Thứ Hai, 29 tháng 4, 2013

Business news and markets: as it happened - April 29, 2013


16.28 By the way, the FTSE 100 is on course for its 11th

consecutive month of gains.



16.10 Markets have responded positively to the news that Italy’s new

Prime Minister will focus on growth.



The Italian stock exchange, the FTSE MIB, is up 2.2pc just ahead of

close, following Mr Letta’s speech in Parliament (see 14.46).



Michael Hewson, senior market analyst at CMC Markets said:



cc66b quotes 1817837a The hope is that this won’t be another false dawn as has been often the

case with previous Italian governments.




15.50 Letta mentioned in his speech to Parliament that he will

visit Europe’s leaders this week,. First up he’s off to Berlin tomorrow to

meet German Chancellor Angela Merkel.



The two leaders will hold a joint news conference 4pm (UK time) after

preliminary talks, then continue their discussions over dinner.



The talks should prove very interesting given Letta’s proposals today to push

away from a focus on austerity – of which Merkel is a staunch

supporter – towards more growth policies to boost its economy.



AP’s Brussels correspondent has this take on it:





15.20 Continuing with Letta’s maiden speech as Prime Minister, he said

Italy’s widely condemned electoral law will be changed before the next

national election,



cc66b quotes 1817837a We must solemnly make the commitment that February’s was the last vote

conducted under the current electoral law.



He said it must be replaced with a system that is able to guarantee stable

governments.



He said he would verify his government’s progress on reforms after 18 months

and would “draw the consequences” if his plans had been blocked by

political vetoes.




Italian Premier Enrico Letta delivers his speech during a vote of

confidence to confirm the government, in the lower house of Parliament.




15.08 Back to Italy and more from new Prime Minister
Letta (see 14.46). Still speaking in Parliament, he said that the

country must reform its outdated and inadequate welfare system.



cc66b quotes 1817837a We need a welfare system which is more universal, more focused on young

people and women, extending it to those who are not covered, especially

temporary workers.



He added that he would work with trade unions to find ways to cut

unemployment.



He also announced that the first measure of his government would be to reduce

the salaries of parliamentarians.




14.53 Leaving Italy and heading across the pond now, where stock market

trading is underway but share dealing appears to be as lucklustre in the US

as it is in London. The Dow Jones Industrial Average has added 18

points, or 0.1pc, since trading began, while on this side of the Atlantic,

the benchmark FTSE 100 has risen just 10 points, or 0.2pc.




14.46 And Italy’s Enrico Letta is now speaking in parliament for

the first time since he became Prime Minister.



He said Italy was still in a serious economic situation after more than a

decade of stagnation and the country must focus immediately on reviving its

economy.



Strengthening the justice system and fighting corruption are all part of his

plan to help the recovery. He will also reduce taxes that are weighing on

labour and young people and plans to reform housing tax.



This includes scrapping the unpopular IMU housing tax, a demand of Mr

Berlusconi, which should therefore see Mr Letta gain his support in this

evening’s confidence vote.



The IMU tax was was imposed last year by Mario Monti when he was prime

minister, to help with Italy’s financial crisis, after it had been abolished

in 2008 by Mr Berlusconi.



He said he will also lobby its European partners to obtain more

growth-oriented policies at the EU level.



Later this week he will visit leaders in Brussels, Paris and Berlin to

demonstrate the importance Italy attaches to the EU-wide economic strategy.



cc66b quotes 1817837a We will die of fiscal consolidation alone, growth policies cannot wait any

longer.




Prime Minister Enrico Letta gives his maiden speech to the Italian

parliament.




14.35 As Italy’s new Prime Minister gets ready to speak in parliament

ahead of a confidence vote, the country’s central bank has said bad loans

to Italian companies will continue to rise in coming months
, while

overall lending to the private sector continues to contract.



Bad loans in December last year amounted to 7.2 percent of all loans, the Bank

of Italy said in its’ twice yearly Financial Stability Report.



cc66b quotes 1817837a There is an increase above all in bad loans to companies, especially in the

construction sector.



According to leading indicators a further deterioration is underway.



Lending from Italian banks to households and non-financial firms fell by 2.3

percent in March, declining for the eleventh consecutive month after falling

2.6 percent in February, ABI said.



The Bank of Italy said that drop in lending is due to “declining demand

for loans and the tightening of credit conditions on the part of banks,”

as Italy languishes in its longest recession for 20 years.




14.30 On the FTSE 250, shares in the homebuilders have received

a boost from analysts at both Goldman Sachs and Jefferies, who

reckon the Government’s new Help to Buy scheme will help spur a

recovery in house prices. Jefferies expert Anthony Codling said the

initiative is likely to benefit the housing market in the Midlands and the

North the most, and said the scheme could act as a “silver bullet”:



cc66b quotes 1817837a We believe that Help to Buy can be likened to a silver bullet. Mortgage

availability has been the brake on recovery and Help to Buy has the

potential to release that brake.



[...] We estimate that it has the potential to support the purchase of up

to 800,000 homes. Help to Buy is, in our view, the biggest stimulus the UK

housing market has received since the onset of the credit crunch.



Shares in Redrow have climbed 3.1pc, Bellway is up 2.7pc and Persimmon

has advanced 1.9pc.




14.18 Germany has played down criticism it received from France’s

ruling Socialists regarding Chancellor Angela Merkel’s insistence on

austerity, and said it saw cooperation with Paris as “essential”. AFP

reports:



“German-French collaboration is, for us, essential. It comprises a

very broad line-up of topics. For us it is of enormous importance,”

government spokesman Steffen Seibert told a news conference when asked about

the remarks.



Seibert pointed out that the remarks were made in a draft text for the

Socialists’ party conference, adding: “As spokesman for the government,

I don’t comment on statements by parties in other countries.”



“For us it’s not the parties that count, for us government action

counts. The direct cooperation with the French president, with Prime

Minister (Jean-Marc) Ayrault, with the ministers counts,” he said.



“That looks quite different,” he added.



Germany and France may have different views on individual issues but “that

is not so new”, Seibert said, stressing the EU’s two biggest economies

were “completely different countries” with their own economic and

political landscapes.



“But that hasn’t in recent decades and won’t in the future, prevent a

close, friendly cooperation which is good for Germany, good for France and

good for Europe,” he added.



In a draft document on Europe leaked on Friday, President Francois

Hollande’s Socialist Party pilloried Merkel for being “selfish” in

her drive for eurozone austerity to fight Europe’s debt crisis.



It also accused conservative Merkel, who faces elections on September 22,

of being obsessed with “Berlin’s trade balance and her electoral future”.




France and German cooperation is seen as “essential”.




14.06 The extra

charges imposed by low-cost airlines have soared by as much as 67pc


– 24 times the rate of inflation – during the last year, new research has

shown.



The Telegraph’s digital travel editor Oliver Smith reports:



An annual study by TravelSupermarket, the price comparison website,

revealed those carriers whose fees for “optional” services, including

checked luggage and allocated seating, have risen most sharply.



The largest increase in baggage fees was by Thomson. The airline’s charge

has gone up by 47pc since 2012, from £15 per person per flight to £22.

EasyJet’s equivalent fee has increased by a quarter, from £14.50 to £18,

since March 2012, while Ryanair, Flybe and Jet2 have all raised their

baggage fees by at least 10 per cent.



The cost to check in an overweight item of hand luggage has also increased

on several airlines – from £30 to £50 with Monarch (+67pc), from £30 to £40

with Flybe (+33pc), from £35 to £40 with British Airways (+14pc), and from

£130 to £140 with Ryanair (+8pc).



Checked baggage



Overweight hand luggage



Booking fees



Other Ryanair increases




13.53 Over in Spain, Prime Minister Mariano Rajoy has urged the European

Central Bank
to change its collateral rules in order to help small

companies access funding at better conditions. Speaking at an event in

Madrid he said:



cc66b quotes 1817837a Things have been done (by the ECB) but it is possible to do more.



For SMEs, by changing the collateral (rules) or by promoting other kinds of

aid and operations through the banks, such as what has already been done in

some countries with the central banks and on which we can still move

forward.




Mariano Rajoy



13.32 Inflation in Germany has slowed to its lowest level in two and a

half years in April.



The cost of living in Germany increased by 1.2pc on a 12-month basis in April,

down from 1.4pc in March, the federal statistics office Destatis calculated

in preliminary data.



On a monthly basis, the consumer price index (CPI) fell by 0.5pc in April from

March.



The last time, the annual inflation rate was this low was in September 2010.



Using the Harmonised Index of Consumer Prices (HICP), the ECB’s inflation

yardstick, the rate of inflation in Germany fell to 1.1pc in April from

1.8pc in March, Destatis said.



The ECB defines price stability as increases in HICP of close to but just

below 2.0pc.




13.16 Europe’s biggest carmaker, Volkswagen AG, has reported

that first-quarter profits at its core brand have halved due to the ongoing

eurozone crisis.



Operating profit at the VW brand, which accounts for over half the German

group’s €46.6bn sales, plunged to €590m, falling 9 percentage points to 25pc

of the group’s total earnings.



The Audi division retained its position as VW’s largest earnings contributor

with €1.31bn in first-quarter earnings, or 56pc of the group total versus

45pc a year earlier. Porsche, which was integrated into VW in August,

generated 24pc of parent-company earnings.



The VW brand’s profit margin tumbled to 2.4pc from 4.1pc in the first three

months of 2012.



“The current environment is definitely a tough challenge for the entire

industry,” Chief Executive Martin Winterkorn said in a statement.



The Audi division retained its position as VW’s largest earnings contributor

with €1.31bn in first-quarter earnings, or 56pc of the group total versus

45pc a year earlier. Porsche, which was integrated into VW in August,

generated 24pc of parent-company earnings.





13.03 More corporate news out, this time from O2

which will pay BT hundreds of millions of pounds to bolster its network


to meet a sharp rise in demand for mobile internet access, expected to

result from the introduction of 4G.



The Telegraph’s Technology and Telecoms editor Christoper Williams

reports:



cc66b quotes 1817837a The deal will intensify speculation that O2 will in turn run a consumer

mobile network for BT.



Monday’s announcement means BT will build and manage new fibre optic “backhaul”

links within the O2 network to carry data to and from its new 4G masts.



The signal is due to be switched on this summer and the deal is understood

to be worth around half a billion pounds over the next 10 years.



O2 said it expects the new technology to more than quintuple demand for

mobile data by 2016. It will offer internet access around 10 times faster

than its existing 3G networks, allowing smartphone and tablet owners to

access data-intensive services such as video streaming without frustrating

delays.



“With the UK’s 4G spectrum auction complete, UK mobile data traffic is

set to grow by more than 400 per cent by 2016,” said Adrian Di Meo,

chief technology officer at O2.




12.52 Despite of the difficulties in the eurozone, there are still

many good reasons to join the single currency
, according to European

Central Bank Executive Board member Joerg Asmussen



Emerging economies in central and eastern Europe are among potential

candidates to join the single currency. Asmussen, speaking at an annual

meeting of central and east European bank chiefs, said those countries would

benefit from lower transaction costs and the removal of exchange rate risks,

given that the euro zone was already by far their main trading partner.



“I recognise that, at present, the euro area is not an excellent

advertisement for stability given the difficulties facing a number of its

members,” he said in a speech at the meeting in Berlin. “I also

think it is important not to read too much into the current situation.”



Asmussen said many eastern and central European companies were already

integrated into the euro zone supply chain, another reason they would

benefit from joining the currency bloc.





12.26 The chief executive of Spain’s Santander , the euro zone’s

largest bank, has stepped down
today after a prolonged legal battle over

whether he should be barred from banking due to a criminal conviction.



Alfredo Saenz, 70, was convicted in 2009 of filing a false complaint against

shareholders in Santander-owned Banesto bank to pressure them to pay a debt

– in a case that first arose more than a decade ago.



He was later pardoned by then Prime Minister Jose Luis Rodriguez Zapatero, but

Spain’s Supreme Court decided earlier this year to re-instate the conviction

in a case that has dogged the executive for years.



In a fresh twist this month, the Bank of Spain opened new proceedings to

decide Saenz’s fate after the government passed a new law on banking ethics

that could have kept him in post.



Santander said in a statement that Saenz was stepping down voluntarily and

thanked him for his work at the bank, during which time it had quadrupled in

size.



Javier Marin, a 46 year-old Botin confidante who has held several executive

positions within the group, has been named as the bank’s new chief.



The bank’s shares, which have lost 9pc so far this year, were up 1.75pc.




Alfredo Saenz



12.20 And more good news for the property market as a separate report

out today says that five years after the mortgage market froze in the credit

crisis, there are signs

that more first-time buyers are accessing home loans
.



The Telegraph’s personal finance reporter Jessica Winch reports:



According

to recent data from the Council of Mortgage Lenders, the number of

first-time buyers increased by 3pc in February, marking the best start to a

year since 2008.



First-time buyers accounted for 43pc of all house purchase loans in

February, the sixth consecutive month that this indicator has been at or

above 40pc.



Mortgage availability is easing for those with modest deposits for the

first time in several years, with lenders lowering rates on a regular basis.



But raising a deposit remains a significant challenge. Savills research has

found that the average first-time buyer deposit nationally is just over

£27,000, which equates to 80pc of average gross wages.




12.14 There has been good news for the property market this

morning.



House

prices rose for the third month in a row in April
as market

conditions improved to levels not seen since 2007, a property analyst has

reported.



The Telegraph’s personal finance writer Richard Evans reports:



Property

prices increased by 0.3pc month-on-month across the country, following a

similar uplift in March, with a 0.7pc rise in London driving the rate of

growth, Hometrack found.




It also hinted further improvements might follow after the balance between

supply and demand “turned positive” for the first time in three

years.



Demand from new buyers registering with estate agents in London has grown

three times faster than the rate of homes coming on the market over the last

three months, the study said.



London homes now take just four-and-a-half weeks to sell typically – which

is around half the national average and also the quickest selling time seen

since 2007. Although the strength of the London market continues to

outperform the rest of the country, there are signs that the market is also

picking up elsewhere.



Outside London, the next highest levels of growth were seen in Oxfordshire

and Cambridgeshire, which recorded increases of 0.5pc and 0.4pc

respectively. Across the country, the length of time it takes to sell a home

has been cut from almost 10 weeks in January to nine weeks by April.





12.03 Back among the movers on the FTSE 100, shares in

scientific publisher Reed Elsevier are languishing at the bottom of

the blue-chip index, having fallen 2.3pc after the experts at Citigroup

cut their recommendation on the stock to “neutral” from “buy”

following a strong run in the shares. They suggested investors were less

worried by moves to provide free access to scientific research, known as Open

Access
, which in turn had boosted the share price in recent months:



cc66b quotes 1817837a If we look back over the past 6 months, one area where market perceptions

have clearly changed is on structural threats to growth. This is

particularly palpable within [the scientific technical and medical

publications area], where we think there is growing comfort that the move to

open access (of whatever colour) will not fundamentally disintermediate the

commercial publishers like Reed.




11.45 A bit more on the new Italian government, that was sworn

in yesterday but was overshadowed by a lone gunman. The end of two-months of

political turmoil in the eurozone’s third largest economy had led to gains

in European markets.



As the ministers in Italy’s new left-right coalition cabinet were being sworn

in on Sunday, an

unemployed man shot two police officers
and a passerby outside the

prime minister’s office in Rome, just a mile from the nearby presidential

palace where the swearing in occurred. Reuters reports:



cc66b quotes 1817837a Officials said the shooting was an isolated incident but it came amid

tensions that have built up in the euro zone’s third largest economy after

almost two years of acute economic and social crisis.



“This is another sign of despair,” said lower house speaker Laura

Boldrini. “Politicians have to come back to providing concrete answers

to people’s needs.”



The country’s new Prime Minister Enrico Letta, who at 46 is one of the

European Union’s youngest prime ministers, is due to speak in parliament

today ahead of a confidence vote at 3pm local time (1pm in UK), in which he

can expect the backing of his own centre-left Democratic Party and former

prime minister Silvio Berlusconi’s centre-right People of Freedom party.



Forced into a coalition with Berlusconi after the centre-left fell short of

the numbers in parliament to govern alone in elections in February, Letta

has pledged to try to restore confidence in the country’s battered political

institutions.



He also has promised to address the poverty worsened by a jobless level

running at more than 40 percent among young people in some areas of the

country and push the European Union away from its fixation with budget

austerity.



With some doubt over whether his government will last a full five-year

term, Letta is expected to try to pass at least a few basic reforms quickly

including a change to Italy’s much criticised electoral laws and a cut in

the size of parliament.



His cabinet, which includes a record seven women and Italy’s first black

minister, was shaped in part as a response to disillusion with political

elites shown in the success of the anti-establishment 5-Star Movement led by

comic Beppe Grillo.



He will need all his diplomatic skill to keep the government on track and

tensions in his forced coalition with the centre-right under control given

the deep suspicion that exists between the rival blocs.




Italian President Giorgio Napolitano, front row, center, poses for a

family photo with Premier Enrico Letta, fifth from left, and his Cabinet at

the end of the swearing in ceremony of the new government at the Quirinale

Presidential Palace, in Rome. (AP Photo/Riccardo De Luca)



You can view more on that shooting in Rome yesterday below:





11.20 On the back of Italy forming a government, the euro has risen

against the dollar
in Monday’s trading, but was restrained by

expectations of a rate cut by Europe’s central bank on Thursday.



The single currency was up 0.5pc to $1.3095.



“Investors are trying to balance two risks: a further reduction in

peripheral bond yield spreads which is euro positive, and the prospects of

further easing by the ECB which historically has proven to be euro negative,”

said Valentin Marinov, head of European G10 FX strategy at Citi.




11.01 Confidence may be falling in the eurozone as a whole, but Italy

has just seen strong support from investors in its latest bond auction,

pushing 10-year yields toward the lowest level since October 2010.



Borrowing costs fell sharply in a five and 10-year bond auction this morning,

after the swearing in of a new coalition government ended a two-month

political stalemate and brought fresh hopes to the recession-hit country.



The government raised €3bn in ten-year bonds at a rate of 3.94pc

compared to 4.66pc on March 27 and €3bn in bonds due to mature in 2018 at a

rate of 2.84 pc, compared with 3.65pc at the last similar auction on the

same date.




Italian 10-year bond yields



10.50 Silver miner Fresnillo is among the biggest FTSE 100

risers despite announcing it is placing about 19.6m shares with First Eagle

Investment Management at £11.30, a 2pc discount to Friday’s close of £11.53.

The transaction ensures the company meets new free float requirements

set by FTSE Group. Deutsche Bank analysts reckoned it was a “clean

transaction” and upgraded their recommendation on the shares to “hold”

from “sell”:



cc66b quotes 1817837a The key positive is that this equity issuance is not linked to another

corporate transaction, such as an acquisition.



[...]The challenge for Fresnillo in doing a share placement was always

going to be justifying the additional cash on the balance sheet, given the

already strong net cash position ($613m at end 2012). The recent pull-back

in metal prices (gold and silver), combined with the company’s statement in

their Q1 production results, highlighting the need to review capital spend,

opened the window of opportunity for the placement in our view.




10.44 Some reaction to that fall in eurozone confidence (see

10.15
).



Howard Archer, economist at IHS Global Insight says they “intensify

the pressure” on the European Central Bank to cut its bank rate from

0.75pc to 0.5pc.



cc66b quotes 1817837a The further and increased slippage in economic sentiment in April

reinforces our belief that the ECB is more likely than not to cut interest

rates on Thursday. If the ECB does hold fire on interest rates on Thursday,

it is very likely only delaying the inevitable.



The second successive drop in eurozone economic sentiment to a 4-month low

in April fuels concern that the single currency area is headed for yet

another GDP drop in the second quarter of 2013 after almost certainly

suffering a sixth successive drop in the first quarter of 2013.



The drop in sentiment follows on from the purchasing managers reporting

that manufacturing and services activity contracted at an appreciable rate

in April.




10.30 As confidence in the eurozone dips (see 10.15), new

research out today says austerity is having a devastating effect on health

in Europe and North America, driving suicide, depression and infectious

diseases, and reducing access to medicines and care. Reuters reports:



cc66b quotes 1817837a Detailing a decade of research, Oxford University political economist

David Stuckler and Sanjay Basu, an assistant professor of medicine and an

epidemiologist at Stanford University, said their findings show austerity is

seriously bad for health.



In a book to be published this week, the researchers say more than 10,000

suicides and up to a million cases of depression have been diagnosed during

what they call the “Great Recession” and its accompanying

austerity across Europe and North America.



In Greece, moves like cutting HIV prevention budgets have coincided with

rates of the AIDS-causing virus rising by more than 200 percent since 2011 –

driven in part by increasing drug abuse in the context of a 50 percent youth

unemployment rate.



Greece also experienced its first malaria outbreak in decades following

budget cuts to mosquito-spraying programmes.



And more than five million Americans have lost access to healthcare during

the latest recession, they argue, while in Britain, some 10,000 families

have been pushed into homelessness by the government’s austerity budget.



“Our politicians need to take into account the serious – and in some

cases profound – health consequences of economic choices,” said David

Stuckler, a senior researcher at Oxford University and co-author The Body

Economic: Why Austerity Kills



“The harms we have found include HIV and malaria outbreaks, shortages

of essential medicines, lost healthcare access, and an avoidable epidemic of

alcohol abuse, depression and suicide,” he said in a statement. “Austerity

is having a devastating effect.”





10.15 Confidence in the eurozone’s economy fell for a second straight

month in April and by more than expected to hit a four-month low,

strengthening the case for a cut in interest rates this week.



An index of executive and consumer sentiment dropped to 88.6 from 90.1 in

March, according to the European Commission’s latest Business

and Consumer Surve
y
results.



That’s the lowest since December. Economists had forecast a decline to 89.3,

according to the median of 26 estimates in a Bloomberg News survey.



The disappointing data highlights the euro zone’s difficult road out of

recession and the souring of the mood among companies and consumers since

March, after an optimistic start to the year.



The decline in confidence was broad-based among all business sectors, with

services seeing the sharpest drop to a 23-month low of -4.1, driven by “significantly

worsened assessments of the business situation and demand over the past

three month”.



However, consumer confidence increased to 1.2 points, as people’s unemployment

fears eased and expectations concerning households’s future financial

situations better than expected.



In particular, economic sentiment worsened “significantly” in

Germany, Europe’s largest economy, down to -2.3. It also fell in France (-2)

and Italy (-1.9). Spain saw a pickup in confidence, up to +0.9.



Many now expect the European Central Bank to cut interest rates on Thursday to

lower the cost of borrowing and help improve morale.




09.55 The Telegraph’s energy correspondent Emily Gosden

is in Angola and reports that a massive BP oil development off

the coast of the country has come in $4bn (£2.6bn) over budget after being

delayed by a year.



The PSVM project, more than 100 miles offshore, was originally slated to

start producing oil in late 2011 and to cost about $10bn. Instead, it began

production in December last year.



While analysts thought PSVM would cost nearer $12bn, the total is now

expected to be “up over $14bn” once all the wells have been drilled and

connected, Gerry McGurk, BP Angola’s vice president of developments for

disclosed.



BP has a 27pc stake in the project and costs will be divided between it and

its partners.



The development uses a floating production, storage and offloading (FPSO)

vessel, which was converted from a crude oil tanker in Singapore. It

produces oil through water depths of more than 6,500 feet, requiring the

biggest underwater oil-extraction infrastructure in the world.


y



BP’s PSVM floating production storage and offloading (FPSO) oil vessel,

180km off the coast of Angola



09.37 Back in London’s stock market, both construction group Balfour

Beatty
and baker Greggs have been hit by profit warnings, with

shares in the former dropping 11.2pc and the latter sliding 8.3pc on the FTSE

250
. Rentokil Initial, however, has climbed 5.5pc – the single

best-performing share on the mid-cap index – after announcing it had sold

its troubled parcel delivery division City Link for £1 to private

equity firm Better Capital (see 8.20). Oriel Securities

appeared somewhat disappointed with the sale, which has long been speculated

by the market:



cc66b quotes 1817837a The exit from City Link is a distraction. We had hoped that progress would

have allowed for a disposal for value. At least there hasn’t been a dowry

payment. Nonetheless, it has gone and the market no longer has to spend a

disproportionate amount of time focusing on the progress to turnaround.

There should be relief that this period is over.




09.26 Spain has inflation figures out this morning.



The preliminary data from the National Statistics Institute shows annual

inflation slowed more-than-expected in April as energy costs tumbled in the

recession-hit economy.



Consumer prices over the year to April climbed just 1.5pc, after a 2.6pc

advance the previous month.



When compared to March, prices were up just 0.1pc.



Falling fuel and electricity prices dragged down the annual inflation rate,

which was adjusted to smooth out the impact of seasonal blips, the institute

said.



Spain’s inflation rate shot higher after the government raised the sales tax

in September last year so as to boost revenues and help curb the annual

public deficit.




09.10 Further afield now and it was a quiet session for markets in Asia

with holidays in China and Japan. Over the weekend official data out of the

world’s second largest economy showed a slower reading on Chinese Industrial

Profits growth.



And overnight the International Monetary Fund has lowered its growth

forecast estimate for the Asia-Pacific region
from 5.9pc to 5.7pc. The IMF

report
said:



cc66b quotes 1817837a While the external risk of severe economic fallout from an acute euro area

crisis has diminished, regional risks are coming into clearer focus.



These include some ongoing buildup of financial imbalances and rising asset

prices, although this has generally not been excessive so far and is

occurring amid still strong corporate and banking sector balance sheets.



Other risks include an unexpected slowdown in China, weaker-than-expected

effects from ongoing stimulus in Japan, or trade disruptions from a natural

disaster or geopolitical tensions.




08.55 Bank of England policymaker Ian McCafferty said that he

was “cautiously optimistic” about Britain’s economy, though

recovery would continue to be difficult.



In a column for Monday’s edition of the Daily

Mail, he wrote:



cc66b quotes 1817837a I see grounds for hope. Some of the forces that have held back recovery

are easing. Supportive policies from the Bank of England are having an

effect. Confidence is creeping up.



In my view, for some time the economy has been healthier than headline

figures suggest.



The BoE’s Monetary Policy Committee, on which McCafferty serves, will meet

next week to consider a quarterly economic forecast update and whether to

restart the central bank’s asset purchase policy.



McCafferty has opposed this, and said in Monday’s article that he was “struck

by the improvement in confidence” in recent months, though he added

that domestic inflation pressures remained subdued.




Bank of England policymaker Ian McCafferty




08.41 The 214-year-old brewer and pubs group, Greene King, has

said it is on

track to meet market expectations for the full year
as a successful

Easter helped to offset “extreme” weather conditions during the

second half. The Telegraph’s Nathalie Thomas reports:



In a pre-close trading update on Monday, the group reported robust trading

at its retail division, which includes brands such as Hungry Horse, Old

English Inns and Loch Fyne restaurants, with like-for-like sales up 2.2pc in

the 51 weeks to April 21.



Food sales across Greene King’s businesses grew 2.7pc on a like-for-like

basis, the company said, while sales of its hotel rooms were also 3.1pc

ahead. The company reported a particularly strong performance over Easter

and it sold a record 700,000 meals over the four-day holiday, delivering

like-for-like cover growth of 5.2pc.



Greene King is reducing the size of its “pub partners” business,

which includes its tenanted, franchised and leased pubs, and it has

offloaded 108 sites to reduce the size of its estate to 1,272 during the

past year.



Like-for-like earnings before interest, tax, depreciation and amortisation

(Ebitda) at the pubs partners division was “level” with the

previous year, Greene King said.




08.37 Shares in Aberdeen Asset Management are leading the FTSE

100
higher in early trade, having risen 7.4pc after the fund manager

announced a 25pc jump in first-half revenues to £516m and a 51.4pc surge in

pre-tax profit to £188.2m.



The group, which has benefited from growing demand for riskier assets such as

equities, boosted its interim dividend by 36pc. Here’s what chief executive Martin

Gilbert
had to say:



cc66b quotes 1817837a It has been a strong first half to the year with investors’ appetite for

risk assets returning. As a result we have seen healthy net new business

flows which, combined with performance by global markets, has generated

strong growth in our revenue and in profit margins. We remain cautious on

the market outlook but believe our fundamental approach to investing will

continue to serve our clients’ long term needs.



The group also had an encouraging update for investors on share buybacks.

Chairman Roger Cornick said:



cc66b quotes 1817837a We expect our strong balance sheet position and ongoing cash generation to

provide us with surplus capital over time. I have already reiterated the

Board’s objective of growing the dividend progressively. Thereafter, we will

look to distribute available surplus capital to shareholders, after taking

into account a comfortable level of headroom over our required regulatory

capital and after investing in the development of our business, over time.

Share buybacks will be considered provided they are earnings enhancing and

in the interests of shareholders generally.




08.29 In another deal announced overnight, BHP Billiton has sold an

Arizona copper mine and railway to Capstone Mining Corp for $650m
. The

mining giant has been looking to off-load non-core assets after it reported

a 58pc drop in half year net profits earlier this year.




08.20 Rentokil Initial has announced that it has sold its struggling

parcel business, City Link
, to Jon Moulton’s Better Capital who

snapped it up for the bargain price of £1.



The private equity group has agreed to inject £40m into the parcel group which

has dragged down Rentokil with five years of losses including £26m in 2012

and £31m in 2011.



The rat-catcher and hygiene group, which has said it will take a £40m loss on

the disposal, has also unveiled a 13.1pc drop in first quarter pre-tax

profits to £10.6m. Revenues rose 3.3pc to £645m




08.15 Back to corporate news and Balfour Beatty, the

infrastructure group, has warned that its UK construction business will

deliver “significantly lower profits” in 2013 than outlined

by the management last month.



Andrew McNaughton, chief executive, said he expects the drop to be £50m and

has blamed the “change in procurement trends” which have allowed “customers

to impose increasingly stringent conditions onto contractors.”




08.10 European markets have fallen in early trading on Monday. The CAC

in Paris is down 0.8pc, the DAX in Frankfurt is down 0.2pc, the IBEX

in Madrid is down 0.8pc and the FTSE MIB in Milan is down 0.5pc.



08.05 It’s a flat open for the FTSE 100 in London this morning,

with the benchmark index edging up nine points in early deals, or 0.1pc,

while the mid-cap FTSE 250 has had as stronger start to trading and

has risen 35 points, or 0.3pc. Whether or not the European Central Bank

cuts interest rates this week is once again likely to be a central concern

for traders, according to Peel Hunt strategist Ian Williams:



cc66b quotes 1817837a Investors’ attention is now focused firmly on Thursday’s ECB announcement

and the apparent certainty that a 25 basis-point repo rate cut is on the

way, raises the risk of disappointment. The ECB’s most recent policy moves

have come at times of extreme financial market stress, which is absent at

present. The ECB remains well behind other central banks in the flexibility

of its policy approach, when arguably it has the most to do.




08.00 A look at some corporate news now. This morning Lloyds Banking

Group has agreed to sell its Spanish retail banking business to Banco

Sabadell
in exchange for a 1.8pc stake in the Spanish bank.



Under the agreement, Lloyds said Banco Sabadell would hand over shares from

its treasury stock in exchange for Lloyds’ private and retail banking

business in Spain, worth £1.52 billion.



On completion Banco Sabadell will give Lloyds 53.7 million shares from its

treasury holding worth around £72 million, based on its average share price

on April 26, said Lloyds, adding that Sabadell could pay a further £17

million over the next five years dependent on mortgage book margins.




07.57 Heading Down Under now where the economy is starting to slow, but

Aussie PM Julia Gillard has no plans to follow Europe’s “mindless”

austerity program to boost growth.



The Telegraph’s Jonathan Pearlman in Sydney reports:



cc66b quotes 1817837a Australia has abandoned plans to lead the world in bringing budgets back

to surplus after revealing a £8 billion hit to revenue this year as the

economy slows.



However, the country’s Prime Minister Julia Gillard says she will not

follow Europe’s “mindless” austerity program and will push ahead with a new

$20 billion spending on schools and people with disabilities.



After predicting a $1.1 billion surplus, collapsing company profits have

led to a deficit of as much as $19 billion at next month’s budget, which

could risk Australia’s AAA credit rating.




07.48 In more good news for Britain’s economy, as many as 200,000

manufacturing jobs will return to the UK over the next decade
,

cutting the trade deficit by a third, as outsourcing becomes increasingly “unattractive”,

according to new research. The Telegraph’s economics editor Philip

Aldrick
reports:



Advances in production technologies, as well as rising costs and

regulations abroad, will “fundamentally change” the economics of

manufacturing, a study by the Royal Society for the encouragement of Arts,

Manufactures and Commerce (RSA) found.



“This will mean more will be made at home and exporting will be replaced

with owning or controlling factories in target markets abroad,” it said. For

the UK, the changes is likely to result in jobs that were outsourced

overseas coming home and overseas manufacturers setting up UK factories.



“With a strong vision and purposeful intervention, the decline in

manufacturing employment could be arrested and some increase in

manufacturing employment, of the order of 100,000 to 200,000, could occur

over the coming decade,” the RSA said in its study, conducted with Lloyds

Banking Group.



About 2.5m people are employed in the manufacturing sector, which accounts

for 10.5pc of national economic output.




07.40 A report out by Ernst and Young this morning has shown that it

expects lending to UK businesses to pick up for the first time in four

years
, driven by looser money markets and a fall in bad debts. PA

reports:



cc66b quotes 1817837a The Ernst Young (EY) Item Club sees lending to companies in the

UK rising 3pc -or £13 billion – this year to £440 billion, after shrinking

5pc in 2012 to £427 billion.



It expects business lending to surge by 8.5pc to £477 billion in 2014.



It also expects the Government’s recently-revamped Funding for Lending

Scheme (FLS) to encourage lending to small companies and restore confidence

– helping drive the better-than-expected business lending.



The Bank of England and the Treasury last week overhauled the FLS amid

signs the flagship policy is losing its bite and failing to boost credit for

small firms.



The scheme – which incentivises banks and building societies to lend more

to households and businesses – will be opened up to non-bank lenders such as

invoice finance houses and leasing firms.



Lenders will also be given access to more cheap funding in return for

extending loans to smaller firms.



Andy Baldwin, head of financial services in Europe at EY, said: “Behind

the scenes, banking fundamentals have quietly been improving and banks are

now in a better position to be able to provide funds to the wider economy.



“Our analysis suggests the main drivers of banks’ return to lending

will be better access to wholesale funding and a decrease in non-performing

loans, rather than the Funding for Lending Scheme making a material

difference.



“That said, the scheme is making a contribution in shifting emphasis

and encouraging lending expansion across the sector while also helping to

restore confidence and stimulate demand from consumers and SMEs (small and

medium businesses) alike.”



The Item Club expects improving credit conditions and economic growth to

cut bad debt write-downs to £9.3 billion or 0.56pc of total loans this year,

from £11.6 billion in 2012.



It also predicts the Government’s multi-billion pound Help to Buy package

of loans and guarantees will boost the housing market, with transactions

rising by 7.4pc in 2013 and 7.8pc in 2014.




07.30 Also overnight, savers

in the Bank of Cyprus have taken a hit of 37.5pc of their uninsured deposits
,

that were converted to equity as part of the island’s €10bn (£8.4bn) rescue

deal.



Denise Roland reports:



The so-called ‘bail-in’ forces savers to foot the bill for the

recapitalisation of Cyprus’ biggest bank, after it was hit by massive losses

from its exposure to debt-crippled Greece.



Bank of Cyprus said it had converted 37.5pc of deposits exceeding €100,000

into “class A” shares, with an additional 22.5pc held as a buffer

for possible conversion in the future.



Another 30pc would be temporarily frozen and held as deposits, the bank

said.



The bail-in is part of attempts by Cyprus to find €13bn – a figure nearly

double the island’s original bill – to shore up its economy. Other measures

include a possible sell-off of the nation’s gold reserves.




07.16 Overnight in Greece, the parliament has voted to adopt a

law providing for the dismissal of 15,000 civil servants by the end of 2014,

as part of austerity measures imposed by the country’s international

creditors. Reuters reports



cc66b quotes 1817837a After heated debate during an emergency session, 168 deputies voted for the

bill, with 123 voting against and one abstaining as the opposition proved

powerless to stop cuts the government insisted were needed to keep the

country afloat.



The new law overturns what had been a guarantee of a job for life for

workers in Greece’s notoriously bloated civil service.



Around 800 people turned up outside the parliament to protest against the

measure in a demonstration called by trade unions.



The bill provides for the dismissal of 15,000 civil servants by the end of

2014, including 4,000 this year, to meet terms set by Athens’s creditors for

billions in bailout loans.



Slashing an unwieldy public service is a condition set by Greece’s

so-called “troika” of creditors — the International Monetary

Fund, European Union and European Central Bank — to unlock loans of €8.8

billion.



The new law will speed dismissal procedures, which previously made it

impossible to sack civil servants and saw the public sector swell over the

years as every new administration brought in its own people.



Employees who have been disciplined for corruption or incompetence and

those working for one of dozens of shuttered government agencies will be the

main targets.



The law, which was written in a single article to force lawmakers to adopt

all its provisions together, also extends weekly working hours for teachers,

opens a number of professions to competition and reduces a controversial

property tax by 15 percent.



Another section creates new payment terms for unpaid taxes, intended to

help the government recover billions of euros owed by indebted companies and

households.





07.10 Looking ahead to what’s happening today, we will be keeping an

eye out for eurozone consumer and business confidence which will be released

a bit later this morning.



There are reports this morning that Europe may accelerate a shift away from

its austerity-first agenda this week as the new Italian government changes

course and a German-Spanish investment pact underscores a renewed focus on

combating record unemployment.



Enrico Letta’s government wraps up two months of political turmoil in Italy



Germany’s finance minister Wolfgang Schaeuble will be in Madrid today and will

hold a joint press conference with his Luis de Guindos, Spain’s economy

minister this afternoon so we will bring you the details of that when it

happens.



There will also be German inflation today.




Enrico Letta.



07.05 And a look at The Telegraph‘s business page. Economics

editor Philip Aldrick reports that growth

has been hit by a “chaotic” strategy on big projects
.

Economists have warned that chaotic decision making and lack of vision at

the heart of the Government’s infrastructure plans are harming the economy

and holding back growth. He writes:



The Government’s Infrastructure Plan is dismissed as “simply a long list

of projects requiring huge amounts of money, not a real plan with a

strategic vision and clear priorities” in a new report from the Public

Accounts Committee published on Monday.



The Treasury has identified £310bn of works that need investment, with

£200bn to come from the private sector.



Echoing the MPs’ concerns, the London School of Economics’ Growth

Commission has called for “a new architecture for national infrastructure

decisions to reduce policy uncertainty”.



John Van Reenan, of the Growth Commission, claimed the Government had

simply created a “wish list with no analysis of how they are going to

deliver. It’s pretty chaotic.”



Business groups also called for improvements. John Cridland, CBI

director-general, said: “I have a queue of businesses at my door telling me

the Infrastructure Plan needs speeding up.”




07.00 Now for a look at this morning’s business pages…



The Financial Times reports that UK

ministers are to consider offering communities fracking sweeteners
,

by proposing h cheaper energy bills in exchange for dropping opposition to

local fracking projects as part of plans to push ahead with shale-gas

extraction.



The Independent reports that bank

lending is to bounce back as bad debts fall
. Experts have claimed

that bank lending to businesses is set to rise for the first time in four

years as risk appetite starts to recover, handing a potential lifeline to

smaller firms and the UK’s growth prospects.



The Guardian is also leading with the story that bank

lending to UK businesses is set to rise in 2013
. Lending is expected

to grow by 3% to £440bn this year, and by 8.5% to £447bn in 2014, according

to a report published on Monday by independent forecaster the Ernst

Young ITEM Club.



The Times reports that the victims

of rate swap misselling have claimed that banks may pocket the compensation
.



The extraordinary situation has been branded a “huge injustice” by affected

businesses, which claim that the banks have cut them out of the compensation

process by forcing them into administration.




06.55 Good morning and welcome to our new daily business and markets

live blog, your one stop shop for all the breaking business stories of the

day.



Business news and markets: as it happened - April 29, 2013

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