Stocks slump on bail-out distrust
Stocks fell after investors became concerned that the US bail-out will have limited success. In New York on Friday the Standard & Poor's 500 Index dropped one per cent and S&P futures declined another 0.70 per cent. The markets in the US are closed today for Presidents' Day. In Asia the declines were repeated, with the Asia Pacific Index falling 0.70 per cent, after Japan reported its worst economic performance since the 1970s. The Nikkei 225 Stock Average lost 0.4 per cent after the announcement. In London the FTSE 100 Index opened 0.62 Per cent lower, after a 0.3 per cent drop on Friday.
Japan GDP falls most since 1974
Japan's economy contracted at an annual rate of 12.7 per cent last quarter, its worst performance since the "oil shock" of 1974, reported Bloomberg.com. The reason behind the steep drop is subdued demand for its products from major export markets like the US and Europe, which has led to the country's third straight quarterly decline in gross domestic product. Exports plunged an "unprecedented" 13.9 per cent from the previous quarter, with economists saying the country's economy was in "terrible shape" as its loss-making companies fire "thousands of workers".
Government tougher on bonuses
The government "hardened its stance" on banking bonuses on Sunday, with ministers suggesting they will "veto payments" to senior staff at lenders which have received taxpayer funds, reported the Financial Times. Public pressure appears to be behind the stricter guidelines, with prime minister Gordon Brown under duress to "thwart" plans by Royal Bank of Scotland and Lloyds to pay their staff "hundreds of millions of pounds" in bonuses. Lloyds has defended itself over plans to pay a reported £120m in bonuses, although its chief executive and executive directors will "forgo" theirs.
Lloyds dismisses nationalisation
Lloyds Banking Group has dismissed speculation that it will be nationalised as "tosh", reported the Daily Telegraph. Investors have been selling shares, betting that the government will have to inject more capital into the group and another "volatile day's trading" is expected today. Senior bankers say the scale of the writedowns suggest that the bank will need to raise another "£5bn to £10bn" of capital. Another suggestion is that the bank might encourage the government to convert preference shares to save it in dividend payments, leaving the public owning 50 per cent of the company.
UK loan scheme not working
The UK business loan scheme is "not working", with only about £12m lent to companies under the government's £1bn loan guarantee scheme for small businesses, reported the Financial Times. A month after the plan was launched business organisations "attacked" the small amount of bank-lending and warned that government attempts to revive the corporate sector were proving ineffective. There were also criticisms from employers' groups over the "lack of apparent progress" of initiatives to bail-out the car industry and guarantee credit insurance.
Downturn hits oligarchs
Russia's more than 100 oligarch billionaires have been "slashed in half" by the global recession, reported the Independent. According to Russian business magazine Finans, the "brutal" financial markets and tumbling rouble have taken their toll on 52 Russians, who have lost their billionaire status. Among the main losers were reportedly Sergei Polonsky, whose company Mirax has a "major role" in building a new 52-storey tower in London, and Alexander Mamut, who has a house in Kensington and made an investment recently in blogging website LiveJournal. Oleg Deripaska tops the list.
...in brief..................
BMW axes Mini workers and ITV puts Friends Reunited up for sale
BMW has confirmed that it is making cutbacks at its Mini car plant near Oxford, reported the Independent. 850 workers are set to be "axed", with agency staff taking the brunt of the reductions at the Cowley plant, which employs 4,500 staff in total. The factory is to stop making cars for a week in the "latest blow" to the industry............
BP has been forced to "go back to the drawing board" in its search for a new chairman, reported the Times. Last night Paul Skinner, considered the "leading candidate", withdrew from the race, after becoming caught up in a boardroom split at Rio Tinto, where he is currently chairman, over its $19.5bn injection from Chinalco............
Hedge funds have "gained more ammunition" for their legal complaints against Porsche after the carmaker revealed nearly €400m of profits last year from placing "several" bets on German shares, said the Financial Times. The revelation "undermined" the company's claims that its Volkswagen trades were done for industry reasons............
Hector Sants, the chief executive of the Financial Services Authority, is to "waive his bonus", after criticism of the regulator, reported the Daily Telegraph. The news comes amid "fury" over payments for bankers, in spite of shareholder and taxpayer losses. Bonuses will still be paid to other staff at the watchdog............
R. Allen Stanford, the billionaire chairman of eponymous Stanford Group investment firm has blamed "disgruntled employees" for the probes into his company's business, reported Bloomberg.com. The group is under investigation by the US Securities and Exchange Commission for its "above-average returns"............
Michael Grade is believed to have put social networking site Friends Reunited up for sale as part of cost-cutting at ITV, reported the Guardian. Grade is expected to confirm the decision next month when the struggling television company announces its results, but it is thought to be part of a "wider cost-cutting drive"............
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