Interest rates Hopes of series of further cuts in interest rates soared after what the City saw as an abrupt change of tone by the Bank of England’s Monetary Policy Committee to a more doveish stance. Minutes of the MPC’s December meeting, when it cut rates by a quarter-point to 5.5 per cent, showed that members voted unanimously for that reduction and believed that a “substantial loosening of policy might ultimately be needed” to fend off the drag on the economy from the credit squeeze. Doubts over the timing of future cuts were kept alive, however, by the MPC’s lingering worries over persistent inflation risks.
Consumer spending Fears of consumer demand in the retail industry’s crucial Christmas trading period grew after a CBI survey showed that the credit squeeze and housing downturn had put Britons off starting their seasonal shopping earlier this month. The CBI’s headline index for retail sales in the first fortnight of December fell to plus 8 from plus 13 in November, taking it to its lowest in a year. Retailers’ expectations of future sales fell to their lowest since April 2006, while shops also suffered a build-up of stock.
Bank of England Gordon Brown said that a process to decide on the reappointment of Mervyn King as Governor of the Bank of England, or the choice of a successor, would be made “in the normal way” next year. His comments came after The Times reported that sources have signalled that Mr King is set to be reappointed to his post.
The pound fell below $2 yesterday for the first time since September as the markets seized on expectations of further cuts in UK interest rates.
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German business climate The Ifo index of morale among German businesses fell this month to its lowest since January 2006, hit by companies’ worsening assessment of present business conditions. The Ifo index dropped to 103.0, from 104.2 in November.
Eurozone prices Jean-Claude Trichet, President of the European Central Bank, said that it is determined to prevent higher food and oil costs driving up inflation. Mr Trichet emphasised to a European Parliament committee that the ECB would not tolerate higher energy and foods costs feeding through in “second-round effects” into further price rises for other goods and bigger wage demands. His comments came after a recent jump in headline eurozone inflation to a six-and-a-half year high of 3.1 per cent last month.
Credit markets Hope grew that coordinated action by central banks to pump liquidity into money markets may now be alleviating strained credit conditions after demand by eurozone banks for three-month funds in a regular auction by the European Central Bank fell to a record low. For the first time the capital on offer by the ECB at rates as low as 4 per cent was not fully taken up. A parallel ECB auction of dollar funds to eurozone institutions did see strong demand, however.
US bank funding The US Federal Reserve auctioned $20 billion (£9.9 billion) in funding to banks in a special operation to ease money market stresses that saw greater than expected demand from US banks. Some 93 bids were submitted in the auction worth $61.6 billion, resulting in the funding being allotted at a higher than expected rate of 4.65 per cent.
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Northern Rock’s shares rose on hints that Bradford & Bingley, the bank, could be a potential buyer of some of the troubled mortgage lender’s assets. It also emerged that Rock may be forced to hold a special shareholder meeting.
Resolution, the insurance group, said Clive Cowdery, its chairman and founder, plans to sell his entire 3 per cent stake in the closed-life group, aiming to raise £145 million to back his new financial services venture.
BNP Paribas, France’s biggest listed bank, has bought a 28.3 per cent stake in Impax, the UK specialist financial company, to raise its overall stake to 29.4 per cent.
Financial Services Authority Banks have prioritised profits over prudence in the way they use the short-term money markets, the Financial Services Authority, the City watchdog, said as it proposed new rules to limit lending at some of the UK’s biggest banks and building societies.
UBS, Switzerland’s biggest bank, is at the top of the mergers and acquisitions league table for deals involving UK companies this year, according to preliminary figures from Thomson Financial, the data provider.
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MasterCard has been ordered by the European Commission to end its practice of charging fees for credit and debit card transactions.
Atticus Capital, the US hedge fund group, is understood to have suffered losses of several hundred million dollars on its holdings in Barclays after its activist campaign against the banking group back-fired last summer.
Morgan Stanley, the Wall Street bank, reported the first quarterly loss in its 73-year history after taking $9.4 billion (£4.65 billion) of writedowns on mortgage-related investments.
Bear Stearns, the US investment bank, is expected to announce its first quarterly loss, largely because of hits on its prime brokerage business.
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Kaufman et Broad, the French housebuilder, said that its full-year net profits had edged up to a weaker than expected €84.4 million (£60.3 million), from €84 million last time, as revenues rose by a smaller than predicted 10 per cent to €1.38 billion.
DTZ Holdings, the property adviser, said that its first-half pretax profits had fallen by 24 per cent even as revenues increased by 58.5 per cent and added that its full-year results will reflect the challenging conditions it faces.
Prada, the Italian fashion designer, has started its long-awaited listing process and hired Banca IMI, UBM and Goldman Sachs global co-ordinators and book-runners.
Aga, the kitchen stove and appliance maker, has completed the £260 million sale of its Aga Food-service division to Ali, its Italian rival. Stephen Rennie resigned as a director following the deal.
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Cobham, the aerospace group, said that its trading profit for the 11 months to the end of November was ahead of last year despite the currency downslide, and added that it is confident of continuing profitable growth. Cobham will also buy BAE Systems’s Surveillance and Attack business unit, based in Pennsylvania, for $240 million (£118.9 million), and rename it Lansdale.
Galapagos, the Belgian drug discovery company, has entered a collaboration agreement with Eli Lilly, the US group, to develop treatments for osteoporosis and will receive a €3 million (£2.1 million) upfront payment from Lilly.
AstraZeneca, the Anglo-Swedish pharmaceuticals company, said that it will launch a new direct drug distribution deal in February with UniChem, the Alliance Boots unit, and Celesio’s AAH Pharmaceuticals, despite warnings from the Office of Fair Trading that such arrangements could add hundreds of millions of pounds to the annual drugs bill of the National Health Service.
British Polythene Industries cautioned that it expects its full-year pretax profits before restructuring costs to be 15 per cent below that for 2006 as trading conditions continued to be challenging.
The Real Hotel Company, formerly CHE Hotel Group, said that full-year trading would be “quite some way below” previous expectations because of poor weekend business in the regions. It announced the scrapping of its UK master franchise agreement with Choice Hotels International and said it would launch its own budget brand, called Purple Hotels.
Trinity Mirror, the newspaper group, will return £175 million to shareholders through a share buyback programme following its disposals earlier this year.
Aegis, the media group, said it expects a “good” improvement in full-year underlying pretax profits, helped by strong trading and a robust advertising market.
SMG, the Scottish broadcasting group, confirmed that it has raised £95.1 million through its rights issue and this had been taken up by 57.08 per cent of shareholders.
Viacom, the US media conglomerate, is cancelling Double-Click as the primary provider of online advertising to its websites, replacing it with a rival platform owned by Microsoft.
Aquarius Platinum, the South African exploration and mining group, said strike action at the Marikana mine in South Africa had caused it to lose 250 ounces of platinum group metals per day.
Hambledon Mining said that gold production has started at its Sekisovskoye project in Kazakhstan and added that the first “gold pour” will be on December 26.
Norilsk Nickel It seems that Vladimir Potanin, the Russian oligarch, will fail in his bid to find $15.7 billion (£7.78 billion) to buy a 25 per cent stake in Norilsk Nickel, the largest nickel miner in the world. If he fails, the stake will be sold to Rusal, the Russian aluminium giant.
Sports Direct, the sportswear retail group, reported a 70 per cent slump in first-half profits and failed to name a new chairman after a seven-month search.
Biffa, the waste management company that was demerged last year from Severn Trent, the water utility, has opened its books to Montagu Private Equity and Hg Pooled Management, after the private equity groups raised their offer to value Biffa at £1.23 billion. Shares in the company rose by 20¾p to 338½p on news that the bidders had begun due diligence.
Pace Micro Technology, the digital TV technology company, said that it is in discussions about an acquisition that would be classified as a “reverse takeover” and has accordingly requested that its shares be suspended from trading.
Google, Microsoft and Yahoo!, the US technology groups, have agreed to pay $31.5 million (£15.6 million) in fines to resolve claims that they had promoted illegal gambling, the US Department of Justice said.
Mobilkom Austria, a subsidiary of Telekom Austria, has placed an order with Ericsson, the telecoms equipment maker, to expand and upgrade the operator’s network in the Carinthia region.
Rolling stock The Competition Commission said it will investigate the market for the leasing of rolling stock for franchised passenger train services and related maintenance services in Britain.
Gazprom, the state-controlled Russian energy group, said that it may not seek to purchase additional shares in Russia’s OGK-6 utility because RAO UES, its owner, had rejected some of the terms related to the acquisition, according to local reports.