uly 29 (Reuters) – British finance minister George Osborne on Thursday said there was no tacit agreement with the Bank of England’s governor Mervyn King on keeping interest rates low. (Reporting by Sumeet Desai)
COLUMN-The $5 trillion rollover: James Saft
June 30, 2010 By Leave a Comment
Ala, June 29 (Reuters) – Banks around the world must refinance more than $5 trillion of debts in the coming three years, a massive rollover that poses threats to financial stability and growth.
The need to replace these debts, which are medium and long term, will place pressure on bank profit spreads and in turn may either prompt deleveraging, where banks sell assets that they can no longer economically finance, or simply lead to a bout of credit rationing, where borrowers must pay more to borrow, thus crimping investment and economic growth.
For banks in the UK, according to the Bank of England Financial Stability Report (here), the refinancings amount to about $1.2 trillion by the end of 2012.
If banks in Britain raise funds at the same pace they have been this year, they will only collect half of their needs in time. This is even before the fact that the banks need desperately to turn some of their riskier short-term funding into more reliable funding with a longer maturity.
“If funding costs increase dramatically, which is perfectly possible in what could be pretty febrile market conditions, that will hit profitability (and the banks ability to raise capital organically) until they are able to re-price loans and facilities,” according to Richard Barwell, an economist at the Royal Bank of Scotland in London.
“And to the extent that banks are unwilling or unable to roll over funds that would trigger forced deleveraging. Both outcomes imply a sharp contraction in credit conditions for those within and outside financial markets, putting considerable downward pressure on activity and asset prices.”
Banks outside of Britain are perhaps doing marginally better in meeting their needs, but still face an uphill struggle.
U.S. banks have issued $230 billion of debts in the first five months of the year, about 60 percent of the rate they need to achieve over the three year period. Euro zone banks have issued $133 billion, or about 70 percent of their needed run rate.
One easy to see consequence is that, all things being equal, the cost for banks to issue debt should rise, as should competition among banks for consumer deposits. It is possible that a global desire to save more helps to blunt this effect, but even so the macroeconomic effect and the effect on asset prices will both be strongly downward.
BANKS WILL HAVE THEIR FUNDS
The track record of the past three years tells us one thing is likely: the banks will get their money, courtesy of government support if needed.
Unless there is a profound sovereign debt crisis, we can count on governments taking the needed steps to see that the banking system does not fall over for lack of funding. So, if liquidity or support schemes need to be extended or invented anew, they will be.
But a banking system that has not fallen over, while a precondition for strong economic growth, is not in and of it self sufficient to cause strong economic growth. Expensive funding and a rising term premium will stunt growth and they will impose a haircut on risk asset prices.
Viewed another way, however, higher funding costs for banks is really nothing other than the market demanding a different capital structure from banks.
It is not simply that a lot of money needs raising all at the same time, but rather that the people who have in the past supplied the money have a new appreciation of the risks in lending to banks, or should that simply be of the risks of lending.
The Financial Stability Report also looks at the costs and benefits of higher amounts of capital in banking. The benefits are straightforward: a reduced chance of systemic crises. Costs are thornier, but also quite high. The BOE used an assumption that for every 7 basis points of additional lending spread charged by banks should create a 0.1 percent permanent reduction of GDP. On their estimates upping capital in banking by one percent then equates to present value cost of about 4.0 percent of UK GDP.
This puts into perspective not just how challenging it will be to create growth going forward, but just how artificially growth during the boom was goosed by very loose and easy lending.
For the UK and for Europe, this will be happening at the same time that fiscal austerity programmes will be dampening growth.
Something has to give, and it will probably be monetary policy. Look for extraordinarily low rates for a very long time, and for new and bigger quantitative easing programmes.
(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns by James Saft, click on [SAFT/])
BoE buys 107 mln stg of corporate bonds in past week
June 12, 2010 By Leave a Comment
June 11 (Reuters) – The Bank of England bought 107 million pounds of corporate bonds in the week to June 10 and sold 11 million pounds worth, taking total holdings under its secondary market scheme to 1.521 billion pounds.
The BoE said in a regular update on Friday that no purchases of commercial paper took place, leaving total holdings at 1 million pounds.
Gilt holdings remained constant at 198.275 billion pounds, purchased between March 2009 and January 2010.
The BoE completed a planned 200 billion pounds of quantitative easing asset purchases at the end of January and has given no indication it wants to change these holdings in the short term.
Sales and purchases of commercial paper and corporate bonds are aimed at ensuring market liquidity and do not have a monetary policy objective.
(editing by John Stonestreet)
BoE to freeze interest rates to numb fiscal pain
June 11, 2010 By Leave a Comment
(Reuters) – The Bank of England looks set to keep interest rates at a record low on Thursday — and probably for the rest of this year — as it seeks to bolster Britain’s fragile recovery and offset painful government spending cuts.
Although inflation has jumped to almost double the central bank’s 2 percent target, most members of the bank’s monetary policy committee reckon these price pressures will be short-lived.
For now, the risks to the recovery from the biggest fiscal squeeze in a generation and a slowdown in the euro zone, Britain’s biggest trading partner, are likely to hold sway.
Britain’s new coalition government will publish its first budget on June 22. It is likely to contain a mix of spending cuts and tax rises that could have a profound impact on both growth and inflation.
“The BoE will not want to take action before it knows what scale of fiscal tightening will be delivered in the budget,” said Marc Ostwald, an economist at Monument Securities. “The implications of the euro zone debt crisis also argue against doing anything precipitous.”
All 61 analysts polled by Reuters reckon UK interest rates will stay at 0.5 percent when the BoE ends its two-day policy meeting at 1100 GMT and most do not expect any tightening until early 2011.
Minutes to the BoE’s latest policy meeting show some members are worried inflation may not subside as quickly as expected. But while April’s rise in inflation to 3.7 percent surprised most analysts, bond markets show investors are betting on an increasingly benign inflation outlook.
STRONG HEADWINDS
Despite unprecedented monetary stimulus — including the injection of 200 billion pounds ($288.8 billion) into the economy in the form of quantitative easing — Britain’s recovery from its deepest recession since World War Two has been relatively muted.
The economy grew 0.3 percent in the first three months of this year, slower than the 0.4 percent achieved in the last quarter of 2009 and weaker than the BoE had initially forecast.
There are fears that mass lay-offs in the public-sector, which employs a fifth of Britain’s workforce, could prompt a renewed weakening in the second half of the year.
Finance minister George Osborne has pledged to cut the country’s budget deficit, currently at almost 11 percent of GDP, at a “significantly accelerated” pace, starting with 6 billion pounds of cuts this year.
With the euro zone suffering similar spending cuts, hopes of an export-led recovery also look misplaced.
“Relative muted recovery following deep recession, the looming major fiscal squeeze and the risk to UK economic activity coming from the euro zone debt crisis make a strong case for the BoE to keep its finger off the interest rate trigger,” said Howard Archer, an economist at IHS Global Insight.
(Editing by Toby Chopra)
European shares seen lower on Wall St weakness
June 11, 2010 By Leave a Comment
June 10 (Reuters) – European shares were expected to open sharply lower on Thursday, tracking a late overnight fall on Wall Street, ahead of interest rate decisions from the Bank of England and the European Central Bank later in the session.
Stocks | European Markets | Global Markets
Britain’s FTSE 100 .FTSE was expected to open as much as 68 points lower, or down 1.3 percent; Germany’s DAX .GDAXI was seen down 51 points, or as much as 0.9 percent, and France’s CAC 40 .FCHI was expected to fall as much as 43 points, or 1.3 percent, according to financial spreadbetters.
The pan-European FTSEurofirst 300 .FTEU3 index of top shares snapped three days of losses to close 1.9 percent higher on Wednesday.
(Reporting by Harpreet Bhal)
Sterling eases as Pru/AIG effects subside
June 3, 2010 By Leave a Comment
LONDON, June 2 (Reuters) – Sterling trimmed earlier gains on Wednesday as the one-off positive currency effects of the collapse of Prudential’s attempt to buy AIG’s Asian arm subsided.
The pound had risen broadly in early trade after British insurer Prudential plc (PRU.L) said it was withdrawing from a $35.5 billion deal to buy American International Group Inc’s (AIG.N) Asian life insurance business AIA. [ID:nTOE65100R]
Traders said Prudential had put in place a series of currency hedges, selling sterling against the dollar, when the initial bid was announced in March and these positions had needed to be unwound.
“The rally of the past two sessions has been driven solely by the news that the Prudential’s ambition to buy AIG’s Asian arm has failed and this implied that pre-deal hedging positioning have had to be unwound on a large scale,” said Audrey Childe-Freeman, senior currency strategist at Brown Brothers Harriman.
At 1030 GMT, sterling had eased back to trade around flat versus the dollar GBP=D4 at $1.4650, having risen to a high of $1.4771 in early London trade.
“There is no new domestic political or economic development to justify the rally of the past few sessions, which is why we would call for caution on the bullish cable trade,” added Childe-Freeman.
Versus the euro EURGBP=D4, sterling also eased to trade around flat at 83.55 pence after initially extending 18-month highs to 82.80.
Traders said there were significant stop-loss orders building underneath that level and that the technical picture was still positive for sterling versus the euro.
“There’s been a shift in the technical complexion for sterling versus the euro and that should be quite supportive,” said Credit Agricole CIB’s deputy head of foreign exchange research Daragh Maher.
“My year-end target for euro/sterling is 80 pence,” he added.
Sterling had also eased from a four-month high versus a currency basket =GBP of 80.80 to stand at 80.50, according to Bank of England data.
British mortgage approvals rose slightly more than expected in April, but unsecured lending fell for the first time since November, official data showed on Wednesday.
Separate figures from the Bank of England showed its preferred money supply gauge — M4 excluding intermediate other financial corporations — slowed sharply in April to 0.3 percent on the month.
(Editing by Ron Askew)
Conservative-Liberal Democrat coalition agreement
May 13, 2010 By Leave a Comment
London, May 13 (ANI): The agreement inked between Britain”s Conservative Party and the Liberal Democratic Party to form a new government makes for an interesting read.
The pact has eleven key points, which focus on a range of issues and challenges bedevilling British society, and how the new coalition hopes to tackle them.
It covers the full range of policy,including foreign, defence and domestic policy.
The issues that it does not cover include the following: (1) Deficit Reduction (20 Review of spending on the National Health Service, schools and for a fairer society (3) Tax Measures (4) Banking Reform (5) Immigration (6) Political Reform (7) Pensions and Welfare (8) Education and Schools (9) Relations with the EU (10) Civil Liberties and (11) Enviornment.
On the issue of deficit reduction, both parties have agreed that it is the most urgent issue facing Britain and that steps must be taken to protect those on low incomes from the effect of public sector pay constraint and other spending constraints.
Both have agreed that modest cuts of six billion pounds to non-front line services can be made within the financial year 2010-11, subject to advice from the Treasury and the Bank of England on their feasibility and advisability.
The parties have also agreed that funding for the National Health Service should increase in real terms in each year of the Parliament,
They have also committed themselves to carrying out a full strategic security and defence review alongside the Spending Review with strong involvement of the Treasury.
Both have agreed that the personal allowance for income tax should be increased in order to help lower and middle income earners.
The parties have agreed that tackling tax avoidance is essential for the new government.
On banking reforms, they said it is essential to avoid a repeat of Labour”s financial crisis.
On immigration,Tory leader David Cameron and Lib-Dem leader Nick Clegg have agreed that there should be an annual limit on the number of non-EU economic migrants admitted into the UK.
Both have agreed to the establishment of five year fixed-term parliament.
They will also bring forward a Referendum Bill on electoral reform, besides other political reforms.
The parties agree to phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
The parties agree to implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including: The establishment of a smart grid and the roll-out of smart meters. (ANI)
Conservative-Liberal Democrat coalition agreement
May 13, 2010 By Leave a Comment
London, May 13 (ANI): The agreement inked between Britain”s Conservative Party and the Liberal Democratic Party to form a new government makes for an interesting read.
The pact has eleven key points, which focus on a range of issues and challenges bedevilling British society, and how the new coalition hopes to tackle them.
It covers the full range of policy,including foreign, defence and domestic policy.
The issues that it does not cover include the following: (1) Deficit Reduction (20 Review of spending on the National Health Service, schools and for a fairer society (3) Tax Measures (4) Banking Reform (5) Immigration (6) Political Reform (7) Pensions and Welfare (8) Education and Schools (9) Relations with the EU (10) Civil Liberties and (11) Enviornment.
On the issue of deficit reduction, both parties have agreed that it is the most urgent issue facing Britain and that steps must be taken to protect those on low incomes from the effect of public sector pay constraint and other spending constraints.
Both have agreed that modest cuts of six billion pounds to non-front line services can be made within the financial year 2010-11, subject to advice from the Treasury and the Bank of England on their feasibility and advisability.
The parties have also agreed that funding for the National Health Service should increase in real terms in each year of the Parliament,
They have also committed themselves to carrying out a full strategic security and defence review alongside the Spending Review with strong involvement of the Treasury.
Both have agreed that the personal allowance for income tax should be increased in order to help lower and middle income earners.
The parties have agreed that tackling tax avoidance is essential for the new government.
On banking reforms, they said it is essential to avoid a repeat of Labour”s financial crisis.
On immigration,Tory leader David Cameron and Lib-Dem leader Nick Clegg have agreed that there should be an annual limit on the number of non-EU economic migrants admitted into the UK.
Both have agreed to the establishment of five year fixed-term parliament.
They will also bring forward a Referendum Bill on electoral reform, besides other political reforms.
The parties agree to phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
The parties agree to implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including: The establishment of a smart grid and the roll-out of smart meters. (ANI)
EURO GOVT-Bunds open higher after strong U.S. auction
April 9, 2010 By Leave a Comment
LONDON, April 8 (Reuters) – Bund futures opened higher on Thursday supported by strong U.S. Treasury auction results and as Greece’s debt crisis looked set to remain in the spotlight.
U.S. Treasury prices jumped on Wednesday as record-setting demand at a $21 billion auction of 10-year notes allayed concerns over flagging demand for government bonds.
The European Central Bank’s monthly meeting will flesh out a revamp of its lending rules that will help ease the financial pressure on Greece. Interest rates are expected to be kept at a record low 1 percent. [ID:nLDE6361EQ]
In the previous session, the 10-year Greek bond yield spread DE10YT=TWEB GR10YT=TWEB against German Bunds hit new euro lifetime wide at 413 basis points as uncertainty over the country’s debt problems unnerved investors.
“It looks like Greece going to the IMF (International Monetary Fund) is a lot closer than it was at the start of the week,” said a bond trader in London, citing continued unrest over Germany’s involvement in any aid deal for the country.
Resistance towards the European Union’s emergency plan to help Greece has surfaced at Germany’s central bank, a newspaper reported on Wednesday. [ID:nLDE636226]
At 0605 GMT, the Bund future FGBLc1 was 19 ticks up from the settlement close at 123.30 but slightly below the official close of 123.37.
The 10-year German bond yield EU10YT=RR was 3.109 percent, around a basis point higher while the two-year Schatz yield EU2YT=RR was up 1 basis point at 0.957 percent.
The Bank of England also meets on Thursday, and is likely to make no change to monetary policy. [ID:nLDE6201AT]
(Reporting by William James)
Europe Factors-Shares seen down; rate decisions eyed
April 9, 2010 By Leave a Comment
LONDON, April 8 (Reuters) – European shares are set to open lower on
Thursday, tracking falls on Wall Street and Asia, with direction likely to be
dictated by interest rate decisions from the Bank of England (BoE) and the
European Central Bank (ECB) later in the session.
Britain’s FTSE 100 .FTSE is expected to open 25 to 28 points lower, or
down as much as 0.5 percent; Germany’s DAX .GDAXI is seen opening down 17 to
21 points, or as much as 0.3 percent; and France’s CAC 40 .FCHI is expected to
open 20 to 26 points lower or as much as 0.7 percent.
Some worries over Greece’s fiscal problems are also likely to weigh on
equities. Concerns over Greece put pressure on the euro, which ground closer to
this year’s low against the dollar on Thursday as investors grew increasingly
sceptical of the country’s ability to end its debt crisis.
The ECB is expected to do its bit to ease the financial squeeze on Greece on
Thursday by fleshing out new lending rules and keeping euro zone interest rates
at a record low of 1.0 percent.
The ECB’s rate decision is expected at 1145 GMT, followed by a news
conference at 1230 GMT.
Meanwhile, economists expect the BoE to keep interest rates at 0.5 percent
and not to add to the 200 billion pounds of asset purchases made under its
quantitative easing programme as inflation eased in line with central bank
forecasts this month and growth remains uncertain. A rate announcement is
expected at 1100 GMT.
———————-MARKET SNAPSHOT AT 514 GMT———————-
LAST PCT CHG NET CHG
S&P 500 .SPX 1,182.45 -0.59 % -6.99
NIKKEI .N225 11,171.06 -1.08 % -121.77
MSCI ASIA EX-JP .MIASJ0000PUS 503.97 -0.75 % -3.83
EUR/USD EUR= 1.3332 -0.01 % -0.0002
USD/JPY JPY= 93.20 -0.06 % -0.0600
10-YR US TSY YLD US10YT=RR 3.876 — 0.01
10-YR BUND YLD EU10YT=RR 3.101 — -0.02
SPOT GOLD XAU= $1,146.00 -0.09 % -$1.00
US CRUDE CLc1 $85.83 -0.06 % -0.05
———————————————————————–
US STOCKS-Wall St slides on rate angst; airlines up late [ID:nN07136898]
GLOBAL MARKETS-Asia stocks down after strong gains, euro off [ID:nSGE637040]
Nikkei dips, exporters slip on stronger yen [ID:nTOE63701O]
Oil falls 2nd day as dollar, U.S. crude inventories up [ID:nSGE63706J]
TREASURIES-Bonds rally on record 10Y sale, Greece worries [ID:nN07107282]
METALS-LME copper falls 0.7 pct, drags Shanghai lower [ID:nSGE63705F]
PRECIOUS-Gold falls from 3-month high on firm dlr [ID:nSGE63705A]
(Reporting by Harpreet Bhal; Editing by Mike Nesbit)
Fleming ‘based Goldfinger on real-life plot against Bank of England by German spymaster’
July 5, 2009 By Leave a Comment
London, July 5 (ANI): A historian has found evidence that Ian Fleming’s memorable fictional villain Goldfinger, created to beat rival James Bond, may have been based on a German spymaster who planned a real-life plot against the Bank of England.
Historian Andrew Cook, whose expertise lies in intelligence affairs, said that Auric Goldfinger’s plot to blow up the gold in Fort Knox could have stemmed from a conspiracy against Britain on the eve of the First World War.
Fleming’s work with British naval intelligence is known to have its influence on his Bond novels.
Cook thinks the writer may have taken the inspiration for the antagonist from Gustav Steinhauer, “the Kaiser’s master spy” who ran a network of German agents in the UK at the time around 1914.
“The Bank of England plot has been a secret for nearly 100 years and it is only now that we are beginning to uncover the truth,” Times Online quoted Cook as saying.
“If Britain’s Secret Service Bureau had not uncovered the plot and the Germans had succeeded, Britain would almost certainly have lost the first world war,” he added.
The expert continued: “We will never know for certain, but I believe that is where Fleming got the inspiration for Goldfinger.
“Fleming no doubt found out about the real-life plot against the Bank of England in 1914 and simply transposed it to America where the equivalent target would be Fort Knox.” (ANI)
ECB may spend more, widen debt purchases, says Kranjec
May 13, 2009 By Leave a Comment
European Central Bank council member Marko Kranjec said the bank is likely to increase its asset- purchase programme from an initial 60 billion euros ($82 billion) and may also broaden its scope from covered bonds.
“We don’t exclude the purchase of first-class corporate bonds, short-term securities such as commercial paper, but the ECB hasn’t yet considered this as a liquidity boost,” Kranjec, who heads Slovenia’s central bank, said in an interview in Ljubljana today. Asked whether the ECB will spend more than 60 billion euros, Kranjec said: “Very likely,” adding “this is not the final amount.”
President Jean-Claude Trichet last week stepped up the ECB’s response to the worst recession since World War II, lowering the benchmark interest rate to a record-low 1 percent and announcing the bank will buy covered bonds. The plan has divided the 22-member Governing Council, with some policy makers, including Germany’s Axel Weber, opposing asset purchases and pushing for the ECB to set an interest-rate floor.
Weber said yesterday the key rate at 1 percent is now “appropriate” and he doesn’t “see the need for outright purchases of further private debt obligations.” Kranjec said rates are appropriate for current conditions, “which doesn’t mean we won’t discuss other possibilities if new data becomes available. This ‘appropriateness’ has to be understood in this context.”
The ECB’s new economic projections, due next month, are likely to be in line with those of the International Monetary Fund, which forecasts a 4.2 percent contraction in the euro- region economy this year, Trichet said on May 7. Inflation is likely to turn negative before picking up again, he added.
Asked if the recession is bottoming out, Kranjec said there are “diverging signals” and “I don’t have the courage to say this is happening.” While there are “no signs of deflation” at present, “we have to be prepared for such a trend,” he said.
The Federal Reserve, Bank of England and Bank of Japan are already buying government and corporate bonds, effectively pumping new money into their economies to prevent the development of a deflationary spiral.
While Weber says there’s no risk of deflation in Europe and asset purchases add unnecessary risk to the ECB’s balance sheet, others such as Athanasios Orphanides of Cyprus have argued that further monetary easing may be necessary. “We are thinking in all directions, excluding government securities, which due to legal limitations we cannot buy,” Kranjec said. “Everything is open.” Still, covered bonds are a “safe investment” and the ECB “has to consider the risks.”
The technical details of the asset-purchase program, to be unveiled by Trichet next month, probably include “further discussion about augmentation or the increase of the volume,” Kranjec said. Asked how the ECB will fund its debt purchases, he said: “This has yet to be agreed. As a central bank we are creating money. We have no limits with funds to finance projects.” Weber said on Tuesday: “Note well: It’s not our goal simply to print money.”
Bloomberg
Ex-India wicketkeeper Engineer to help Cricket Espana catch the spirit
April 23, 2009 By Leave a Comment
Dubai, Apr.23 (ANI): Former India wicketkeeper Farokh Engineer will help Cricket Espana and Madrid Cricket Club catch the spirit during ICC centenary year celebrations from April 25 to 27.
The man who played 46 Tests for his country between 1961 and 1975 will run three one-hour coaching sessions over the three days. These sessions will coincide with the Madrid Cricket Club hosting its second Solidarity Twenty20 Tournament at La Manga Club, Murcia in southern Spain.
Eight teams from Spain (Madrid Cricket Club, La Manga Cricket Club, Mojacar Cricket Club), the United Kingdom (Bank of England Cricket Club, Belsize Cricket Club, Milton Keynes Cricket Club) and the Netherlands (Amsterdam Cricket Club and The Hague Cricket Club) will be taking part.
Proceeds from the tournament will be donated to the Vicente Ferrer Foundation, a Spanish non-governmental organisation working to improve the lives of the people of Anantapur, India. The foundation also plans to set up a cricket academy for more than 1,200 children with disabilities.
And proceeds from Farokh’s coaching sessions, which start at around 11 a.m. each day and cost 20, will go towards his charity for homeless children in Mumbai and the tournament fund-raising effort.
The Catch the Spirit celebrations are aimed at promoting the ICC’s centenary, the great spirit of cricket and the wide appeal and diversity of the game. While the ICC’s Full Members including Australia, Bangladesh, the West Indies, South Africa, Pakistan and New Zealand have already celebrated their weeks, the spotlight will shine on Spain to showcase the spirit of the game and the collective commitment and values which are central to the sport.
The Catch the Spirit flag, an indicator of the ICC’s centenary year, will also be present at the tournament.
The Catch the Spirit celebrations will continue across the continent during the European summer. The events due to take place shortly include the Italian under-19 Championship from 1 to 3 May, women’s eight-a-side international tournament in Munich, Germany from May 2 to 3, the inaugural under-13 national training camp in Finland from 10 to 14 July, the Limerick World Cup in Ireland from July 12 to 24 and the Maccabiah Games in Israel from July 12 to 24.
Cricket España Chairman Phil Beal said: “I’m really pleased that Cricket España is playing its part in celebrating the ICC’s centenary and demonstrate the spirit of cricket in Spain.” (ANI)
Worst of British recession is over – CBI
April 20, 2009 By Leave a Comment
LONDON, April 20 (Reuters) – Britain has been through the worst of the recession and will return to modest growth in the second half of 2010, an influential business group said in its latest economic forecast on Monday.
The Confederation of British Industry (CBI) said the recession will ease in the second quarter of this year, although it warned that the recovery will be “slow and fragile”.
The British economy went into its first recession since the early 1990s in the last three months of 2008, bringing higher unemployment, lower house prices and falling industrial output.
CBI Director-General Richard Lambert said aggressive rate cuts, the weaker pound, low inflation and the global fiscal stimulus would slow the decline in Britain this year.
“There are a few tentative signs that the steepest phase of the recession is now behind us,” he said in a statement. “The recession is by no means over, but we see a return to very weak growth by spring 2010.”
The recession deepened more than expected in the first three months of this year, according to the CBI. However, it expects modest 0.2 percent quarter-on-quarter growth in the second quarter of 2010 after the decline slows in 2009.
It predicted that the economy will have shrunk by a total of 5.1 percent by the end of the recession — less than the cumulative 5.9 percent seen in the downturn during the early 1980s.
Consumer price inflation is expected to fall below the Bank of England’s 2 percent target in the second quarter of this year and to remain there through 2010, the CBI report added.
Unemployment is expected to continue to worsen over the next year, breaking 10 percent in the first quarter of next year and peaking at 3.25 million unemployed the second quarter of 2010.
Lambert urged British finance minister Alistair Darling to use his budget announcement on Wednesday to target help at jobs and investment rather than more fiscal stimulus.
In a message on the YouTube website, Darling expressed confidence the country would bounce back from the “huge downturn”, saying: “We have underlying strengths that we can play to.” (Reporting by Peter Griffiths; Editing by Jan Dahinten)
BoE’s Blanchflower: “Nonsense” to say crisis unpredictable
April 20, 2009 By Leave a Comment
LONDON, April 20 (Reuters) – It was “crass nonsense” to believe the economic crisis was impossible to predict, Bank of England policymaker David Blanchflower said in an interview to be broadcast on Monday.
The arch dove considered resigning over what he viewed as an overly optimistic report on the economy released by the British central bank last August, according to extracts of a Channel 4 television interview published in two newspapers.
Blanchflower, who steps down from the bank’s rate-setting Monetary Policy Committee at the end of next month, said the bank’s inflation report was based on “wishful thinking”.
“I decided that a severe recession was coming and that the report was just completely wrong,” Blanchflower told the “Dispatches” programme, according to the Guardian and Daily Mail newspapers. “I kept thinking: ‘Am I wrong? If I am so wrong then I ought to just quit’.”
Asked whether it would have made a material difference if the central bank had cut rates sooner, he told the programme: “Yes”.
Blanchflower’s comments come before British finance minister Alistair Darling makes what is widely expected to be one of the bleakest annual budget announcements in years on Wednesday.
Britain’s economy entered recession at the end of 2008, shrinking at the fastest pace since 1980 in the three months to December. Business groups and unions last year accused the bank of being too slow to respond to the crisis with rate cuts.
Although the bank went on to cut rates to an historic low of 0.5 percent, Blanchflower has previously described its policy of failing to be sufficiently forward looking. (Reporting by Peter Griffiths; Editing by Jan Dahinten)
FOREX-Euro hits 1-month low vs dollar on ECB uncertainty
April 20, 2009 By Leave a Comment
ECB President Trichet signals small rate cut
* Trichet gives no details of unconventional steps
* Yen gains broadly as share prices fall
* Aussie retreats from a 6-mth peak vs euro
By Satomi Noguchi
TOKYO, April 20 (Reuters) – The euro hit a one-month low against the dollar and a three-week trough versus the yen on Monday due to uncertainty over policy steps the European Central Bank may take.
The Australian dollar earlier climbed to its highest in more than six months against the euro but then retreated sharply after Asian shares fell, prompting investors to reduce risky bets including the Aussie, also pushing the yen broadly higher.
ECB President Jean-Claude Trichet signalled on Sunday during a trip to Tokyo that the bank’s likely next move could be an interest rate cut of 25 basis points.[ID:nT138276]
But Trichet kept mum on details of plans for unconventional policy responses that are due to be unveiled at the ECB’s next policy meeting on May 7.
Trichet also dismissed any suggestion that ECB policy makers were divided over how far it should go and said he did not think zero interest rates would be appropriate for the ECB. [ID:nSP404768]
Market players are keen to see whether the ECB will follow the Federal Reserve, the Bank of England and the Bank of Japan in making asset purchases to contain the financial crisis.
“The euro looks set to fall further, following the same path as the dollar, sterling and the yen did when they faced month-long selling after their central banks adopted unconventional measures,” said Kengo Suzuki, a currency strategist at Shinko Securities.
The euro fell as low as $1.2967 on trading platform EBS, its lowest since March 17, before recovering to $1.2994, down 0.4 percent on the day.
“The euro is facing selling pressure because the market feels from Trichet’s recent comments that he probably wants to lower the euro,” said a manager of forex trading group at a large Japanese bank.
Trichet said on Friday that saying the euro was weak did not reflect the current situation. The euro was trading around $1.31 at the time of his remarks. The ECB chief also said he appreciated U.S. comments that a strong dollar was in U.S. interests. [ID:nTKF104338]
The euro erased earlier gains against the yen and fell to a three-week low of 128.14 yen on EBS. It then traded at 128.47 yen, down 0.6 percent.
The dollar also shed earlier gains and was down 0.3 percent at 98.85 yen .
The Australian dollar earlier climbed to its highest since early October against the euro, as firmer U.S. stock markets and signs of a pickup reflected in economic data late last week supported demand for riskier assets.
But investors later quickly reduced bets on the Aussie as regional stock markets fell, with the Nikkei average .N225 losing 1 percent partly on caution ahead of more U.S. company reports this week including Bank of America BAC on Monday.
The euro fell as low as A$1.7993 before rebounding sharply to A$1.8121, up 0.6 percent on the day as traders covered euro-short positions.
Traders said expectations that Asian and Oceanian countries will recover faster than European countries due to resilience in the Chinese economy could continue lending strength to the Aussie against the euro in the long run. (Editing by Michael Watson)
Hundreds mourn British man’s death during G20 protest
April 12, 2009 By Leave a Comment
LONDON (Reuters) – Hundreds of people marched through London on Saturday to mourn a British man who died during protests against the G20 financial summit last week.
Newspaper seller Ian Tomlinson, 47, was on his way home from work when he was caught up in a confrontation between police and anti-capitalist protesters near the Bank of England on April 1, a day before the London summit on the global financial crisis.
A post mortem found that he died of a heart attack.
A police watchdog, the Independent Police Complaints Commission (IPCC), said this week it was taking over the inquiry into Tomlinson’s death after video footage emerged showing a policeman push him to the ground shortly before he collapsed.
Black-clad marchers, some carrying placards reading “Who killed Ian Tomlinson?” marched through the capital before laying flowers and lighting candles at the spot where Tomlinson died.
“We are hopeful that the IPCC will fulfill their duty to carry out a full investigation into his death and that action will be taken against any police officer who contributed to Ian’s death through misconduct,” Tomlinson’s stepson Paul King told the marchers.
“We may have a long and difficult process ahead of us in getting justice,” he said.
(Reporting by Adrian Croft; editing by Andrew Roche)