RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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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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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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Archive | November, 2016

Rentokil shares rise on stronger profits

Posted on 27 February 2015 by

Rentokil pest technician Glyn Hughes removes equipment from his van©Bloomberg

Rentokil Initial shares rose to a four-and-a-half-year high on Friday as strong demand for its pest control services combined with cost measures to drive pre-tax profit up 58.4 per cent.

The company unveiled a series of innovative products, including a trap for small vertebrates that sends a text when it catches a creature and an infrared-activated poison dispenser as it seeks to stimulate further growth in its mature markets, where competition is intense.

    Shares in Rentokil jumped 4.4 per cent to 135.3p in London.

    “I feel like we’ve had a pretty good year all in all,” said Andy Ransom, chief executive.

    The company is looking to expand in emerging markets where warm, humid weather is conducive to rapid rodent breeding and termite outbreaks.

    The sector has been boosted by strong growth in global bedbug outbreaks, as a result of warmer weather and rising global travel.

    The FTSE 250 company is targeting Latin America, where revenue jumped 308 per cent, and Asia, with revenue up 29.1 per cent in India, China and Vietnam combined. Mr Ransom said these regions have large pest populations but limited extermination services, providing ample growth potential.

    The company accelerated its merger and acquisition programme, in which it acquired 30 businesses with combined revenues of £66m in 2014, including purchases in Chile, Colombia, India, Mozambique, Korea, Brazil, Brunei, and Singapore.

    Revenue climbed 2.7 per cent to £1.74bn and the company slashed net debt to £260m, a 15-year low, as its costly restructuring continues at a more muted pace.

    In North America, Rentokil increased sales by 6.6 per cent and hopes to fatten sales further through the launch of its “CageConnect” product, a trap for small vertebrates such as skunks, squirrels and raccoons that alerts the operator by SMS when triggered.

    The hygiene division performed less well, with operating profit down 11 per cent to £93.9m.

    Trade in Europe proved challenging, with operating profit down 8.7 per cent, although Mr Ransom said poor growth in the eurozone was not to blame, and the infrared mouse traps should help growth recover when launched.

    ”Rats don’t read the Financial Times . . . If you’ve ever had a rat running around your kitchen you don’t say, ‘let’s wait until the economy picks up’. It’s a very defensive industry, a very reactive industry,” he said.

    Robert Plant, analyst at Morgan Stanley, highlighted that beneath the acquisitions, organic growth was “fairly low compared to other parts of the sector” at 1.2 per cent in 2014.

    “Long term we remain concerned that the core businesses operate in mature markets whose margins may be eroded by greater competition,” he said.

    Imminent QE triggers European fund inflows

    Posted on 27 February 2015 by

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    European funds are attracting a rising tide of money as investors prepare for the dawn of full-blown quantitative easing by the central bank to combat deflation and jump start growth.

    Stocks have reached new highs and bond yields have fallen to ultra-lows as capital inflows to European equity and credit funds increase.

      Funds that invest in European equities took more than $4bn in the week ending February 25, according to data from EPFR Global, helping to push the FTSE Eurofirst 300 index to a seven-year high this week.

      Even Greece, home to a debt crisis in constant danger of boiling over, had its biggest inflow into domestic equity funds so far this year.

      With the European Central Bank scheduled to begin a programme of sovereign bond buying in March in an attempt to boost the currency bloc’s fortunes, investor focus remains on how rates markets will react, said Justin Knight, strategist at UBS.

      European bond funds recorded capital inflows of €1.09bn during the past week, marking a slight demand slowdown from the pace of the previous three weeks, but sufficiently high to enable Germany to sell more than €3bn of five-year debt with a negative yield for the first time.

      Across the eurozone, yields on government debt have fallen to record lows following the ECB’s announcement that it will begin a €60bn a month programme of bond buying in March. As a growing swath of government bond yields drop below zero, countries including France, Finland and the Netherlands have been able to sell debt to investors at a negative yield, meaning that in effect investors pay to lend the governments money.

      “QE is coming at a very opportune time for these bond markets,” said Mr Knight. If the bond buying plan boosts growth and borrowing costs continue to fall it could mean that countries in the eurozone see their debt to GDP ratios drop, making their debt burdens more sustainable.

      Corporate borrowers have also moved to take advantage. US companies including Priceline, AT&T and Mondelez International opted to raise money in European debt capital markets this week, pushing the number of sales by US borrowers in Europe to a record high of $16.5bn so far in 2015.

      But for fund managers, low or even negative yields in fixed income are more uncomfortable.

      Andrew Milligan, head of global strategy at Standard Life Investments, said there was interest among some investors in buying European equities as an alternative.

      “I think the appearance of negative bond yields is one factor, although we should not forget other aspects of this developing story — the improvement in European economic prospects and of course imminent QE affecting the euro currency,” he said.

      Tommaso Mancuso, head of multi asset at Hermes Investment Management, said clarification around QE had removed a significant point of uncertainty about investing in European equities. The fund manager recently rebalanced portfolios to reduce exposure to US equities and increase it in Europe.

      The caveat, he added, is the question of what might happen in the US. “The Europe story could be reversed if the Fed acts in a way that surprises investors. If it spooks the US equity market then it would be likely to have an impact in Europe too.”

      AB InBev plans buy-back and dividend rise

      Posted on 26 February 2015 by

      Bottles of Budweiser beer sit on ice during a press conference in Moscow, Russia, on Wednesday, May 19, 2010. Anheuser-Busch InBev NV, the world's largest brewer, started selling its Budweiser brand of beer in Russia, the company said in a statement today. Photographer:Alexander Zemlianichenko JR/Bloomberg©Bloomberg

      A strong World Cup in markets such as Brazil offset disappointing performance in the US and Europe

      Anheuser-Busch InBev focused on returning cash to shareholders in its fourth quarter results as analysts played down expectations of a “transformational” acquisition from the world’s biggest brewer by market capitalisation.

      The maker of Budweiser launched a $1bn share buy-back and increased its dividend by nearly 50 per cent even after its fourth-quarter earnings fell short of estimates on Thursday.

        AB InBev is subject to renewed rumours that it is set to buy a rival brewer or soft drinks company. The sector has seen heightened M&A chatter since London-listed rival SABMiller’s attempt to buy Heineken was knocked back by the Dutch group.

        Analysts at Bernstein warned that AB InBev’s focus on organic growth and cash returns made any big M&A deal unlikely over the short term. An acquisition of SABMiller would be “expensive” and “high-risk”, particularly as the Anglo-South African group’s share price is close to a record high, according to Trevor Stirling, analyst at Bernstein.

        Shares in the group initially fell but rallied in late afternoon by 3.1 per cent to €113.60 – an all-time high.

        Overall in 2014, a strong football World Cup in markets such as Brazil helped offset some of the disappointing performance in the US and Europe, where beer sale volumes fell 1.4 per cent and 6.1 per cent respectively.

        The Belgian-listed drinks group, which owns brands ranging from Budweiser to Stella Artois, reported adjusted earnings of $5.07bn for the quarter, up 5.6 per cent year on year, but short of the $5.27bn forecast by analysts.

        AB InBev said that improving the performance in its US market, with a focus on more expensive beer and introducing similar products such as cider, was one of its main priorities. But Felipe Dutra, chief financial officer, said that turning round brands such as Budweiser was “not an easy challenge”.

        Budweiser – which goes back 139 years – has struggled to gain market share among younger drinkers in the US, who are opting for craft beer over mass-market rivals. Sales outside the US account for 60 per cent of the brand’s volumes.

        Investors received better news on the dividend, which AB InBev said would rise to €3 for the whole of 2014 – slightly more than an estimated €2.92 and nearly 50 per cent up on 2013’s dividend.

        Mr Dutra outlined plans to increase the group’s dividend yield to 3-4 per cent from its current level of 2.7 per cent, bringing the brewer into line with other consumer goods groups.

        The share buy-back will go ahead throughout 2015. AB InBev’s shares have rallied by nearly a fifth since the start of 2015 as investors anticipated increased cash returns from the brewer.

        Cyberonics and Sorin merge in $3bn deal

        Posted on 26 February 2015 by

        Cyberonics' Vagus Nerve Stimulator pulse model 102©AP

        Cyberonics of the US has agreed to merge with Italy’s Sorin to form a medical devices company with a combined equity value of nearly $3bn, which will be domiciled in the UK under a lower-tax regime.

        Shares in Cyberonics jumped almost 25 per cent to $75.29 in Thursday morning trading in New York, with Sorin up 32.5 per cent at €2.91.

          The transaction, the second-largest US-Europe deal so far this year, underscores US companies’ continued appetite to strike deals that allow them to relocate to a lower tax jurisdiction despite a White House crackdown on so-called tax inversions.

          Executives at the two companies said that the decision to unite was driven by strategic interests rather than tax advantages. Yet the relocation to London will also help them cut their tax bill substantially as UK corporate tax is 21 per cent compared to 35 per cent in the US.

          “As one company we will be able to leverage our combined strengths, capture new opportunities and create new solutions to benefit patients and healthcare professionals alike,” said André-Michel Ballester, chief executive of the Milan-based company.

          The Cyberonics-Sorin combination, which will have a strategic presence in over 100 countries with approximately 4,500 employees, will apply for dual-listing on Nasdaq in New York and the London Stock Exchange.

          After the all-stock transaction is completed Sorin’s shareholders will own approximately 46 per cent of the combined company, while Cyberonics shareholders will control about 54 per cent, on a fully diluted basis.

          The combined company would have pro-forma revenues of approximately $1.3bn and is expected to be cash accretive to all shareholders from 2016, the company said in a statement.

          Houston, Texas-based Cyberonics, which develops medical equipment for the treatment of epilepsy and sleep apnoea, said the merger will help it bolster its presence in the growing business for the treatment of cardiovascular diseases.

          Mr Ballester will become the chief executive officer of the “NewCo” — a name for the new company has yet to be agreed — and Cyberonics’ Dan Moore will become the non-executive chairman.

          “While each company has a strong record of execution on its own, the geographic diversification, scale benefits and strong financial profile of the combined company will create tremendous new opportunities to drive growth and build significant shareholder value,” Mr Moore added.

          A rush of tax inversion deals from US groups seeking to lower their tax rates by buying foreign companies contributed to a frenzy of deal making in 2014, especially in healthcare, where M&A activity added up to $412.5bn out of a global total of $3.6tn.

          The wave of tax-driven deals came close to a standstill after the Obama administration made it harder to pursue fresh inversions but bankers focusing on tax structures said their clients were still looking for similar deals.

          “The logic has changed . . . now the deal is driven by strategic interests and then they think about whether they can also go for a tax inversion,” said a banker who has worked on scores of inversions.

          Rothschild is serving as financial adviser to Sorin Group, and Latham & Watkins is serving as its primary legal adviser. Piper Jaffray is serving as financial adviser to Cyberonics, and Sullivan & Cromwell is serving as its legal adviser, with Legance advising Cyberonics on Italian law matters.

          Companies diary: February 23 – February 27

          Posted on 22 February 2015 by

          Pedestrians walk past a T-Mobile USA store in New York, U.S., on Tuesday, March 15, 2011. A decade after staking $28.5 billion to gain a foothold in the U.S. mobile-phone market, Deutsche Send Telekom AG is now mulling a sale of T-Mobile USA that may value its original investment at less than 60 cents on the dollar. Photographer: Jin Lee/Bloomberg©Bloomberg

          Earning power: Deutsche Telekom has a 67 per cent stake in T-Mobile

          Economic Outlook: Yellen testimony to Senate may hold clues to timing of tightening

          4CAST Economic Calendar

          Diary commentary from FT reporters; data and company announcements, unless otherwise stated, from Thomson Reuters. Company announcements are of information publicly available before last week.

          Monday – February 23

          BHP Billiton’s interim results should see the world’s most valuable mining company give updates on capital spending in the light of a broad commodities downturn. BHP will reveal cuts to its shale drilling budgetfor this year after the oil price slide, having already said it will reduce the number of rigs it operates.

            Investors will also want to know whether BHP is still on track for its most radical corporate restructuring in years — a spin-off of its smaller operating divisions into separately listed South32. The results will show those assets’ performance and may give some guide as to how much group debt will be parcelled into South32 ahead of its launch.

            Consensus estimates are for a 9 per cent year-on-year fall in revenues, to about $31bn, and a drop of more than one-third in underlying post-tax profit to about $5bn. BHP has already flagged that petroleum impairments will hit underlying profit by $200m-$250m. James Wilson

            HSBC’s private bank may account for only 3 per cent of total pre-tax profits, but the unit is still likely to dominate discussions about the annual results.

            A media and political firestorm erupted around HSBC a fortnight ago after dozens of news outlets published damaging details of how it helped clients of its Swiss private bank to hide assets from the taxman between 2005 and 2007.

            Douglas Flint, chairman, is due to appear on Wednesday before the influential Treasury select committee to answer questions about the affair from MPs. Stuart Gulliver, chief executive, is expected to appear before the public accounts committee soon afterwards.

            Analysts expect a slight fall in 2014 pre-tax profits to about $21bn, against $22.6bn the previous year.
            Investors will be watching for any extra provisions for litigation costs and pushing for fresh targets on cost efficiency and return on equity fter earlier ones were abandoned. Martin Arnold


            BHP Billiton H1 $1.47 ($1.47)

            HSBC FY $0.87 ($0.84)

            Holcim Q4 SFr0.97 (SFr0.71)

            Tuesday – February 24


            Ferrovia lFY €0.52 (€0.92)

            Hewlett-Packard Q1 $0.91 ($0.90)

            Macy’s Q4 $2.40 ($2.31)

            Persimmon FY 120p (82.80p)

            Wednesday – February 25


            AP Moeller M Q4 $48.03 (n/a)

            Axa FY €2.07 (€2.03)

            Barratt Develop H1 (FY estimate) 43.03p (30.40p)

            Brit FY 32.15p (n/a)

            Bouygues FY €1.89 (€2.03)

            Com de St Gobain FY €2.19 (€1.86)

            Dollar Tree Q4 $1.14 ($1.02)

            HSBC FY $0.87 ($0.84)

            Liberty Media Q4 $0.17($5.17)

            Man Group FY $0.18 ($0.14)

            Target Q4 $1.46 ($0.90)

            Telefónica FY €0.83 (€0.99)

            TJX Companies Q4 $0.90 ($0.81)

            Thursday – February 26

            ● Fourth-quarter earnings before interest, tax, depreciation and amortisation at T-Mobile US, the smallest of the main US mobile phone networks, rose 41 per cent year-on-year to $1.75bn.

            T-Mobile US has grabbed market share by paying the contact termination fees of customers who switch. It gained 1.3m of the most lucrative “postpaid” customers in the fourth quarter.

            The US subsidiary now represents about 35 per cent of Deutsche Telekom’s revenues and a fifth of core profits.

            The German telecoms operator attempted to sell its majority stake in T-Mobile to larger rival Sprint last year, believing it lacks the scale to compete with market leaders AT&T and Verizon.

            But the deal collapsed in the face of hostility from US regulators, and Deutsche Telekom rejected an offer for T-Mobile from French carrier Iliad.

            Analysts predict stable earnings in Germany, Deutsche Telekom’s core market, following a 2.1 per cent decline year-on-year in the third quarter. Revenues and earnings in central and eastern Europe, excluding Germany, are expected to show a worsening decline.

            Deutsche Telekom is investing heavily in high-speed mobile and broadband networks to defend its position in its German home market.

            Chief executive Timotheus Höttges said last month that the company planned to spend €23.5bn over five years to improve German infrastructure.

            Deutsche Telekom is moving to a pan-European “internet protocol” network in which all customers, whether on mobiles or landlines, make calls and send data through a unified infrastructure.

            Deutsche Telekom’s entire customer base in Slovakia and Macedonia was moved to “all-IP” last year. Analysts expect a further rollout of the technology will allow the telecoms operator to cut costs. Jeevan Vasagar

            ● It is almost exactly a year since Ross McEwan launched Project Cook, a five-year restructuring plan designed to finally put Royal Bank of Scotland
            back on a stable footing after it was almost blown away by the financial crisis.

            The New Zealand-born RBS chief executive is expected to say that the plan is ahead of schedule when he presents annual results that analysts predict will feature a return to pre-tax profits after six consecutive years of losses.

            RBS has been pulling out of many activities in Asia, the Middle East, continental Europe and the US. It has drastically cut back its once mighty investment bank, listed its Citizens branch network in the US and is selling the international part of its Coutts private bank in Switzerland.

            Mr McEwan, who ran RBS’s retail bank before he replaced Stephen Hester as CEO in 2013,
            told the Financial Times in a recent interview that he expects to hit his £1bn cost-cutting target for the past year. Investors will be keen to hear of progress in shedding the £38bn of toxic assets put into its “bad bank” in 2013. Martin Arnold


            ACS FY €2.25 (€2.20)

            Ahold FY (Q3 estimate) €0.89 (€0.92)

            Allianz FY €13.91 (€13.05)

            Ambev Q4 R0.30 (R0.30)

            Anheuser-B InB Q4 $1.37 ($1.47)

            BAT FY 206.96p (216.60p)

            D Telekom Q4 €0.10 (€0.08)

            Domino’s Pizza Q4 $0.93 ($0.78)

            Gap Q4 $0.73 ($0.68)

            Premier Oil FY $0.38 ($0.43)

            Repsol Q4 €0.27 (€0.14)

            RBS FY 38.19p (-38.30p)

            RSA Insurance FY 25.00p (34.62p)

            Friday – February 27

            As long as IAG’s €1.35bn bid for Aer Lingus remains stuck on a Dublin runway while the Irish government weighs whether or not to accept, investors know to expect little more on that subject from the UK-based airline group when it publishes annual results.

            The focus is instead likely to be on what the future holds in a world of far lower fuel prices and investors will want an update on hedging policy. The question will be whether IAG sees fit to raise its 2015 target for operating profits of €1.8bn. While lower fuel prices may have made life more difficult for some heavily hedged legacy carriers by encouraging even more aggressive competition — from Gulf rivals in particular —this is not expected to affect IAG’s carriers.

            But there may be questions about how IAG intends to work with Qatar, the Gulf airline which last month revealed that it had taken a 10 per cent stake in the airline group.

            IAG said in November it expected 2014 operating profit to increase by between €550m and €600m on 2013’s €770m, so there seems little chance that the parent of British Airways and Spain’s Iberia will disappoint. Peggy Hollinger


            IAG FY €0.405 (€0.21)

            Airbus Q4 €0.99 (€1.14)

            Lloyds Banking Group FY 7.81p (6.92p)

            Pearson FY 65.27p (70.10p)

            Vivendi FY €0.45 (€1.15)

            William Hill FY 29.59p (28.80p)

            Results forecasts, from Thomson Reuters, are for fully diluted, post-tax EPS in local currency for the stated fiscal period. The comparable period of the previous year is bracketed. Non-UK reporting periods are broken by quarter: Q1, Q2, Q3, Q4. UK periods are designated: Q1, H1 (first half), Q3 and FY (full year). Thomson Reuters calculates mean earnings estimates based on a majority policy where the accounting basis used for each company estimate is that used by the majority of contributing analysts

            Sweden dives deeper into negative territory

            Posted on 12 February 2015 by

            The headquarters of the Riksbank, Sweden's central bank, stand in Stockholm, Sweden, on Thursday, Nov. 29, 2012. Sweden's Riksbank is unlikely to back proposals for a cap on banks' foreign borrowing even after the government and regulator warned that the industry is too reliant on international funding markets. Photographer: Casper Hedberg/Bloomberg©Bloomberg

            In global currency wars, one of the smaller players has just fired a very big weapon.

            Sweden’s Riksbank on Thursday became the first central bank to move its main repo rate into negative territory — by 10 basis points to -0.1 per cent — and launch quantitative easing.

            The move followed four rate cuts in 18 days from the Danish central bank, which has cut its deposit rate – levied on money parked at the central bank – to a record low of -0.75 per cent. The actions of Sweden’s central bank are raising wider questions about what appears to be a worldwide race to the bottom for interest rates.

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            The Swedish and Danish rate cuts come just weeks ahead of the start of the European Central Bank’s QE programme and weeks after the Swiss abandoned the defence of their currency.

            Gary Jenkins, chief credit strategist at hedge fund LNG Capital, said the Swedish and Danish moves highlighted the difficulty for small, independent central banks in resisting pressure from the likes of the ECB, US Federal Reserve and Bank of England.

              “It’s almost like a tidal wave. Even though you have got a firm hold, there is a huge amount washing over you. Yes, they are independent. Yes, they can do what they want. But the truth is that in this very co-ordinated macro world that we live in it is very difficult to be properly independent,” he said.

              The scale of the Riksbank’s actions surprised the markets, with the Swedish krona falling to a six-year low against the dollar.

              The Swedish central bank was the first to raise rates after the global financial crisis, to 2 per cent in 2011. But inflation soon began to slide – headline rates have been negative for most of the past two years in Sweden – leading to heavy criticism from the likes of Paul Krugman, the economist, and a reversal of the rate rises.

              Now the Riksbank has taken a leap into the unknown with its rate cut and said they could fall further, depending on the reaction from banks and the public. Some economists worry that people could start hoarding cash if rates remain negative.

              The Riksbank also announced the purchase of a modest SKr10bn in government bonds but said it was ready to “act quickly where necessary” even between normal monetary policy meetings.

              Reaction was mixed. Mikael Sarwe, head of strategy in Sweden for bank Nordea, said: “This smells like a central bank that is panicking. It is very hard to understand [their actions] when you look at the economy with GDP at 2 per cent, employment rising by 1.5-2 per cent, house prices rising by 15 per cent, credit growth booming; all this says that you should not stimulate the economy any more.”

              Janet Henry, European economist at HSBC, said the Swedish and Danish central banks had made a “pre-emptive strike” ahead of the ECB’s QE launch in March.

              “These are very small players on the global stage and that is why we are seeing action sooner rather than later,” she said.

              The Riksbank said there were signs the drop in inflation had bottomed out and consumer prices would rise gradually. But it appeared worried that low inflation expectations could become entrenched, a potential problem for forthcoming wage negotiations.

              Mr Sarwe said the Riksbank’s move could have the opposite effect. “In doing this, they might be pushing inflation expectations down even more because they are signalling to the population ‘we have a huge inflation/deflation problem’.”

              Economists expect the Swedish cut to put further pressure on neighbouring central banks to do likewise. Norway is likely to cut rates next month despite fears of a housing bubble and it being one of the few countries to have inflation close to its target.

              Oystein Olsen, Norges Bank governor, said: “We are a small, open economy. Our monetary policy is affected by what is happening abroad. To explain why Norwegian rates have been so low for such a long time, the short answer is that rates internationally are so low.”

              Bellway reports off-plan sales boost

              Posted on 10 February 2015 by

              The sky's the limit: a Bellway home under construction - A builder moves a piece of roof timber into position on a construction site for residential housing by Bellway Plc., in Epping, U.K., on Wednesday, Jan. 19, 2011. A U.K. housing-market gauge stayed close to an 18-month low in December as cold weather saw demand for homes wane and fewer people put their properties on the market. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

              Bellway, one of Britain’s biggest housebuilders, said sales of off-plan homes had jumped by a quarter in the first half of its financial year, signalling that the UK housing market remains robust despite fears of a slowdown.

              The housebuilder added it increased the number of housing completions by 15.7 per cent in the six months ended January 31, to 3,754 compared with the previous year, with the group taking an average of 139 reservations per week.

                It sold 4,200 off-plan properties worth £975m, a 25 per cent rise, it said in a trading update on Tuesday.

                Chief executive Ted Ayres said he expected to deliver further earnings growth in the financial year, helped by plans to open a new regional division. The Newcastle-based company has seen particularly strong growth in the north of the UK, with 1,822 homes completed, an increase of 23.6 per cent compared with last year.

                This echoes the strong regional performance of other housebuilders such as St Modwen, which reported record profits last week as a result of a robust recovery beyond the traditional strongholds of London and other major cities.

                Data released in January by the National House Building Council showed that Yorkshire and the Humber, Wales, Northern Ireland and West Midlands are all now outpacing London in terms of the year-on-year percentage growth in the number of new builds being registered.

                Bellway said it expects operating margins of 20 per cent for the full fiscal year, up from 15.6 per cent in the same period last year, thanks to a boost in average selling prices. Its average house prices were up 3 per cent year on year to £219,000, as the company focused more on prime locations.

                Bellway stepped up its investment in land during the half-year, investing £335m compared with £240m in the same period last year. It also has plans to open a 16th regional operating division this financial year.

                “With advanced plans to open a 16th division in the second half of the financial year, Bellway is well positioned to deliver further earnings growth,” Mr Ayres said.

                Mr Ayres added that market conditions remained “favourable” coming into 2015, but there was a slowdown compared with the same period a year earlier, which was when the Help to Buy subsidy scheme had been introduced. City analysts said that the trading update indicated a positive moderation taking place in the sector following the white-hot growth levels seen last year.

                “The housebuilders are as a group starting to reach cruising altitude as the percentage gains in volumes and pricing start to reduce and the market stabilises,” noted Stephen Rawlinson, analyst at Whitman Howard.

                “Bellway is one of the groups that wants to fly at a higher altitude and is still a bit more foot down than others. All is set well for the housebuilders in our view and we remain positive.”

                Shares rose 1.4 per cent to 1,860 in early trading.

                European stocks struggle for momentum

                Posted on 10 February 2015 by

                Tuesday 08:30 GMT. Fretting over Greece’s stand-off with its creditors, concerns about the conflict in Ukraine and more evidence of softening demand in China are contributing to a cautious mood across global markets.

                After a mixed Asia-Pacific session for stocks, the FTSE Eurofirst 300 is down 0.2 per cent, while US index futures suggest the S&P 500 will climb to 2,049, recovering two of the nine points lost at the start of the week.

                  The fragile risk appetite can be seen in the industrial commodities sector, where copper is slipping 0.6 per cent to $5,650 a tonne in a broadly downbeat base metals space, and Brent crude is giving back some of its recent sturdy gains, retreating 1.2 per cent to $57.66 a barrel.

                  Perceived havens are muddled. Gold is up $3 to $1,242 an ounce but the Japanese yen is several pips weaker against the dollar at Y118.71. Treasury prices are softer, pushing 10-year yields up 4 basis points to 1.98 per cent — hovering near a four-week high following last Friday’s strong US jobs report.

                  In contrast, the 10-year German Bund, though up 1bp on the day, is yielding just 0.36 per cent. The meagre payout reflects the ultra-easy policies of the European Central Bank as it uses stimuli to battle deflation and weak growth, and also “flight to safety” flows as investors worry about Greece and Ukraine.

                  Investors are wary ahead of what could prove to be a crucial few days for both crises.

                  Greek finance minister Yanis Varoufakis will meet his 18 euro-area peers at an emergency gathering in Brussels on Wednesday to discuss Athens’ desire to renegotiate the terms of its bailout.

                  Rhetoric suggests Greece and Germany are far apart in agreeing a deal, though some in the market seem hopeful a compromise may be reached. Greek three-year borrowing costs are down 101 basis points to 20.01 per cent.

                  The euro is little changed on the session at $1.1326, a little more than 2 cents above its 11-year low hit late last month.

                  The same day will see a summit in Minsk between the leaders of Ukraine, Russia, Germany and France, designed to halt an escalation in fighting between Kiev and Moscow-backed rebels.

                  If no progress is made, traders fear heightened tensions between Moscow and Washington — particularly should the US decide to arm Kiev. More sanctions against Russia may also hit the European economy.

                  The rouble is 0.1 per cent weaker at Rbs65.90 but the Micex equity index is adding 0.6 per cent.

                  Another issue making investors wary is the latest prices data out of China, which are adding to concerns about global deflationary pressures.

                  Consumer price inflation in China fell to a five-year low in January, undershooting expectations with a rise of 0.8 per cent year-on-year. Analysts’ consensus forecasts were for a 1 per cent increase and the outcome increases fears that growth in China’s economy continues to slow.

                  Meanwhile, Chinese factory gate prices fell for their 35th consecutive month, with the producer prices index down 4.3 per cent year-on-year in January, dragged down by falling energy and commodity prices.

                  Analysts offered different interpretations for the data, with some attributing it to a one-off timing impact. Julian Evans-Pritchard, China economist at Capital Economics, said the CPI reading was affected by the Chinese new year holiday falling in January last year and February this year.

                  Economists at ANZ agreed that the later timing of Chinese new year contributed to the falling CPI, but argued that deflation has become a “real risk” for China.

                  “PPI inflation suggested that the out-of-factory prices remained extraordinarily soft due to sluggish demand for manufactured goods,” they said.

                  The Shanghai Composite index rose 1.5 per cent as traders bet that weak inflation allowed more room for Beijing to ease monetary policy.

                  Elsewhere in the region, Japan’s Nikkei 225 contracted 0.3 per cent, though Nissan bucked the trend after Japan’s second-largest carmaker raised its annual profit forecast on the back of surging car sales and a weaker yen.

                  Additional reporting by Jennifer Thompson in Hong Kong

                  CME pit closure sparks member buyout call

                  Posted on 10 February 2015 by

                  In this Sept. 24, 2014 photo, traders work in the ten-year bond pit on the floor of the CME Group in Chicago. Main Street investors have poured a trillion dollars into bonds since the financial crisis, and helped send prices soaring. As fund managers and regulators fret about an inevitable sell-off, the bigger fear is that when people go to unload, there won’t be anyone to buy. (AP Photo/M. Spencer Green)©AP

                  The demise of futures trading pits in Chicago and New York has triggered debate over exchange membership, a privilege some now view as a burden in an era of electronic markets.

                  A membership gave traders and brokers access to the once-bustling trading floors of CME Group, the biggest futures exchange operator. CME last week announced it was closing most open-outcry futures trading, abandoning a tradition dating to the 19th century.

                    But memberships are to survive, prompting pointed questions to CME executives at a member meeting last Friday, attendees said. More exchange members are scheduled to see the executives in New York on Wednesday.

                    Ray Cahnman, chairman of TransMarket Group, a prominent Chicago-based proprietary trading firm, told the FT that memberships were a “throwback to when the pits were the main thing. Now they’re not. So you should find a way to reduce them.”

                    Pat Mulchrone, a founding partner of broker Advantage Futures, said CME should buy out members’ stakes.

                    “I think it’ll make the exchange stronger in the long term,” Mr Mulchrone said.

                    Members are still entitled to discounts on exchange fees even if they trade electronically. But memberships can cost millions of dollars as traders must buy or lease at least one for each CME exchange they use, including the Chicago Board of Trade and New York Mercantile Exchange.

                    Mr Cahnman said the membership system gave CME a “more complicated fee structure” than competing exchanges such as Intercontinental Exchange and Deutsche Börse’s Eurex, threatening its appeal as a trading venue.

                    The decision to close futures pits will reduce demand for memberships as individual floor traders exit, said Mr Cahnman, a member and CME shareholder.

                    It would be a big plus to CME stockholders if access to the lowest exchange rates was available without requiring the added burden of owning memberships

                    – Ray Cahnman, chairman of Transmarket Group

                    “With only limited demand for memberships offset by a very large supply of unleased memberships, the CME board has an opportunity to make a tender offer for memberships at prices that are viewed as beneficial to CME stockholders,” Mr Cahnman said. “It would be a big plus to CME stockholders if access to the lowest exchange rates was available without requiring the added burden of owning memberships.”

                    As CME became a for-profit company and acquired other exchanges, it compensated members as they ceded some of the rights of owning a seat. Each member of the Nymex got $750,000 when CME took it over in 2008, for example.

                    Buying out all of CME’s 3,138 “class B” memberships could cost more than $1bn at current prices, industry executives said. CME said in response to an FT query: “Like all of our customers, class B shareholders provide important liquidity.”

                    Dozens of memberships are available for lease on the CME website, while only a handful of applicants were recently seeking new memberships. A full membership on CME’s Chicago Mercantile Exchange sold for $720,000 on Friday, down from $785,000 in mid-January.

                    Minister raises concern on HSBC clean up

                    Posted on 10 February 2015 by

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                    Doubts over HSBC’s claims to have cleaned up its act after alleged collusion with widespread tax-dodging by rich clients of its Swiss private bank have been raised by the UK business secretary in letter to bank chairman Douglas Flint.

                    Vince Cable said he was worried by the sacking of Sue Shelley, the head of compliance in Luxembourg at HSBC’s private bank, who told the BBC’s Panorama programme that she was dismissed 18 months ago for flagging up tax-dodging problems.

                      HSBC has responded to the allegations that it colluded with thousands of wealthy clients in helping them keep money hidden from tax authorities by arguing that its Swiss private bank has “undergone a radical transformation in recent years”.

                      The bank said: “We have taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.”

                      But Ms Shelley, who won an unfair dismissal case in an industrial tribunal, told the BBC on Monday night that she was fired for pointing out compliance failures as recently as 2013. “I think the verbal messages were great but they weren’t put into practice and that disturbed me greatly,” she said.

                      Mr Cable said in his letter to Mr Flint: “I have been particularly troubled at suggestions that some elements of these practices may have continued much more recently, notably the allegations of your private bank’s former head of compliance in Luxembourg.”

                      The political storm prompted by the revelations about HSBC have raised the possibility that the bank could face fresh legal action in the US and UK.

                      British politicians have promised to hold an inquiry into the affair and a Treasury minister has raised the possibility of launching a criminal investigation of the bank, as the US, France, Belgium and Argentina have already done.

                      Meanwhile, the US Department of Justice could re-examine a 2012 agreement that shields HSBC from prosecution for earlier money-laundering infractions, according to people familiar with the agency.

                      The DoJ is still investigating whether HSBC helped clients avoid US taxes, and, separately, whether the bank manipulated foreign exchange markets.

                      In relation to those probes, officials could reopen the DPA, choose to impose other penalties, or none at all, people familiar with the case said. The agreement did not limit the DoJ in the tax probe.

                      The revelations could put additional pressure on the DoJ to be tough on HSBC in the pending probes.

                      “The recent revelations about HSBC’s efforts to shield individuals from the laws of the US and other nations are just the latest in a long list of troubling misdeeds by the bank,” said Congresswoman Maxine Waters, the senior Democrat on the House Financial Services Committee.

                      “While HSBC has paid billions in fines to the United States and other nations, it outrages me that not a single individual has been prosecuted or held accountable.”

                      HSBC argues that the recent allegations – stemming from a leak of client account details to several media organisations – date back to 2005-2007 when Swiss private banking “operated very differently to the way it does today”.

                      “Private banks, including HSBC’s Swiss private bank, assumed that responsibility for payment of taxes rested with individual clients, rather than the institutions that banked them,” it said. “We are also cooperating with relevant authorities investigating these matters and we acknowledge and are accountable for past control failures.”

                      The Labour opposition party has focused its attack on the appointment by David Cameron of Lord Green, former HSBC chief executive and chairman, as a trade minister in 2011 — after details of the Swiss tax evasion scandal became known. Lord Green declined to comment.

                      But the role of Lord Green in the affair will come under scrutiny from the powerful UK Commons public accounts committee, which is investigating tax avoidance and is due to question Lin Homer, the head of HMRC, on Wednesday.

                      “Either he [Lord Green] didn’t know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices,” said Margaret Hodge, the committee’s chairman.

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