Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Archive | November, 2016

Berlin housing law threatens sharing economy by restricting rents

Posted on 30 April 2014 by

Model Molly Sims at Airbnb's Hello LA event at The Grove on Monday, September 30, 2013 in Los Angeles.©Getty

A housing law that comes into force in Berlin on Thursday could throw a spanner in the works of the sharing economy by restricting permission to rent out lodgings in some of the most popular areas of the city.

The law – intended to conserve the city’s housing stock as accommodation becomes increasingly scarce – bans the regular short-term letting of rooms without permission from the authorities.

    This approval may be subject to conditions, including paying compensation for the loss of living space.

    Airbnb and its German competitors Wimdu and 9flats face a potential shrinkage in supply of hosts in sought-after central districts of Berlin.

    Matthias Brauner, housing policy spokesman for the Christian Democrat party in the Berlin regional legislature, said: “We have an extreme scarcity of housing. There are between 10,000 and 20,000 holiday apartments but they are concentrated in two or three districts – Mitte, Prenzlauer Berg and Charlottenburg. There is an over-concentration, and it has a significant impact on these central areas.”

    There is a two-year transition period for apartments that are already being used for holiday lets at the time the law comes into force.

    After this transition period, once city authorities have built up a clear picture of who is registered to rent out their apartments, they can actively crack down on abuses, Mr Brauner said.

    Mr Brauner said this would be based on “complaints from neighbours of abuses, to find people who are not following the rules”.

    The law would be applied on a case-by-case basis, and an exception is likely for the occasional letting of a single room, Mr Brauner said.

    The latest stumbling block for the sharing economy in Berlin follows a civil injunction prohibiting the Uber taxi service, granted by Berlin’s district court last month.

    However the plaintiff in that case, a taxi operator, has chosen not to enforce the injunction as he fears paying compensation for lost earnings if it is overturned.

    The housing shortage in the German capital, fuelled by migration to Berlin from other parts of Germany and abroad, has manifested itself in rapidly rising rents and a falling vacancy rate.

    We’re trying to get clarity for our community, and our hosts. No one is really sure who and what this law will really affect, because the law is written so broadly, it doesn’t narrow down whether it’s for private people renting out their homes.

    – Julian Trautwein, Airbnb Berlin

    Rental offers in Berlin stood at €8.36 per sq m in the third quarter of last year, a 10 per cent increase on the same quarter the previous year, according to Investitionsbank Berlin, a business development bank.

    Airbnb has fought back with a campaign that highlights the economic benefits of its business. A study published by Airbnb last year found that its community contributes €100m in total economic activity in a year.

    The US company also argues that renting out unused space helps residents make ends meet.

    Airbnb celebrated a legislative victory in Hamburg last summer when the city government enacted a law that allowed residents to temporarily rent out their homes without a licence. But New York and Paris are among the cities that have clamped down on renting out homes.

    Julian Trautwein, a spokesman for Airbnb in Berlin, said: “We’re trying to get clarity for our community, and our hosts. No one is really sure who and what this law will really affect, because the law is written so broadly, it doesn’t narrow down whether it’s for private people renting out their homes.”

    The change in the law has led to confusion for some of Airbnb’s hosts. Zakiah Omar is a video producer who lives in a three-bedroom apartment in Prenzlauer Berg and began renting out a room through Airbnb after going freelance. She said: “What we don’t understand is whether it will affect us as we only rent out one room and it is our flat. We do think that Berlin has a housing problem and it should be solved, but we wonder whether going after some people who are renting out flats will really help.”

    Takeover theories boost Shire stock

    Posted on 30 April 2014 by

    Another day, another Shire takeover theory.

    The latest suggestion came from Société Générale analysts, who reckoned AstraZeneca should make an all-share offer that may help repel the attentions of Pfizer.

      AstraZeneca can fund a deal exclusively with equity because its shares have soared to 19 times next year’s earnings, against Shire on 14 times, SocGen said. It believed Astra could offer about £47.60 per Shire share, a 41 per cent premium, without diluting earnings for its own shareholders.

      The relative simplicity of Astra buying Shire meant the deal could be completed before Pfizer could buy Astra, SocGen continued.

      Astra becoming $50bn bigger “could be a deal breaker for Pfizer”, it said. But by giving Shire shareholders equity, they would still get the potential upside if Pfizer pursued Astra regardless, the broker argued.

      A day ahead of results, Shire closed 3.5 per cent higher at £33.78. The gain came even after a trial data for its Lifitegrast dry-eye treatment suggested patients felt little benefit. Astra rose 0.7 per cent to £46.64.

      The FTSE 100 ended up 0.2 per cent, or 10.12 points, to 6,780.03. Shell alone added 19 points to the index, its B shares rising 3.7 per cent to £25.20, on quarterly earnings that beat expectations.

      For the month the FTSE 100 was up 2.8 per cent.

      Oil explorers rose after Heritage Oil revealed it had agreed to be bought by Qatar’s royal family for 320p a share. Hopes of a counterbid looked much reduced after Heritage founder and majority shareholder Tony Buckingham tendered a 34 per cent stake, locked the rest in for five years and agreed to stay on in a consultancy role paying £166,667 a month.

      Heritage jumped 23.3 per cent to 315.2p while among the African explorers, Ophir Energy added 4.9 per cent to 263.6p and Afren was up 2.7 per cent to 157.5p. Eland Oil & Gas, a neighbour to Heritage’s field in Nigeria, gained 5.3 per cent to 128.3p.

      Aveva, the design software maker, was squeezed up 7.8 per cent to £21.08 with Numis Securities repeating “buy” advice. A valuation of 16 times next year’s after-tax net profit “feels like a very attractive rating for a company of this quality”, said analyst David Toms. “Aveva continues to deliver circa 10 per cent underlying growth, with scope for acceleration from recent product initiatives and/or improvements in some end markets,” he added.

      Arm fell 1.9 per cent to 891.5p after Citigroup cut the stock off its “buy” list. Sterling’s strength and a weaker outlook for mobile device growth were offsetting robust licensing demand, meaning upside looked limited over the next 12 months, it said.

      Fellow chipmaker CSR slid 10.4 per cent to 574.5p after cutting sales guidance to reflect a quicker than expected decline of its legacy business.

      AB Foods rose 0.8 per cent to £29.71. Late in the day, JPMorgan Cazenove raised its target price to £35 based on the group’s Primark chain tripling European sales within a decade.

      Just Eat drifted to a record low, down 3.5 per cent to 214.8p even after saying it expected to meet liquidity rules that would allow it a premium listing and inclusion in FTSE’s indices. The stock has lost 17 per cent since flotation in April after its private equity backers cut their stakes.

      Portugal opts for clean bailout exit

      Posted on 30 April 2014 by

      Pedro Passos Coelho©AFP

      Pedro Passos Coelho

      Portugal is to exit its three-year €78bn bailout without an emergency backstop, in a remarkable turnround for a country that only six months ago seemed destined for a second rescue programme.

      Portugal follows Ireland as the second eurozone country to opt for a clean exit from a punishing rescue programme. An announcement by Pedro Passos Coelho, the prime minister, is expected before a meeting of eurozone finance ministers on Monday, just weeks before the programme comes to an end on May 17, according to officials involved in the bailout talks.

        The “troika” of international lenders – the European Commission, International Monetary Fund and European Central Bank – had urged Lisbon to consider a line of credit as an emergency safety net, especially given its debt redemptions over the next two years. But Portugal’s success in raising cash in the private markets has convinced the government that such assistance is unnecessary.

        “Clearly the market developments and the market euphoria has influenced it,” said one official involved in the talks.

        Without accepting a eurozone line of credit, Lisbon would not be eligible for the ECB’s emergency bond-buying plan, known as outright monetary transactions.

        According to troika officials, the German government was urging Lisbon to proceed without the line of credit; Berlin has been eager to avoid debates in the Bundestag over eurozone aid.

        But one official said relations between Angela Merkel, the German chancellor, and Mr Passos Coelho were very close, and that Berlin would have signed off the assistance had Lisbon decided it was required.

        Political and public opposition to reforms and austerity has been growing in Portugal. Troika officials said it would have been difficult for the government to meet the reform criteria that would have come with a line of credit from the eurozone’s €500bn rescue fund, the European Stability Mechanism. Such conditions can be just as stringent as a bailout.

        A mission from the troika was due to leave Lisbon on Wednesday or Thursday after concluding its final quarterly assessment of the government’s compliance with the adjustment programme.

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        The centre-right government coalition also set out its fiscal strategy for 2015-18 on Wednesday, a move partly designed to reassure global investors that Lisbon remained committed to reducing its deficit and budgetary discipline once the bailout ended.

        A formal announcement on Portugal’s clean exit strategy will follow, possibly as early as Friday.

        Officially, the government will not make a final decision until a special cabinet meeting this week. “The national interest demands that Portugal decide as late as possible,” Luís Marques Guedes, parliamentary affairs minister, said on Tuesday.

        Bankers and economists have been almost unanimous in forecasting Portugal’s unaided return to market funding. Analysts at Nomura said on Wednesday that “improvements in the [Portuguese] economy and market sentiment in the past few months” had “tilted the balance in favour of a clean exit”.

        Portugal’s government borrowing costs have tumbled in recent months to levels similar to those of Ireland when it emerged from its €67.5bn rescue programme. Lisbon has also built up a cash buffer of €15bn, enough to cover state borrowing requirements for a year.

        “The great thing is to have a choice [between a clean exit and a credit line],” a senior Lisbon government official said. “Eight months to a year ago, not many people saw that as likely.”

        A clean exit meant Portugal would emerge from its adjustment programme “not owing anything to anyone”, the official said. A credit line was more like “an insurance policy you never want to use”.

        An ESM credit line, which Lisbon would use only if necessary, would be available for one year and limited to a maximum of 10 per cent of gross domestic product, about €16bn-€17bn.

        Last week, the prime minister said a disadvantage of seeking an ESM credit line was that such a safety net had never been negotiated before, making it unclear what conditions would be attached to it.

        WH’s aborted IPO leaves banks empty-handed

        Posted on 30 April 2014 by

        Some of the products made by WH Group Ltd. under Chinese brand names are displayed during an investment luncheon in Hong Kong April 10, 2014. China's WH Group Ltd, the world's biggest pork company, has launched a Hong Kong initial public offering of as much as $5.3 billion in the second-largest ever IPO by a food and beverage company. REUTERS/Bobby Yip (CHINA - Tags: BUSINESS FOOD)©Reuters

        Banks hired to run WH Group’s aborted Hong Kong flotation have earned such low fees that only travel companies like Cathay Pacific and the Four Seasons hotel are set to emerge as winners from the deal.

        The 29 banks hired to run the pork producer’s deal face losses after its failure. The seven main deal managers, that included UBS and Goldman Sachs, were given a token sponsor fee from the company described by one of the bankers as “tiny”.

          They are likely to end up losing money after paying their own legal and travel costs from the scrapped IPO, which was originally slated to be the biggest in Hong Kong since 2010 at more than $6bn.

          Having sliced the deal in half last week, the company on Tuesday said it was axed it completely, although it may yet return to the market later in the year or early in 2015.

          Due to the record number of underwriters, few of the banks hired to manage the deal were ever likely to see a penny of profits from it. Many were picked due to existing relationships with either the Chinese parent company, Smithfield Foods of the US, which WH Group bought in 2013, or Campofrio, the European meat producer that it part-owns.

          That resulted in the likes of Rabobank and Crédit Agricole – two banks with no record of running Hong Kong IPOs – finding their names on the front page of the prospectus.

          Blow to Hong Kong

          Residential and commercial buildings rise above the business district of Central as the Kowloon peninsula stands across Victoria Harbor in Hong Kong

          First Alibaba, then Watson, now WH Group. The decision from the world’s top pork producer to ditch its IPO in Hong Kong is not just a blow to the company but also to the city itself, writes Josh Noble in a Business Blog post. Having started the year with several possible blockbuster deals, Hong Kong will be lucky now to get even one.
          Read the full blog post

          The lead banks – Bank of China, Citic Securities, Goldman Sachs, Morgan Stanley, Standard Chartered and UBS – flew teams across Asia, Europe and the US during the IPO roadshow, racking up large hotel and airline bills. Those costs will no longer be matched by fees from a completed deal, although the lawyers will still receive some payment, according to two people familiar with the process.

          Hong Kong has become an increasingly difficult place for investment bankers to make money, even as IPO and M&A markets take off in other parts of the world. Though bond sales have thrived, they remain small by global standards, meaning that equities still comprise the bulk of the business in Asia.

          As sentiment towards China has declined, dealmaking has become harder and less profitable than in the heady days of 2010 when Hong Kong hosted some of the world’s biggest IPOs.

          Since then underwriting teams have grown and fees have shrunk. Though WH Group’s 29 banks set a new record, double-digit bookrunner teams are no longer uncommon. Last year, China Galaxy Securities hired 23 banks for a deal of just $1.1bn.

          Fees on Hong Kong IPOs over $1bn typically range from 2-3 per cent, compared to 3-5.5 per cent in the US, according to data from Dealogic. WH Group was set to pay just 1.5 per cent, according to its prospectus.

          Apple bonds rise on first trading day

          Posted on 30 April 2014 by

          A woman looks at the screen of her mobile phone in front of an Apple logo outside its store in downtown Shanghai September 10, 2013. Apple Inc is expected to introduce a cheaper version of the iPhone on Tuesday, bringing one of the industry's costliest smartphones within reach of the masses in poorer emerging markets. The world's most valuable technology company, which many expect to unveil an iPhone 5C in several colors alongside the latest high-end iPhone 5S, is trying to beat back rivals like Samsung Electronics Co Ltd and Huawei Technologies Co Ltd in markets like India and China, where it is fast losing ground. REUTERS/Aly Song (CHINA - Tags: BUSINESS SCIENCE TECHNOLOGY TELECOMS)©Reuters

          Apple bonds rose in their first full day of trading in secondary markets, rewarding investors who bought $12bn worth of the securities at attractive prices in the largest corporate debt sale so far this year.

          Investors who did not take part in the technology company’s large offer on Tuesday turned to secondary markets to buy the debt, pushing the price of the securities higher.

            The maker of the iPhone sold Double-A rated debt in a combination of floating- and fixed-rate notes, with maturities ranging from three to 30 years. Demand for the debt reached the $40bn mark, people familiar with the sale said. That figure was close to the $50bn in orders seen at Apple’s previous $17bn sale last year, a record at the time.

            On Wednesday, the technology group’s $3bn of bonds maturing in seven years, the largest tranche in the offering, traded as high as 100.25, up from an issue price of 99.75, according to data compiled by IFR and Standard & Poor’s LCD. The yield, which moves inversely to prices, fell 8 basis points to 2.80 per cent.

            Apple’s $2.5bn in 10-year notes also rose, and traded at 100.15, after being priced at 99.91. Meanwhile, the yield fell 3 basis points to 3.43 per cent.

            “I have no doubt Apple bonds will be heavily traded,” said Michael Mullaney, a portfolio manager at Fiduciary Trust. “The nature of markets is such these days that bonds such as these get snatched almost immediately.”

            Trading volumes were also higher. Apple’s new issues were among the most actively traded corporate investment grade bonds in the morning session in New York on Wednesday, according to MarketAxess data. Apple’s 30-year debt sold in 2013, was also heavily traded.

            The company stoked demand for the deal by selling the debt at more generous levels compared with that of other similarly rated bonds. Average yields for Double-A rated corporate debt stood at 2.32 per cent on Wednesday, according to Barclays indices.

            Apple’s debt sale tapped particularly strong demand for high-quality corporate bonds, reaching levels last seen in the credit boom era. The bonds also sold at higher yields than last year’s offer, which came near all-time lows.

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            The new 10-year bond was sold at a yield of 3.46 per cent, or about 17 basis points higher than the company’s existing debt for that maturity, a so-called concession for bond investors.

            “Apple sold 10-year bonds, with Double-A ratings, paying 77 basis points over US Treasuries. For some people, that is a good enough deal,” said Adrian Miller, director for fixed-income strategy at GMP Securities.

            Apple plans to use proceeds from the debt sale to fund a $90bn buyback programme rather than tap its $150bn cash pile, which would incur tax charges.

            Robin Hood tax has roots in 17th century

            Posted on 30 April 2014 by

            For all the political fuss over the eurozone’s planned financial transaction tax, it is likely to resemble a levy Britain has imposed for more than 300 years: stamp duty.

            The so-called Robin Hood tax as first outlined by the European Commission was expected to generate €35bn a year, ensnaring financial trades from London to Hong Kong.

              George Osborne, the UK chancellor, likened it to Britain proposing a “cheese tax” on France. But those ambitions have been greatly scaled back. Since 11 member states pledged to agree a joint tax last year, talks on its exact terms have been fraught, with few member states in agreement over what it should cover.

              According to EU briefing papers, a potential compromise taking shape is to start with a more narrow stamp duty style levy on equity trades, which would also apply to some derivatives. There would be an option to expand the tax at a later stage. This could include applying it widely to trades executed by FTT-based institutions all over the world, rather than just levying it on instruments issued in the FTT area.

              With European elections looming, France and Germany have sought to put political impetus behind finding a compromise. Ministers are aiming to issue a declaration as soon as next week. Yet even this scaled back version is proving tricky. Officials involved think the declaration might not include concrete details and will only amount to a show of political will.

              One of the big sticking points is divvying up the booty from the tax. A stamp duty would generate disproportionate amounts for big economies, while smaller ones such as Estonia or Portugal would barely cover their administrative costs. Some kind of redistribution system would be needed, according to officials.

              Rates too remain open to discussion. The Commission initially suggested a levy of 0.1 per cent on stock and bond trades. Should that be the level of the simple eurozone stamp duty on equities, it would represent a fifth of that imposed in the UK.

              Heritage Oil agrees £924m takeover offer

              Posted on 30 April 2014 by

              Heritage Oil has agreed a £924m cash takeover offer from a Qatari investment vehicle owned by the gas-rich Gulf state’s former prime minister.

              The FTSE 250 Jersey-based company, whose main oil production is in Nigeria, said it was recommending the 320p a share offer from Al Mirqab, the equivalent of a 25 per cent premium on its closing price on Tuesday.

                Heritage, founded by Anthony Buckingham, also produces oil in Russia and has exploration assets in Papua New Guinea, Tanzania, Malta, Libya and Pakistan.

                Mr Buckingham, Heritage’s chief executive and largest shareholder with a 34 per cent stake, has agreed to remain as an adviser and retain a 20 per cent holding for at least five years.

                Al Mirqab is owned by Sheikh Hamad bin Jassim Al Thani, the country’s influential former prime minister and former chief of Qatar’s sovereign wealth fund, and his family in a private capacity.

                Al Mirqab said the acquisition provided “access to a high-growth, producing asset base in Nigeria and a diverse international exploration portfolio”.

                Sheikh Hamad, one of Qatar’s richest men and a renowned global investor, stepped down from his official roles when the former emir, Sheikh Hamad, abdicated in favour of his son, Sheikh Tamim, last year. Since then, Sheikh Hamad, known as HBJ in banking circles, has kept a low profile.

                The deal between the Qatar’s former prime minister group and Heritage is the second this month targeting Nigeria by an investment company.

                Earlier this month, Temasek, the S$215bn (US$171bn) state-backed investment arm of Singapore, paid $150m to become one of the largest shareholders in Seven Energy, a Nigeria-based oil and gas company.

                Lombard: HBJ gives Heritage a get-out

                Jonathan Guthrie

                Ex-mercenary Anthony Buckingham appears to have snatched a measure of victory from the jaws of defeat by selling his business Heritage Oil to a prominent Qatari for £924m.

                Continue reading . . .

                Heritage, which has previously profited from the quick buying and selling of exploration assets in Uganda and the Kurdistan region of Iraq, announced an $850m investment in onshore assets in Nigeria previously held by Royal Dutch Shell, Total and Eni less than two years ago.

                The deal established Heritage as one of an increasing number of smaller oil companies, which also includes London-listed Afren, that have acquired underperforming Nigerian fields alongside local partners under a policy of indigenisation of the state’s oil industry. That trend has also seen oil majors reduce their exposure to the country.

                Analysts at Mirabaud Securities said the offer implied a premium to the price paid by Heritage to acquire its Nigerian oil assets alongside its local partner Shoreline Power.

                “Not for the first time in its history it appears that Heritage’s management have proven adept at securing an impressive sales price for its shareholders,” they said.

                However, Mark Henderson, analyst at Westhouse Securities, suggested that the offer price offered only a modest premium to his own conservative valuation of 300p a share.

                “We believe that this offer highlights the huge challenges and uncertainties involved in operating onshore in Nigeria and potential market volatility that will be caused by ongoing security issues with infrastructure leading to significant potential production delays,” he said.

                Shares in Heritage rose 22 per cent to 313p.

                Pensions minister defends reforms

                Posted on 30 April 2014 by

                Pensions minister Steve Webb©PA

                The UK pensions minister has come under pressure to defend reforms that will allow retirees to take their savings pots as cash, because of concerns they could increase pensioner poverty.

                During a two-hour evidence session before MPs on Wednesday, Steve Webb was repeatedly asked to explain why the lifting of restrictions on accessing pension cash would not lead to pensioners running out of money or buying unsuitable products.

                  The reforms, which were announced in the Budget, will from April 2015 allow those who are 55 and over to take their pension savings as a lump sum, and avoid buying an annuity – an insurance product that turns savings into an income for life.

                  Mr Webb, who has previously said people could use their savings to buy a Lamborghini if they wanted to, told the committee pensioners would not be left impoverished.

                  “There will be fall back in the form of the state pension, so they won’t be destitute,” Mr Webb told the Department of Work and Pensions select committee.

                  “You will be paying higher rate tax [if you take a big lump sum] and that would be crazy. The tax thresholds give you a strong incentive to spread income payments [instead of taking a lump sum].”

                  Mr Webb said a new legal right for free face-to-face advice about options at retirement would support the reforms. This will come into effect in April next year.

                  “Far more people will be making decisions in a far more informed way because of these changes,” he added.

                  However, he did not support a suggestion from the committee that insurers be banned from directly selling to their customers.

                  Mr Webb also responded to suggestions that the reforms, which have already led to a steep drop in annuity sales, would lead to poorer deals for those who want to buy one.

                  “This is not a death blow to annuities,” he said.

                  “People will defer annuity purchase but there will be new products and annuity providers will have to up their game.”

                  He added that people from Surrey would no longer be as subsidised as people from Glasgow, who have a shorter life expectancy, when buying an annuity.

                  Defend City vaults from foreign courts

                  Posted on 30 April 2014 by


                  The UK banking sector still produces golden eggs: a great deal of tax, foreign exchange and employment. It is to be hoped that those still attacking it will soon weary of the damage being wrought by their broadsides.

                  The latest salvo comes from the European Court of Justice, which adjudicates on EU law in Luxembourg. On Wednesday the court dealt a blow to Westminster’s campaign to block eurozone plans for a levy on financial transactions. Rejecting a challenge by the UK government, judges said there was no objection in principle to a tax that applies to eurozone securities, even when they are traded outside the eurozone. It is a sharp reminder that the so-called Robin Hood tax, though less advocated now than it was in the immediate aftermath of the crisis, has not died away.

                    The UK is not among the 11 countries planning to introduce an FTT. But the measure has extraterritorial effect. If a deal is done in London involving assets that are covered by the charge, the tax will have to be collected here. It will apply to eurozone securities, and probably derivatives too. London’s markets would certainly be harmed.

                    The ECJ ruling is not surprising. Created to enforce EU law, its judges feel it is their duty to back the drive for “ever closer union”. There is no room for English common law, with its tradition of resisting excessively authoritarian government. The dissenting opinions of judges who disagree with the majority are not published. There is no appeal – although the UK is likely to mount a fresh challenge against the FTT at a later stage.

                    This is not the first time the UK has suffered a defeat in a case involving vital City of London interests. In January the ECJ declined to limit the authority of the European Securities Markets Authority to prohibit naked short selling of securities listed in the eurozone. It in effect gave Esma the power to issue new rules over the heads of national regulators. The legal route by which it arrived at this decision is convoluted, but the precedent is clear. Regulatory powers can be transferred to Brussels without the need for Westminster’s consent.

                    This cannonade from the Luxembourg judges is not the only problem the British banking sector now faces. The US Federal Reserve is proposing expensive new regulatory requirements that will apply to banks based outside the US which do a significant amount of business there. From July 2016 the US central bank will require foreign banks with more than $50bn of assets in the US to “ring fence” their American businesses within separately capitalised subsidiaries, which must then meet stringent capital and liquidity levels, without relying on their parents’ strength.

                    The Fed no doubt painfully remembers the substantial funding such banks needed when the crisis struck six years ago. But whatever the motive, the effect is a relapse into protectionism that will strike a blow against global banking. Affected institutions will face a choice between raising extra capital or scaling down their US operations, ceding market share to American competitors. By contrast, banks from the US and elsewhere are allowed to set up branches in London without having self-sufficient subsidiaries, so long as the UK authorities have confidence in the regulatory framework in their home countries. This is important business; UK branches of foreign banks have assets exceeding £2tn.

                    Not that foreign regulators are the only ones. British banks are under relentless attack in their home market as well. Regulators are imposing restrictive rules. They continue to investigate product mis-selling and the rigging of Libor and foreign exchange rates. All this absorbs much management time, and involves increased compliance costs. The new regulators are also significantly more expensive than their predecessors.

                    The risk that banks will suffer damage that proves difficult to reverse is not hypothetical. The Financial Times reported on Wednesday that Barclays is considering how to stave off an exodus of talented bankers who fear the bank’s profits will be diminished by the regulatory onslaught it faces in the US. Among other things it is said to be considering setting up a “bad bank” to house distressed assets.

                    There is little that the UK government can do to counter US protectionism. But it must resist Brussels’ attempts to suppress London’s markets, which are valuable not only to the UK but to the EU as a whole. The ECJ’s dictatorial approach needs to be strenuously opposed, before it becomes too entrenched.

                    The writer is a former chancellor of the University of Buckingham

                    Marcegaglia warns on EU-US trade deal

                    Posted on 30 April 2014 by

                    Emma Marcegaglia, head of Italy's employers' association Confindustria, speaks during the 'Reforms For Growth' conference in Milan, Italy, on Friday, March 16, 2012. Italy's Prime Minister Mario Monti will press ahead with efforts to revise the country's labor laws this week, amid fresh warnings that the three-year-old European debt crisis is far from over. Photographer: Alessia Pierdomenico/Bloomberg *** Local Caption *** Emma Marcegaglia©Bloomberg

                    The president of Europe’s biggest business lobby group has issued an unusually blunt warning to the US administration that trade talks with Brussels are in danger of stalling unless Washington shows much more “commitment”.

                    “The message we are bringing is that we need to see real progress, real contents. The risk is that in Europe the negative opinion will prevail,” Emma Marcegaglia, president of BusinessEurope and the new chairman of Eni, Italy’s state-owned oil company, told the Financial Times on a visit to Washington. “What we see is everyone sticking to their positions – the Americans more than the Europeans,” she added.

                      Ms Marcegaglia this week will meet Ken Hyatt, a senior commerce department official, Michael Froman, the US trade representative, and Caroline Atkinson, the national security adviser on international economic issues, as well as Dan Mullaney, the chief US negotiator for the Transatlantic Trade and Investment Partnership.

                      Ms Marcegaglia’s complaints span several contentious matters in the talks that appear to be unresolved after little less than a year of negotiations and four sessions held both in Washington and Brussels.

                      She lamented that the Obama administration’s initial offer on remaining tariffs imposed on EU goods had been underwhelming, as had its efforts to prevent discrimination against EU companies in public procurement – particularly at a state level – and its unwillingness to include provisions on financial services regulation.

                      In addition, Ms Marcegaglia said even though the Ukraine crisis had reinforced the strategic importance of a transatlantic trade deal, the US was reluctant to designate the EU as a preferential recipient of natural gas and crude oil exports.

                      “The attitude has not been of great commitment,” she said.

                      A USTR spokesperson said: “Both sides are committed to conclude expeditiously a comprehensive and ambitious agreement. We continue to make progress in all areas of the negotiations and look forward to hosting the fifth round, which is scheduled for the week of May 19.”

                      The US has its own complaints about Europe’s stance in the talks, particularly a move in the last round to back away from a pledge to slash all tariffs on agricultural goods, replacing some of them with a form of quotas.

                      Brussels is also resisting efforts to bring more transparency to the EU legislative process, which many US companies find so opaque they struggle to have their voices heard.

                      But Ms Marcegaglia’s comments reflect concern, even among the deal’s most ardent supporters – she touts its “very important growth potential” – that it may not “get done or gets done in a minimal way”.

                      FT Video Archive

                      EU-US trade talks: stumbling blocks

                      Container ship

                      July 2013: EU correspondent Joshua Chaffin looks at the five stumbling blocks to successful negotiation

                      Originally, the US and the EU had aimed for a conclusion of the talks this year, but that quickly became unattainable, and even the optimists are not expecting a deal before the end of next year.

                      Political challenges abound on both sides of the Atlantic, with European Parliament elections looming in May, possibly leading to a legislature that is more sceptical of a deal with the US, and Congress openly unwilling to advance any trade liberalisation legislation before the November midterm elections.

                      Ms Marcegaglia said BusinessEurope was planning a joint tour of Europe alongside the US Chamber of Commerce in the coming months to tout the benefits of the deal. “The moment is difficult on both sides . . . we want to bring a positive narrative,” she said. “We are ready to do our part but we need to see more commitment.”