The UK house-price recovery will continue through 2014 as low interest rates and a shortage of supply buoy the market, according to the Centre for Economics and Business Research. (Sources) Prices in the fourth quarter will be 6.7% higher than a year earlier, rising to an average GBP 179,000, the London-based research group said. The annual rate of growth in the fourth quarter of 2011 will ease to 2%.
UK News
In an interview Robert Stheeman said, “Considering the market environment has changed dramatically, and so has the government’s borrowing requirement, the market for British bonds has held up much better than expected. Partly, that’s because sovereign debt is often seen as a safe haven.” (Mail Online)
Manufacturing led recovery would be hard to sustain, economists warn. (Guardian) The manufacturers’ organisation EEF will warn today that “low levels of investment remains an Achilles’ heel”. Its Economic Prospects 2010 report is upbeat about the short-term. Manufacturing will grow by 3.8% this year and 3.4% in 2011 outstripping growth in the economy as a whole, forecast at 1.1% in 2010 and 2.1% in 2011. But it believes investment by manufacturing firms will grow by only 2% in 2010 after falling by more than a third during the recession.
Luxury home prices in central London declined in July for the first time in 16-months as the recovery persuaded more owners to sell, according to broker Knight Frank LLP. (Sources) Prices of properties costing at least GBP 1mln fell 0.5% from June, the London based real estate adviser said. They rose 17% from a year earlier, the smallest gain since February.
David Smith writes that August is an important month with the BoE MPC having access to new inflation forecasts, which will show inflation remaining above the 2% target for much of 2011 as well as the rest of 2010. (Sunday Times) So when will rates rise? Not this month, says the shadow MPC. Though two of its members voted for a hike, seven wanted to leave rates on hold. One wants GBP 30bln of QE to add to the existing GBP 200bln. There will be differences on the actual MPC as Andrew Sentance will stick to his view that there should be a rise in rates. However, Mervyn King and David Miles appear disinclined to move on rates or QE. Smith writes that they are likely to carry the majority for some months to come
Britain ‘will grow faster than US and Euro-Zone’. (Sunday Times) Britain will enjoy a stronger recovery next year than the US , the Eurozone and other advanced economies, despite the government’s tax rises and spending cuts, according to forecasts from Goldman Sachs. The investment bank predicts growth of 2.9% for Britain next year, followed by 3.2% in 2012. It says America will grow by 2.4% next year, Japan by 1.7% and the Eurozone by 2.2%.
Higher tax threat to final salary pensions. (FT FrontPage) Thousands of people on middle incomes risk paying higher taxes after the government introduces sweeping changes to the pension system next year. The new rules, set out in a government consultation paper this week, target middle income and high earners in final salary pension schemes. The changes are also expected to hasten the closure of final salary schemes. Only one in 10 was still open to new members at the end of 2009, according to research by Aon Consulting
Housing market to stay flat until 2013. (Telegraph) The think tank said that although there would be no double-dip in the housing market – with “doomsayers” incorrectly predicting sharp falls over the coming years – growth in house prices was likely to slow next year. “While we see a double-dip in house prices as being completely avoidable, this does not mean that we will see a return to dizzying house prices anytime soon,” said Benjamin Williamson, economist at CEBR. “Our forecasts show that house prices are unlikely to reach 2007 levels before 2013,” he added, CEBR forecast a 6.7pc rise in house prices this year, slowing to a 2.7pc rise next year and 5pc in 2012.
Cabinet revolt over ‘blunderbuss’ cuts. (Sunday Times) George Osborne, the chancellor, faces a cabinet revolt against his demands for cuts of up to 40% as a hard-hitting report condemned the Treasury’s “blunderous approach”. The Centre for Social Justice (CSJ), the think tank founded by Iain Duncan Smith, the works and pension secretary, warns that good programmes will be axed while “wasteful and pointless spending” will survive. In other news, support for the Liberal Democrats has fallen to 12%, a third of the party’s peak during the election campaign and half its share of the vote at the election with Nick Clegg suffering an even sharper slump in popularity.
US News
T-notes trended higher on Friday as stocks came under pressure due to weaker than expected US GDP data. Treasuries managed to hold firm despite better than expected University of Michigan and Chicago PMI data due to month end buying. T-notes traded range bound heading into the close and finished up 22+ at 123.25+. At 0631 BST UST’s were trading down 6 ticks to 123.20 as Asian equities rose (Shanghai Comp +1.4%, Nikkei +0.4%) following a number of good corporate earnings.
Former Fed Chairman Greenspan says a decline in house prices may cause a new recession. (Sources) He also said that although he agrees with tax cuts, but not with borrowed money, and that the pause in the recovery feels like a quasi-recession.
White House’s Romer says that there is room for the government to do more to promote economic growth and jobs, and noted some encouraging signals, including a higher savings rate that indicates much of the necessary consumer retrenchment may be past. (WSJ)
25%: The share of Americans with a credit score of less than 600. (WSJ) The United States may still have a triple-A credit rating, but the creditworthiness of the people who live there has fallen sharply amid the housing bust and recession.
Borrowing by small US businesses edged up in June, according to data released by Paynet Inc, but the bounce fell well short of suggesting the economy is gaining steam. (RTRS) The Thomson Reuters/Paynet Small Business Leading Index rose 4% in June from a year earlier.
European News
IMF says Spanish authorities believe IMF staff macroeconomic forecasts are overly pessimistic. (RTRS) IMF says Spain should quickly adopt bold pension reforms to complement fiscal consolidation, says Spanish labour reform has ‘many positive aspects’ and welcomes ‘decisive’ Spain response to financial market turbulence. Says banking sector is sound but faces elevated unevenly distributed risks, says consolidation and reform of sector needs to be accelerated. The IMF sees the unemployment rate in Spain at 19.3% in 2010, dropping to 18.7% in 2011, sees Spain GDP at -0.4% in 2010 and +0.6% in 2011 and sees Spanish budget deficit at 9.3% in 2010.
Italy’s house speaker has rejected the prime minister’s call to resign after his expulsion from the ruling party, leaving his allies free to vote against the government as the crisis besetting the country deepened. (Sources)
EU Commission forecasts German growth at 1.2% this year, reaching 1.6% in 2011. (Die Welt)
Wilders ready to back Dutch government. (FT) Geert Wilders, the anti Islamic Dutch politician is set to agree a deal to support a minority right of centre government in exchange for policy concessions on immigration in a move that could break the deadlock in coalition talks following June’s inconclusive general election.
Asian News
JGBs gained overnight and three-month euroyen futures hit a five-year high on speculation of further easing by Japan. JGBs were trading at 141.98 (+0.14) at 0603 BST. (RTRS)
Chinese Official PMI (July) 51.2 vs. Exp. 51.4 (Prev. 52.1) (WSJ) China’s official PMI, issued by the China Federation of Logistics and Purchasing and the National Bureau of Statistics, fell to 51.2 in July from 52.1 in June, the third straight month in which it has declined. The reading was also closer to the expansionary threshold of 50 than it had been in 17 months.
China’s PBOC vows to keep policy stable in H2. (RTRS) China will stick to a relatively loose monetary stance in the second half of the year, with an emphasis on implementing policy flexibility, the PBOC said on Sunday. They also said they will improve liquidity management, and keep liquidity at an appropriate level by reasonably combining open-market operations and the reserve requirement ratio.
China won’t relax property measures until they have effectively controlled home prices, according to a researcher at the nation’s housing ministry. (China Securities Journal) The researcher added that China should stabilise market expectations by keeping its policies consistent, strengthened property curbs in some cities and increase housing supply during the second half of this year.
Forex
Japan’s finance minister today stepped up his warnings on big currency moves as the USD hovered near an eight-month low versus the JPY due to growing signs that the US economy is slowing. USD/JPY was trading at 86.51 (+0.04) at 0620 BST. (RTRS)
China’s current daily CNY-USD trading band is appropriate, and may be widened in the future, according to Hu Xiaolian, a deputy governor at the PBOC. He added that there is no timetable for exchange rate reform. (Century Weekly)
Commodities
Oil rose towards 12-week highs above USD 79 a barrel overnight, driven by investor appetite for commodity and energy risk, with macroeconomic indicators in top consumers the US and China showing slower but sustained growth. WTI crude futures were trading at USD 79.18, up USD 0.23, at 0621 BST. (RTRS)
BP faces a forced wind-down of its Gulf of Mexico operations after American lawmakers passed a bill that could halve its production there in five years. However, a final bill not expected until the autumn, when lawmakers return from their summer break. (Sunday Times/RTRS) In other news, co. could start plugging its broken deepsea oil well in the Gulf of Mexico on Monday night. BP engineers were preparing to pump heavy drilling mud and cement into the well in a procedure known as “static kill”, retired Coast Guard Admiral Thad Allen said on Sunday.
Company News
UK Banks – The Chancellor has urged banks to use revenues that would traditionally be paid in bonuses and dividends to help to fund lending to small and medium enterprises instead. Mr Osborne said that the Government “will not tolerate” banks “piling the pressure” on SMEs, and said that banks have an “economic obligation” to help the sector. (Telegraph)
UK
BP – US Justice staff said to urge subpoenas for co.’s managers. Elsewhere, Imperial, Exxon and co. form a Canadian arctic joint venture, says venture includes Beaufort Sea acreage acquired in 2007, 2008. Says Imperial and Exxon to have 25% stakes each and co. to have 50%. (Sources/RTRS) – In other news, co. could start plugging its broken deepsea oil well in the Gulf of Mexico on Monday night. BP engineers were preparing to pump heavy drilling mud and cement into the well in a procedure known as “static kill”, retired Coast Guard Admiral Thad Allen said on Sunday.
– Co. faces a forced wind-down of its Gulf of Mexico operations after American lawmakers passed a bill that could halve its production there in five years. The so-called Miller amendment proposes to freeze BP out of new drilling leases for seven years. It would also bar the co. from being granted the permits it needs to maintain current production. A final bill not expected until the autumn, when lawmakers return from their summer break. (Sunday Times) – Co dismissed speculation about selling Aral, Its German petrol station chain (ARD)
- The owners of co.’s 11,300 US petrol stations are actively considering whether reverting to the traditional American Amoco brand might lead to a reversal in fortunes for the tarnished oil giant. (Telegraph) – Kuwait Investment Authority (KIA), THE Kuwaiti sovereign wealth fund, is currently considering its stake in co., citing an unidentified KIAS source. (Al-Anba). Co. has no plans to sell its Poland based fuel stations. (Parkiet)
Lloyds Banking Group – Co. is expected to be the best performer among Britain’s five biggest banks reporting their H1 results this week. It is expected to report a pre-tax profit of GBP 800mln vs. Prev. loss of GBP 4bln in H1 2009. (The Independent)
Barclays – Co. is expected to report on Thursday H1 pre-tax profits of GBP 3.50bln vs. GBP 2.75bln in H1 2009. However, the GBP 3.5bln figure will be helped by a gain of between GBP 350mln and GBP 925mln on the bank’s own credit which, if excluded, means H1 pre-tax profits are closer to the GBP 2.97bln mark. Co. expects overall impairment in 2010 to improve between 15-20% on 2009. Elsewhere, co.’s investment arm BarCap has already said it had experienced weaker trading conditions in May and June. In addition, Barclays Corporate is also expected to report higher impairments with provisions against falling Spanish property values. (The Independent)
HSBC – Co. is expected to post another strong half-year performance today, with an estimated pre-tax profit of USD 8.6bln (GBP 5.5bln) vs. USD 5bln (GBP 3.5bln) in H1 2009. (The Independent)
Standard Chartered – Co. is expected to post H1 pre-tax profit of GBP 2.0bln vs. GBP 1.9bln in H1 2009. (The Independent)
Prudential – Tidjane Thiam, the chief executive, is attempting to make peace with investors by boosting the co’s. Dividend by 5% when the company announces its groups results in two weeks. Thiam is also expected to say that he has no plans to sell off the group’s American operations, or its UK business. (Sunday Times) In other news, co. may be interested in Pacific & Orient’s insurance business. (The Edge)
RBS – Analysts expect the co. to post a pre-tax profit of about GBP 200mln for the first six months of the year, ending a two-year run of multi-million GBP loses. Co. is expected to announce the sale of 318 branched to Santander ahead of its results; the deal is worth about GBP 1.7bln. It is also close to selling its global payments business to consortium of private equity firms in a deal worth up to GBP 2.5bln. (Sunday Times)
British Airways – Co. merger with Iberia moves closer after regulators agreed plans for Co. to slash its pension black hole. (FT)
Tesco/ASDA – Co.’s are planning a major expansion of their grocery delivery operations in London to challenge newly floated Ocado on its own doorstep. This month, the supermarket giants will each open a “ghost store” in separate parts of the capital to allow them to deliver more than 10,000 orders a week. (The Mail on Sunday)
Hammerson – Co.’s H1 net GBP 333mln vs. Prev. GBP 791.1mln loss. Co’s interim dividend GBP 7.15 pence, co. improved occupancy levels since Dec 2009. (Sources)
US
Despite a sell off in equity markets post weaker than expected US GDP print, stocks have staged a remarkable come back, buoyed by better than expected Chicago PMI, Michigan and NAPM reading. Also, in spite of lack of fresh news flow and low volumes, equities managed to break out of the range-bound trade and move into positive territory led by basic materials and consumer goods sectors. The NASDAQ 100 has outperformed its peers on reports that Research in Motion (+3.29%) is to launch its own version of Apple’s iPad, dubbed BlackPad. Finally, at the closing bell DJIA closed down 0.01% at 10465.94, the S&P 500 closed up 0.01% at 1101.60 and NASDAQ 100 closed up 0.20% at 1864.00.
Intel – Co. in advanced talks to buy Infineon’s wireless chip business, seeks up to EUR 1.5bln for unit. (WSJ)
AIG – Co. Asian Unit AIA has submitted information need for a Q4 Hong Kong IPO to the Hong Kong Exchange. (Apple Daily)
Research in Motion – Regulators in the United Arab Emirates said Sunday they would prohibit BlackBerry email, instant-messaging and Internet-browsing services starting in October, after what officials in the country said has been a long-running dispute with the device’s maker about how it stores electronic data. (WSJ)
Ford Motor – China’s Geely will complete its USD 1.8bln purchase of co.’s Volvo unit on Monday, a source with direct knowledge of the matter said. (RTRS)
Europe
Siemens – Private equity firms are in preliminary talks to take Nokia Siemens Networks stake, though deal might not yield. Sources say deal could be for up to a third of Nokia Siemens Networks. (WSJ)
SAP – Co’s Co-Chief Executive Officer Bill McDermott said the co. will have significantly more customers by 2015 and that he is very optimistic about its prospects and growth. (FT)
Deutsche Postbank - Co. was considering a rights issue as a potential option if it failed the European bank stress tests, sources say. (Sources)
Infineon – Intel in advanced talks to buy co.’s wireless chip business, co. seeks up to EUR 1.5bln. (WSJ)
Linde – Co.’s first half sales EUR 6.1bln vs. Exp. 5.48bln, co. reaffirms group 2010 outlook. Co.s op. profit expected to exceed year 2008. (RTRS)
Metro – Co. Q2 net EUR 44mln vs. Prev. 52mln. Co. raises full year capex to EUR 2.1bln from EUR 1.9bln, they confirm outlook. (Sources)
BNP – Co.’s Q2 net EUR 2.105bln vs. Exp EUR 1.61bln. Co.’s tier one ratio 10.6% June 30 vs. EUR 10.5% at March 31. Co.’s Q2 provisions fall 54% to EUR 1.08bln. Mitsubishi UFJ to buy China fund stake from co. for USD 50mln. (RTRS)
France Telecom – Orange is holding talks to acquire a 40% stake in Meditel. (Al-Jarida)
EDF – Moody’s maintains review for downgrade of co. (Sources)
EADS – Co. Is preparing to invest EUR 1bln on acquisitions in the USA. (Le Figaro) In other news, Thai Tiger Airways plans to acquire 10 new airbus A320s in 2011 and 2012. (RTRS)
Air Liquide – Co.’s H1 net EUR 676mln vs. Exp. EUR 658mln. Co. confirms 2010 profit growth target. (Sources)
PPR – Co. is looking for acquisitions of brands with an international appeal in order to support its lifestyle division. (Les Echos)
ECB’s Wellink in his role as chairman of the Basel Committee on Banking Supervision, said the new capital and liquidity rules for banks are still substantial, even though they were softened last week. (NRC) He added that some banks may need to sell shares to raise capital.
Nokia – Private equity firms are in preliminary talks to take Nokia Siemens Networks stake, though deal might not yield. Sources say deal could be for up to a third of Nokia Siemens Networks. (WSJ)
Repsol - Co. said to seek about USD 4bln in IPO of Brazilian unit. (Sources)
UBS – Co. has agreed a GBP 600mln property deal for its European headquarters in what will be the largest building in London’s financial district, citing an unnamed person close to UBS. (FT)
