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 […]

Continue Reading


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 […]

Continue Reading


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 […]

Continue Reading


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, […]

Continue Reading


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 […]

Continue Reading

Archive | November, 2016

Windstream: tax windfall

Posted on 31 July 2014 by

Until Tuesday, Windstream was a middling US telecoms company, nervously whistling while it waited for the last possible moment to slash its dividend (it was yielding 10 per cent). On Tuesday, slash it did, by 30 per cent. Yet because it revealed a nifty corporate structuring at the same time, its shares did not crash, as dividend cutters’ shares generally do. Instead, the stock rallied 12 per cent.

    Windstream buried the dividend cut in its announcement that it will now house its copper and fibre network in a real estate investment trust. Reits are entities that avoid corporate taxes by passing nearly all their earnings on to shareholders (who themselves pay tax on the distributions). Billboard owners, data centre operators, and other unexpected companies have adopted Reit status in recent years. Think this sounds like something President Barack Obama or Treasury secretary Jack Lew should protest against, given their complaints about US companies moving their tax domiciles to Europe? Fat chance: Reit conversions get their approval from the Treasury’s own Internal Revenue Service.

    Conceptually, Windstream’s Reit gambit is brilliant. The net tax savings are worth $115m. Windstream was expecting 2014 free cash flow of about $800m but its dividend payment would have eaten up $600m of that. It also needed to invest $120m in its network. Between the tax savings and about $180m in dividend savings, Windstream now has breathing room.

    Then there is the valuation arbitrage. Reits trade at much higher multiples than telcos, so simply rejiggering the business units alone creates value. Pharma execs should be apoplectic – not towards Windstream, which has followed the rules, but towards politicians who curse one sort of tax arbitrage while blessing another.

    Tweet the Lex team @FTLex or email on

    Argentina furious over second default

    Posted on 31 July 2014 by

    Argentina’s government reacted furiously to the country’s second default in 13 years, while investors retained hope for a resolution to the long debt stand-off.

    You need JavaScript active on your browser in order to see this video.

    No video

    Buenos Aires was insisting on Thursday that it was not in default, with cabinet chief Jorge Capitanich urging holders of its restructured debt to demand their money from the US judge who has blocked interest payments.

    “The credit rating agencies, the financial agents and opinionators who are trying to say that Argentina is in a supposed technical default are playing an absurd hoax that is aimed at destroying the restructuring process of Argentina debt,” he said.

    The uncertain nature of Wednesday’s credit event was reflected in the price movement of the country’s bonds, as investors appeared to retain hope that some form of resolution could still be reached.

    Prices for Argentina’s government dollar-denominated bond due to mature in 2033 fell on Thursday morning, pushing up the yield from 8.8 per cent to 9.7 per cent. However the yield remains below the 12 per cent rate reached in June.

    The cost of insuring the country’s debt against default has increased in the last week but fell on Thursday morning, according to data from Markit.

    The International Swaps and Derivatives Association, a committee made up of bankers, traders and fund managers has been asked by UBS to consider whether credit default swaps linked to Argentina have been triggered by the default. The committee will meet in New York on Friday to assess whether payouts on default swaps insuring $1bn of Argentine bonds have been triggered.

    Stuart Culverhouse, head of research at Exotix, the frontier markets specialist, said that further bond prices movements would hinge on the Argentine government’s next moves.

    “It depends what is announced today by Argentina,” he said. “If meetings are announced then investors may feel comforted and bond prices will not necessarily collapse. If nothing is announced over the next few days then we will be in different territory.”

      Standard & Poor’s placed Argentina’s credit rating on “selective default”, after it failed to make a $539m interest payment on its debt by a Wednesday deadline.

      Economy minister Axel Kicillof said “vulture funds” had rejected a renewed offer from the government that had also been made to bondholders who accepted debt restructurings after the 2001 default, but that it was “impossible” to pay them any more.

      Although Argentina has been locked out of the international capital markets since its previous default in 2001, borrowing costs are now likely to rise to punishing levels for state institutions and the private sector. Economists expect a default to worsen a recession, trigger higher inflation and put pressure on foreign exchange reserves, possibly leading to Argentina’s second devaluation this year.

      The default can trigger bondholder claims of as much as $15bn to $20bn because of cross-default clauses.

      “We are not going to sign any agreement that compromises the future of the Argentine people,” said Mr Kicillof at a press conference at Argentina’s consulate in New York after the talks collapsed.

      He said Argentina would take all measures available to put an end to “unprecedented and unjust situation”, adding the country remained open to a dialogue with creditors.

      NML, the fund leading the holdouts, said in a statement that the court-appointed mediator in the talks, Daniel Pollack, “proposed numerous creative solutions, many of which were acceptable to us. Argentina refused to seriously consider any of them, and instead chose to default.”

      Separate behind-the-scenes negotiations between the holdouts and a group of Argentine banks also fell through on Wednesday, according to local press reports, although hopes remained that a deal can yet be reached in the coming days.

      Nevertheless, with official negotiations having reached an impasse, Marcelo Etchebarne, an Argentine lawyer, speculated that Argentina may now attempt to restructure its US and UK bonds under local law, although he doubted this would be feasible.

      Although the government had already deposited the $539m with Bank of New York Mellon, the bondholders’ trustee, New York Judge Thomas Griesa, has forbidden the bank from transferring the funds to the bondholders. He said that was because it would violate his ruling, upheld on June 16 by the US Supreme Court, that Argentina must pay the holdouts in full at the same time as holders of its performing debt.

      “Default cannot be allowed to lapse into a permanent condition or the Republic of Argentina and the bondholders, both exchange and holdouts, will suffer increasingly grievous harm, and the ordinary Argentine citizen will be the real and ultimate victim,” said Mr Pollack.

      Mr Kicillof maintained a defiant attitude before the default. “Who believes in the rating agencies? Why didn’t they warn the owners of mortgages in 2008 if they know so much about risk?” he asked.

      Argentina defaulted on $100bn of debt in 2001-02, at the time the largest sovereign default in history.

      Argentina makes up less than 2 per cent of the JPMorgan emerging markets bond index, which means that even if prices in the country’s debt fall dramatically the knock on effect will be relatively mild across EM bonds. Analysts said that the default is not expected to trigger widescale problems across emerging markets. “These problems have been rumbling along for years and were well flagged,” said Mr Culverhouse.


      Letter in response to this report:

      A rather broad definition of default / From Dr Matthias Hammerl

      SFO pays £1.5m to Robert Tchenguiz

      Posted on 31 July 2014 by

      Property tycoon Robert Tchenguiz has received a £1.5m settlement from the UK’s Serious Fraud Office, days after his older brother Vincent agreed to a £3m settlement, concluding the brothers’ civil damages claim.

      The brothers had been seeking a record £300m in damages over the SFO’s botched criminal probe in 2011, in which they were arrested and had their homes and business premises searched. The settlement means that a planned trial in October will no longer go ahead.

        In a statement issued on Thursday, Robert Tchenguiz said: “The taxpayer should not bear the full financial pain of the SFO, and its former director’s, misguided actions. It is now quite evident that third parties played a major part in this hugely damaging farce. Having resolved my issues with the SFO, I now intend to join my brother in pursuing those who I believe to be both responsible and liable for the devastation that has been caused.”

        The damages that the brothers were seeking were the highest in the SFO’s 26-year history. The agency has an annual budget of £36.5m and was forced to seek £19m in emergency additional funding from the government this year, in part to cover its legal expenses related to the damages trial. The SFO will pay the settlement sum of £1.5m within 14 days.

        “I am pleased that we have been able to resolve this final outstanding matter, without the need for a costly trial,” said David Green, director of the SFO.

        “As I said when Mr Vincent Tchenguiz accepted our offer last week, the SFO deeply regrets the errors for which we were criticised by the High Court in July 2012. On behalf of the SFO, I also apologise to Robert Tchenguiz for what happened to him. I reiterate that the SFO has changed a great deal since March 2011, and I am determined that the mistakes made over three years ago will not be repeated.”

        The brothers were arrested in high-profile dawn raids in Mayfair in March 2011. They challenged the SFO through a judicial review in 2012, arguing the agency had not properly prepared evidence against them when it sought warrants.

        LONDON, ENGLAND - SEPTEMBER 29: Robert Tchenguiz (L) and guest attend the launch party for 'Promise', a new capsule ring collection created by Cheryl Cole and de Grisogono, at Nobu London on September 29, 2010 in London, England. (Photo by Ian Gavan/Getty Images for de Grisogono) *** Local Caption *** Robert Tchenguiz©Getty

        The court severely criticised the SFO and quashed the warrants in a case that raised concerns about its ability to investigate and prosecute complex financial crimes.

        Mr Tchenguiz and his brother had argued in court that the SFO put too much faith in a report by individuals from Grant Thornton, an accountancy firm, whom they consider had a conflict of interest. The firm has previously made clear it denies any such conflict.

        In February, the brothers won a ruling in the Court of Appeal, which upheld an earlier decision that Grant Thornton should disclose five reports that the SFO used as the basis to launch its investigation of the pair.

        Two Grant Thornton individuals are liquidators of Oscatello, an investment vehicle of Robert Tchenguiz.

        The SFO investigated the brothers as part of a probe of the 2008 collapse of Kaupthing, the Icelandic bank.

        Europe’s haven eyes stormy high-yield

        Posted on 31 July 2014 by

        With growing concerns that high-yield corporate bonds are overvalued, could Europe offer nervous investors some shelter from future market storms?

        Standard & Poor’s says now that the US Federal Reserve is winding down its stimulus measures and may actually begin raising interest rates, it is likely that US debt markets will start to pull back while the already favourable conditions in Europe will continue.

          “This is because US issuance will probably drop off as rates rise while the low rate environment in Europe will persist, likely leading to even more issuance, particularly among speculative-grade entities,” says Diane Vazza, head of global fixed income research at S&P.

          There is currently a market expectation of a more benign rate outlook for the eurozone, as compared with the UK or US, according to Mathew Cestar, head of European leveraged finance in Emea at Credit Suisse.

          “A stable interest rate backdrop, coupled with historically low default rates, is viewed as a constructive investing backdrop for high-yield investors,” he says.

          “Further, as rates begin to normalise, higher yielding spread product – high-yield bonds – typically outperform better rated product, given its higher spread and shorter duration.”

          One factor underpinning the issuance outlook is that about $649bn of European speculative grade corporate debt is due to mature between the second half of this year and the end of 2019, according to the rating agency, which companies may need to replace.

          Withdrawals from high-yield bond funds reached $4.8bn globally last week, according to a survey from Bank of America Merrill Lynch, based on data from EPFR Global.

          This is the largest weekly outflow since June last year when bond markets were alarmed by the US Federal Reserve’s hint that it would start to taper quantitative easing.

          But Barnaby Martin, a credit strategist with BofA, says fund flows into west European regional funds, which he believes are more focused on bonds issued in euros, appear to have been generally resilient of late.

          Alberto Gallo, head of European macro credit research at RBS, says euro high-yield exchange traded funds (ETFs) have also underperformed less during the past few weeks than US funds, and he believes they might fare better as the Fed approaches the end of monetary easing.

          One reason for greater confidence over Europe is the growing divergence between the US/UK and eurozone economies.

          The UK and the US economies are strengthening at a faster pace as their unemployment and inflation rates move towards their targets of 6 per cent and 2 per cent, respectively.

          “This calls for tightening of monetary policies soon and we expect the Fed and the Bank of England to turn more hawkish later this year,” says Mr Gallo.

          “We think emerging markets are among the most vulnerable to a potential hawkish change in guidance. In contrast, we expect the eurozone will continue to reap the benefits of the European Central Bank’s accommodative stance as well as ongoing fiscal reforms.”

          But Fraser Lundie, co-head of credit at Hermes Fund Managers, says that, while a rise in Fed interest rates will clearly affect the US high-yield market, the secondary effect on other markets is harder to predict.

          “I wouldn’t make a blanket recommendation on a geographical basis,” he says. “In Europe, there are good reasons to like credit – but it comes down to individual sectors, bonds and companies.”

          Pricing of risk assets does not offer much of a margin for error at the moment, according to Adam Cordery, global head of European fixed income at Santander Asset Management, who says that, 20 years ago, bond funds offering yields of more than 10 per cent could generally attract lots of client interest very quickly.

          “Now 4 per cent seems to be the new 10 per cent,” he says. “Unfortunately, investors often want today the yield/risk mix that was available last year, so the products that get launched, sold and bought in size may be more risky than people think. ”

          James Gledhill, global head of high yield at Axa Investment Managers, says fund flows are a more important indicator to watch for the state of the high-yield market than central bank interest rates or government bond levels.

          “These are globally integrated markets, so if there was a big sell-off in the US market, I don’t believe Europe could stand apart,” he says. “But it could prove to be more defensive. We don’t believe European high-yield is very expensive – though it is not cheap.”

          The outlook for credit in Europe is good, partly because of the ECB’s willingness to keep pumping liquidity into the economy, says Wolfgang Kuhn, head of pan-European fixed income at Aberdeen Asset Management.

          “If the Fed raises rates on a gradual and controlled basis, the effect on the European market should be limited,” he says. “But if there is a panic, then Europe would be impacted.”

          David Fancourt, a high-yield manager at M&G Investments, is also sceptical about Europe’s potential immunity to nervousness – or worse – in the US high-yield market.

          “I would never call high-yield any sort of safe haven, because you are jumping on to a ’search for yield’ bandwagon,” he says. “The European market has always been highly correlated with the American market – so if the US market sells off, so will Europe.”

          Buoyant property market lifts Countrywide

          Posted on 31 July 2014 by


          Britain’s biggest estate agent, Countrywide, has seen its turnover jump more than a quarter year on year, topping £334m as activity in Britain’s housing market increases.

          The company, which went public last March and owns 52 high street estate agency brands including Hamptons and Bairstow Eves, is embarking on a redistribution of cash to investors.

            It will increase its ordinary dividend from up to 35 per cent of annual post-tax profits to a maximum of 45 per cent, and hand out up to 35 per cent more in either a special dividend or a share buyback.

            Pre-tax profits rose more than 200 per cent in the six months to June 30 compared with the same period the previous year, to £37m.

            This was boosted by the flotation of property internet portal Zoopla in June. Countrywide was a shareholder before the flotation and is returning £20m raised in the IPO to shareholders through a special dividend of 9p per share, in addition to its interim dividend of 5p per share.

            Countrywide aims to sell off its remaining Zoopla shareholding and will also return that cash to investors, it said.

            “Given the improvement in the housing market, the increased confidence the board has in the outlook for the group, and the cash-generative nature of the group’s businesses, the board believes that it is appropriate to revise the dividend policy,” Countrywide interim chairman David Watson said.

            Cash in hand was £43.5m at the end of June, up from £36.3m the previous year.

            Countrywide intends to use its booming cash pile to acquire other property businesses, Mr Watson said. In the first half of 2014 it spent £36m acquiring 23 businesses, most of which are letting agents.

            Challenges for business in Scots UK exit

            Posted on 30 July 2014 by

            EDINBURGH, SCOTLAND - MARCH 19: Members of the public view the Diageo Claive Vidiz Collection, the world's largest collection of Scottish Whisky on display at The Scotch Whisky Experience on March 19, 2014 in Edinburgh, Scotland. Chancellor of the Exchequer, George Osborne announced today in his final budget before the Scottish independence referendum, that duty on Scotch whisky is to be frozen. (Photo by Jeff J Mitchell/Getty Images)©Getty

            A vote for Scottish independence in September’s referendum could have a modestly negative impact on the UK stock market, according to a report from Barclays.

            The bank says independence would present several companies with significant challenges, ranging from the likely currency regime to pensions, labour costs, taxation and procurement, even though Scotland only accounts for about 2 per cent of sales by companies in the FTSE 350.

              On balance, it says a Yes vote could have significant consequences for sectors such as the banks, oil, defence, beverages, transport, business services, asset management, insurance, utility, property and industrials.

              Scotch whisky is Scotland’s second-largest export industry after oil and gas, with more than 90 per cent of volumes sold outside of the home market. The analysts say that, given their dominance in whisky, drinks firms Diageo and Pernod Ricard are arguably the stocks with most to lose from a move to independence.

              Simon Hales, a Barclays analyst, says: “In our view, the biggest risk to the Scotch industry is related to any potential exit from the European Union. If the EU were not to admit an independent Scotland this could put the product’s geographic indication status under threat as well as putting at risk the tariff-free trading it enjoys in the EU member states. It may also increase the supply of counterfeit product.”

              Barclays analysts say other stocks with potential for an adverse reaction to Scottish independence include BG Group, Wood Group, RBS, Lloyds, BAE Systems, Babcock, SSE, Aggreko, Weir Group and Standard Life.

              On the other hand, they say companies that could experience a beneficial impact include: easyJet, Ryanair, and IAG, as a result of the Scottish government’s commitment to halve air passenger duty. The report says London-based property companies such as Derwent, Great Portland Estates, and Berkeley Group, could also benefit from any weakening of sterling or migration towards London.

              In depth

              Future of the union

              A Saltire flag

              Scotland will decide in a referendum to be held on September 18 whether or not to end the 307-year-old union with England

              The analysts say commentary on independence in recent months has centred on uncertainty concerning what the fiscal terms for oil and gas production are likely to be and which assets/regions are affected by a new maritime border.

              “While we feel this uncertainty may hinder investment in the near term, in the longer term it is clear hydrocarbon development will be a key part of Scottish fiscal revenues – whichever country’s revenues that may be – and, indeed a new independent Scotland may have conditions that ultimately encourage activity,” says the report.

              “Therefore, while any uncertainty may be a short-term concern, in the medium to longer term it is unlikely to change our positive investment view on either the oil service or oil producer sectors. For the oil services potentially most impacted are Subsea 7, Wood Group, Hunting and Technip.”

              Juncker considers creating financial services tsar

              Posted on 30 July 2014 by

              European Commission president Jean-Claude Juncker©Getty

              European Commission president Jean-Claude Juncker

              A new EU financial services tsar charged with regulating the City of London and ensuring financial stability in the region would be appointed in Brussels under new plans being considered by Jean-Claude Juncker, the incoming European Commission president.

              Mr Juncker is weighing the creation of a powerful standalone finance directorate, which some London-based banks fear will tilt wider EU financial policy towards the eurozone.

                The plans to give a single commissioner a united financial services portfolio comes at a critical time for the industry, with the commission implementing a large number of post-crisis financial reforms as Europe’s banking union finds its feet.

                At present EU financial regulation is overseen by Michel Barnier, the internal market commissioner and former French foreign minister. While finance reform has dominated his workload, he was also responsible for developing the 28-nation common market, covering issues ranging from copyright rules to licenses for ski instructors.

                Senior officials say the new finance directorate would probably move banking and markets units from Mr Barnier’s department, and combine them with the financial stability unit stripped from the department for Economic and Financial Affair.

                Carving out another coveted senior job increases Mr Juncker’s options as he attempts the near-impossible task of divvying up commission portfolios without offending member states vying for influential posts.

                There remains doubt over the exact form of the new department and a final decision has yet to be taken. Detailed plans were drawn up five years ago to separate financial services from the internal market portfolio but were ditched at the last moment.

                No frontrunner has yet emerged for the job but potential candidates include Jyrki Katainen, the former Finnish prime minister, Jeroen Dijsselbloem, the Dutch finance minister, and Valdis Dombrovskis, the former Latvian prime minister.

                FT In depth

                European banking union

                The EU’s banking union plans seek to place eurozone banks under the overarching supervision of the ECB

                Banks fear that without an anchor in the department for the single market, financial services rulemaking would be skewed towards the demands of the eurozone. While euro area states often disagree on policy, as a group they will soon wield an effective majority to pass laws over the objections of non-euro states.

                In a recent internal analysis paper on “eurozone caucusing”, the British Bankers’ Association said it was “of utmost importance to maintain the structure of the relevant commission services dealing with financial services so that their work is permeated with the priority of preserving the single market focus”.

                “We suggest that the UK government should proactively defend the unity of [the internal market directorate] and oppose any plan to move financial services units out of it,” the report added.

                Others see the reconfiguration as a way to focus the commission more effectively. Nicolas Véron of the Peterson Institute think-tank sees “little synergy between financial services and the rest of the internal market” and argues the cohabitation meant single market work was neglected during the financial crisis.

                While British officials are alive to the risks of the new financial services commissioner favouring the eurozone, they are relieved the finance portfolio is not being handed to the economic affairs commissioner, whose work is heavily dominated by the euro area.

                You need JavaScript active on your browser in order to see this video.

                No video

                Eurozone lending conditions improve

                Posted on 30 July 2014 by

                Headquarters of the European Central Bank in Frankfurt©Reuters

                Credit conditions in the eurozone are finally easing, after seven years of financial and economic crises that forced the European Central Bank to slash interest rates below zero and pledge trillions in cheap loans to quell a collapse in lending.

                The ECB’s quarterly lending survey reported on Wednesday that banks relaxed credit standards for all types of loans in the three months to June. It was the first time standards for loans to businesses had eased since the second quarter of 2007 – lowering one of the most significant barriers to the region’s recovery.

                  The survey of 137 lenders also reported that demand for loans to households and businesses had continued to rise, as well as offering further signs that disparities in conditions between weaker and stronger parts of the bloc had lessened.

                  “The survey is pretty encouraging,” said Ebrahim Rahbari, of Citigroup. “It’s a long way back to normal for all sorts of credit indicators. But it’s the only area of the economy where conditions had failed to stabilise, and now we have some signs of a turning point.”

                  The news will be welcomed in Frankfurt, where the ECB unveiled a package of exceptional measures in June to stave off the threat of what its president, Mario Draghi, dubbed a “pernicious negative spiral” of weak lending and low inflation.

                  In June, the ECB pledged to offer up to €1tn in cheap, fixed-rate, four-year loans to tackle a sharp fallback in lending to businesses. The ECB requires banks to commit to tailored lending plans if they are to receive the loans for the full four years.

                  The eurozone’s monetary guardian also became the first central bank to cut one of its key interest rates below zero, charging banks 0.1 per cent on reserves parked in the ECB’s coffers.

                  Analysts believe that the stronger lending figures make it less likely that the ECB will take further unconventional measures, which could include quantitative easing. “Credit conditions still play second fiddle to inflation. But the survey strengthens the case of policy makers who would prefer to wait before acting again,” said Mr Rahbari.

                  While conditions in the eurozone remain tight by historical standards, the poll reported a 3 per cent net easing in standards for loans to enterprises.

                  In the bloc’s largest economies, standards were relaxed in France and Italy, while they remained unchanged in Germany, Spain and the Netherlands. The net figure is the difference between the proportion of banks that have eased standards over the past quarter and those that have tightened them.

                  In depth

                  Euro in crisis

                  A logo of the Euro in front of the European Central Bank headquarters in Frankfurt

                  News, commentary and analysis of the eurozone’s debt crisis and its recovery efforts as it struggles with austerity and attempts to regain competitiveness

                  Demand for loans from businesses rose to 4 per cent, from 2 per cent in the first three months of the year.

                  For mortgages, lenders reported a net easing by 5 per cent and a rise in demand of 19 per cent, up from 13 per cent. For unsecured consumer loans, standards eased 2 per cent while demand soared 17 per cent, up from the 4 per cent increase in the first quarter.

                  Respondents to the survey, polled in late June and early July, said that waning fears over the region’s sovereign debt crisis had helped banks to cut their funding costs, prompting a small narrowing in lending margins for business and household loans. They were also confident that demand would strengthen in the three months to September.

                  Consumer prices fall in Germany and Spain

                  Posted on 30 July 2014 by

                  Eurozone inflation, already at its lowest level in four years, may have fallen further last month, after price pressures in two of the region’s largest economies eased.

                  Consumer price inflation in Germany, the currency bloc’s economic powerhouse, hit its lowest level in more than four years in July, falling from 1 per cent to 0.8 per cent, according to the official estimate published on Wednesday.

                    In Spain, the region’s fourth-largest economy, consumer prices fell 0.3 per cent, after rising 0.1 per cent in June, according to the country’s National Institute for Statistics.

                    In both countries, lower food costs and stable prices for energy were big factors in the falls in inflation.

                    Eurostat, the European Commission’s statistics bureau, will report on Thursday whether the eurozone’s inflation rate budged from its June level of 0.5 per cent, in line with the lowest reading since late 2009.

                    While the consensus is for inflation to remain at its current level, some have predicted a fresh dip. Gizem Kara, senior European Economist at BNP Paribas, said: “The Spanish and German releases out so far are consistent with our forecast of 0.4 per cent [inflation] for the eurozone.”

                    Signs that price pressures have eased further will concern policy makers at the European Central Bank, who revealed measures in June aimed at stamping out the threat of a severe bout of falling prices.


                    Marco Wagner, economist at Commerzbank, said another fall in inflation would “fuel speculation once again on further ECB measures”. The central bank targets inflation of below but close to 2 per cent.

                    Even if inflation has fallen this month, further action as early as next Thursday’s policy meeting is unlikely. Policy makers have signalled they will wait until the end of the year to judge the impact of the June measures before deciding whether to act again.

                    Scottish businesses lack Yes vote plan

                    Posted on 30 July 2014 by

                    Fewer than one in five businesses in Scotland have considered making plans for a Yes vote in September’s referendum on independence

                    , according to a survey by professional services firm KPMG.

                    “Our research suggests that most businesses probably do not feel sufficiently informed to make appropriate long-term plans, with any action likely to be taken only when the outcome is known,” said Craig Anderson, senior partner at KPMG in Scotland.

                      Some companies, particularly in financial services, have revealed they are preparing for any potential disruption to their activities that could result if Scotland votes to end its three century-old union with England.

                      Edinburgh-based insurance group Standard Life announced in February it could move parts of its operations to England in the event of independence – a statement intended to reassure the more than 90 per cent of its customers who live elsewhere in the UK or around the world that their interests would be protected.

                      But many businesses believe a vote for independence remains unlikely, with No campaigners enjoying a clear lead in all opinion polls.

                      Company managers also say there would be plenty of time to prepare after a Yes vote, with the Scottish government’s proposed independence not coming until March 24, 2016.

                      KPMG said nearly 84 per cent of the 137 businesses in Scotland that responded to its survey had not considered a continuity plan for independence.

                      In depth

                      Future of the union

                      A Saltire flag

                      Scotland will decide in a referendum to be held on September 18 2014 whether or not to end the 307-year-old union with England

                      The survey asked Scottish businesses what they thought were the most important issues raised by independence. In response, 29 per cent said potential changes to the tax regime, 25 per cent cited the possible impact of a change in currency and 22 per cent said the effect on cross border trade with the rest of the UK.

                      “The potential creation of an independent and wholly separate Scottish tax system could give rise to a period of uncertainty for businesses and individuals, as well as create opportunities to design a more effective system tailored to Scotland’s specific requirements,” said Jon Meeten, head of tax for KPMG in Scotland.

                      Despite warnings from pro-union campaigners that independence could be hugely disruptive, business confidence in Scotland remains strong.

                      The EY Item Club last month forecast Scottish gross domestic product growth of 2.4 per cent, saying 2014 was “shaping up to be the best for Scottish economic growth since the onset of the financial crisis” and that there were no significant signs of any impact from referendum-related uncertainty.