Stocks fall on recession worries
Markets in Asia fell as investors ran scared of the global recession and were given no lead by Wall Street, which was closed yesterday for Presidents’ Day. The MSCI Asia Pacific Index fell 2.7 per cent, with Japan’s Nikkei 225 Stock average declining 1.2 per cent after yesterday’s poor GDP data and South Korea's Kospi Index slumping 4.4 per cent after Woori Finance Holdings applied for state funding. US S&P 500 futures dropped 1.6 per cent in reaction and in London the FTSE 100 Index was nearly one per cent lower in early trading.
New fears over UK economy
The Bank of England’s Deputy Governor warned yesterday that the recession “could be even worse” than it suggested as recently as last week, reported the Times. Charles Bean said that there was a “three in four” chance that the economy would contract by more than the four per cent predicted by BoE Governor Mervyn King last Wednesday. There are increasing concerns that the UK is heading for deflation, and the RPI is tipped to fall below zero when figures are released this morning. Mr Bean’s warning, however, is the “starkest” yet.
Lloyds sees rating lowered
Lloyds Banking Group “suffered another blow” yesterday as it lost its “long-held” Aaa credit rating from Moody’s, amid worries over continuing losses stemming from HBOS, said the Financial Times. The cut in rating came with a “bleak warning” about the future of the banking group and the likelihood of further writedowns, which put more downward pressure on its share price. Government figures, including Gordon Brown have tried to discourage speculation that Lloyds is to be nationalised, although his spokesman said it was not “ruled out”.
Euro drops to 10-week low
The euro fell to a 10-week low against the dollar, after ratings agency Moody’s indicated it might downgrade “a number of banks” with Eastern European businesses, reported Bloomberg.com. The comments added to worries that “financial turmoil in the region is worsening”. The European unit also weakened against most other currencies after the declines triggered stop-loss selling. Eastern European banks are likely to come under “downward pressure”, weakening their parents, which may “become selective” in supporting their subsidiaries, the agency said.
Two groups exit Gatwick bidding
Two of the five consortia mulling bids for Gatwick airport have now pulled out of the process a full six weeks before bids are due to be submitted, reported the Financial Times. The moves highlight the “growing problem” for majority owner Ferrovial of Spain, although at this stage the consortia’s members can still switch groups to stay in the process. The Gatwick Future Partnership team confirmed it was withdrawing after problems at member Babcock & Brown and a private equity consortium led by 3i has also balked at the £2bn asking price.
BMW accused over lay-offs
Mini-owner BMW has been accused of “scandalous opportunism” after laying off 850 workers at its Cowley factory, reported the Guardian. The German car company came under “furious criticism” for its decision by union leaders, who called on the government to bring in “immediate action” to protect agency workers who have fewer employment rights than their full-time colleagues. The move is the “latest blow” to the UK car industry and opposition politicians said it showed government support for the industry was “not working”.
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Hedge funds short insurers and KFC defies the gloom
Hedge funds appear to have started to position themselves for falls in the share prices of insurers, said the Independent. Lansdowne Partners has revealed its short in Legal & General, which has lost a third of its value in the last week and fell 11 per cent yesterday alone on capital concerns…………
The Association of British Insurers has stepped into the Rio Tinto row, threatening to issue a “redtop investor alert” over its controversial $19.5bn fund-raising, said the Times. The ABI is expected to issue the rare warning “in weeks” in the wake of the opposition by some of Rio’s top shareholders to the Chinalco stake…………
Japanese Finance Minister Shoichi Nakagawa resigned today after “coming under fire” for his actions at a G7 news conference, reported the Financial Times. Although he denied that he was drunk at the event, his departure deals a “fresh blow” to struggling prime minister Taro Aso…………
An “unexpected” rally in the price of coffee, sparked by lower supplies, may prove to be a problem for Starbucks and Kraft Foods, reported Bloomberg.com. Exporter stockpiles are “at the lowest since 1965”, hitting companies which buy beans, and hedge funds which have bet on a decline…………
Social networking “phenomenon” Twitter is looking at ways of profiting from its “explosion” in popularity, reported the Daily Telegraph. The company – which lets users say what they’re doing using 140-character “tweets” - has raised more than $35m as it looks into commercialising its success…………
Fast-food chain KFC is to “defy the high street gloom” by creating 9,000 jobs, as consumers eat out for less, reported the Guardian. The chain is to invest £150m in opening up to 300 new restaurants over the next three to five years after enjoying “strong growth” recently…………
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