on the gauge rallied 1.2 per cent after the Wall Street Journal reported that Citigroup had proposed the US government convert preferred stock into common shares. Asian stocks rose too, with the MSCI Asia Pacific Index gaining 0.6 per cent. Most Asian markets rose, apart from Tokyo’s Nikkei 225 Index, which lost 0.9 per cent. In London the FTSE 100 Index was over one per cent higher in early trade.
RBS to cut costs, split into two
The Royal Bank of Scotland Group plans cost-cutting of more than £1bn and a split into two parts, said Bloomberg.com. Chief executive Stephen Hester is grappling with the group’s financial problems by “scaling back” investment banking and splitting the group into two units during the next five years or so. The plan involves one entity containing the “core” businesses and the other non-strategic businesses. Analysts were positive on the proposed moves, which include withdrawing from some Asian countries and “some product lines”.
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Citigroup presses for injection
Citigroup is “pressing” the US authorities to agree a new capital injection that would increase the government’s stake in the bank to about 40 per cent, reported the Financial Times. The move would “stop short” of outright nationalisation and comes in the wake of shares in the bank slumping on fears over its financial health. Citi insiders said that its top executives had been “in discussions” with the regulator over the weekend with a view to the government and other shareholders converting “up to $75bn” of preferred shares into common stock.
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Northern Rock plans more lending
An additional £14bn in mortgage lending is planned by Northern Rock as part of a “new wave” of government measures to tackle the credit crisis, reported the Independent. The plan is set to be announced today, with £5bn in extra loans to be offered this year and a further £9bn in 2010. The moves come in the wake of Chancellor Alistair Darling's decision last month to “reverse” the winding-down of the bank’s loan book. Nationalised Northern Rock is “well ahead” of schedule on its loan repayments, with £9bn outstanding from £27bn a year before.
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Obama to halve budget deficit
Barack Obama is to put plans in place this week to halve the budget deficit he inherited, while pushing ahead “aggressively” on healthcare reform, reported the Financial Times. His first budget, to be released on Thursday, will show a halving from an estimated $1.3tr deficit to $533bn by fiscal 2013, after an initial increase this year on fiscal stimulus spending. The plan will see ex-President Bush’s tax cuts for those earning more than $250,000 “expire” after 2010, meaning the top marginal income tax rate will rise to 39.6 per cent.
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Clinton pushes China on Treasuries
US Secretary of State Hillary Clinton has “pleaded” with China to continue buying US Treasury bonds, reported the Daily Telegraph. The request comes amid fears that the US government “may struggle” to finance banking bail-outs and mushrooming deficits over the coming years. She told Chinese television stations at the tail-end of her diplomatic visit to Asia that Treasuries are a “safe investment” and that the US has a “well-deserved financial reputation”. Clinton is said to have offered assurances to Chinese government figures over the Obama administration.
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...in brief..................
LDV factory at risk of closure and ITV considers its future
Van factory LDV is believed to be the plant labelled as being in “imminent danger” of closure, reported the Independent. LDV stopped production at its Birmingham factory on December 12th, amid a halving of sales in the past three months, and unions have warned that government support is vital…………
European leaders agreed yesterday to double the emergency IMF fund to $500bn, to prevent a worldwide “depression”, reported the Guardian. EU chiefs have agreed to “boost” the role of the IMF and the World Bank, and the doubling of the fund was agreed to help “struggling economies”…………
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Guy Hands has bought three “cash-strapped” investors out of their holdings in his Terra Firma private equity fund, reported the Financial Times. The purchases were at a big discount, thought to be “close to zero”, that raises issues about its indebted investments…………
The head of Tesco’s US operation Fresh & Easy has said its market research was “mistaken”, reported the Times. Tim Mason said it was an error to assume that the stores could trade on quality and not price and indicated he would be making “big changes” to the outlets…………
Japanese lender SFCG filed for bankruptcy, “triggering a slump” in financial stocks in the Tokyo market, reported Bloomberg.com. The company, which lends to small businesses, has Y338bn, or $3.6bn, in liabilities, making it the biggest Japanese bankruptcy in nearly seven years…………
ITV chairman Sir Michael Grade is said to be considering a “raft” of far-reaching measures to reduce the broadcaster’s debt, said the Daily Telegraph. The plans involve “scrapping” its dividend, making disposals and raising funds from shareholders, according to sources…………
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