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Thursday, 12 December 2013

JP Morgan facing $2bn fine for involvement in Madoff ponzi scheme

Bank tentatively agreed to pay $2bn to settle allegations it failed to inform US authorities of the jailed fraudsters suspicious activity

JP Morgan Chase, the biggest bank in the US, is facing another multi-billion dollar fine, this time deriving from its involvement with notorious Ponzi scheme fraudster Bernard Madoff.

The bank has tentatively agreed to pay $2bn to settle allegations it failed to inform US authorities of the jailed fraudsters suspicious activity, according to people familiar with negotiations. A settlement deal with the Justice Department could come as early as next week. The bank declined to comment.

Madoff was arrested at his Manhattan penthouse five years ago this week after his $20bn scam came to light. JP Morgan was his bank for two decades and the US authorities suspect it continued to service his business even as it suspected something was wrong.

The fraudster himself predicted the bank would one day face a big fine. In a 2011 interview with the Financial Times he said: “JPMorgan doesn’t have a chance in hell of not coming up with a big settlement.” He claimed: “There were people at the bank who knew what was going on,” an assertion that JP Morgan has consistently claimed is false.

According to court papers filed by Irving Picard, the trustee charged with recouping losses for Madoff’s victims, the bank had grave doubts about Madoff 18 months before his scam unwound. The documents quote one banker claiming Madoff’s “Oz-like signals” were difficult to ignore.

The filings also quote a June 2007 email from a senior JP Morgan banker warning colleagues that another banker “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”

The bank filed a “suspicious activity” report with UK authorities in 2008 but did not take a similar step in the US.

JP Morgan has always denied wrongdoing and disputes Picard’s findings but this week chief executive Jamie Dimon signalled that a deal was in the offing and suggested it was easier for the bank to settle than to fight its corner in court. “You read about Madoff in the paper the other day. We have to get some of these things behind us so we can do our job,” he told a conference in New York on Wednesday, first reported by the Financial Times.

According to a report in the New York Times on Thursday, the settlement would include a so-called deferred-prosecution agreement. Such an agreement would list all of JP Morgan’s alleged criminal wrongdoings but stop short of an indictment as long as the bank acknowledges wrongdoing and pays the fines.

The agreement would be the second time in a month that JP Morgan has been forced to acknowledge wrongdoing. On November 19 the bank paid a record $13bn to settle charges that it routinely bundled poor quality home loans into securities that were billed as high-quality to investors. That settlement too required the bank to own up to wrongdoing, something Wall Street has fought against for fear of triggering more shareholder lawsuits.

If the fine comes before Christmas it will cap an annus horribilis for JP Morgan. Alongside the $13bn fine for its involvement in the subprime loan scandal, JP Morgan has:

paid $4.5bn in November to settle allegations it has mis-sold mortgage bonds to pension funds and other institutional investors;
paid $920m in September to settle US investigations into the “London Whale” trading scandal;
in the same month, paid another $390m in refunds and $80m in settlement for billing credit card customers for identity theft protection they did not receive;
paid $410m in penalties and repayments in July related to alleged manipulation of California and midwest electricity markets;

Investors, however, have largely discounted the historic scandals and the bank’s share price is currently close to a year high.

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Tuesday, 17 September 2013

Slumping car sales underline fragility of eurozone economy

The UK is the only major European market to record more new passenger car registrations in 2013 than last year

Slumping car sales across the EU in August have underlined the fragility of the eurozone economy, with the cumulative figures for the year to date at a record low.

The UK remained the only major European market to record more new passenger car registrations in 2013 than last year, with 10.9% more sales this August than last.

Across the EU, sales dropped to 653,872 vehicles in August – traditionally a slow month but a figure that still remains 5% lower than in 2012. For 2013 so far, the total stands at just 7,841,596 – the lowest figure since the European Automobile Manufacturers' Association (ACEA) started compiling them in 1990.

After a slight rise in July, the trend continued downwards outside the UK, with what is set to be a sixth straight year of falling sales. Sales slid further in France, Italy and Germany. In Cyprus sales this year are down 40%. ACEA said: "The downturn prevailed across significant markets."

The PSA Group, manufacturer of Peugeot and Citroën cars, continued to lose ground to rivals, with an 18% drop in registrations, while market leader Volkswagen Group's sales fell 11% in August. VW-brand vehicles alone were down 17.3% year on year – a statistic the German manufacturer partly attributed to freak weather that damaged thousands of vehicles ahead of delivery.

Despite the downward trend, analysts believe the picture could soon improve for car manufacturers. Mark Fulthorpe, an automotive analyst at IHS, said: "The general sense we get is that we are now bumping along the bottom. At least in the car market, the rate of decline has slowed.

"There have been some positive developments in France and Germany in recent months, but not enough to offset problems in the periphery – but we may get a more neutral picture ahead."

He pointed to the experience of Britain and the US to argue that car sales in Europe could pick up before a full economic recovery. "The age of vehicles on the road is increasing, and servicing costs and repair costs for older vehicles will give many drivers reason for a newer car when consumer confidence returns at all.

"That has been the impetus for the turnaround we've seen in the American market, where many purchases were deferred in the darkest days of the crisis."

He added: "It's only in last few weeks that commentators in the UK have really thought that the economy has turned, but you can see from the last year's figures that people were already making those big-ticket purchases here."

The UK has now seen 18 months of consecutive rises, with the market for new cars in August up to 65,937 units. Although September's figures will be more significant, the summer continued the trend of double-digit rises.

The Society of Motor Manufacturers and Traders ascribed the growth to increasingly confident consumers being offered attractive terms, including a surge in sales of alternative fuel cars. Mike Hawes, SMMT's chief executive said: "Buyers are clearly capitalising on attractive deals and new technologies against a backdrop of increasing economic confidence."

Article Source : http://www.guardian.co.uk

Thursday, 12 September 2013

Lloyds must help TSB, Office of Fair Trading says

Lloyds Banking Group now required to bolster TSB's profitability by £50m a year in its first four years while giving it another £40m

Lloyds Banking Group has been ordered to help the 631-strong TSB branch network become more profitable under a series of measures set out by the Office of Fair Trading to make the offshoot a stronger high street competitor.

The move will be seen as clearing the way for government to kickstart the sale of its stake in 39%-taxpayer owned Lloyds Banking Group, which was first signalled by chancellor George Osborne in his Mansion House speech in June.

But the OFT's verdict is a frustration for Lloyds which just two days ago launched TSB as a new brand with much fanfare. It will now be required to bolster TSB's profitability by £50m a year in its first four years while giving it another £40m. But Lloyds will be relieved that is not being forced to include more branches in the spun-off TSB, which is likely to be floated on the stock market next year.

The announcement by the OFT follows an analysis commissioned by Osborne in June of whether the sale of the TSB branches as well as the 315 outlets by Royal Bank of Scotland – ordered by Brussels as a condition of the 2008 taxpayer bailouts – will be enough to increase competition on the high street.

The OFT concludes that the RBS sell-off, codenamed Rainbow, does not need alteration. A separate analysis of splitting RBS into a good and bad bank, also commissioned by Osborne, is ongoing. Business secretary Vince Cable said: "We must not forget the potential implications of a 'good bank/bad bank' split of RBS".

The competition body acknowledges that asking Lloyds to put more branches in to the TSB network could risk "incurring further delay and additional sunk costs" but wants steps to be taken to ensure that the TSB offshoot attains a 4.6% share of the current account market. As currently constructed, the OFT estimates TSB's current account market share is between 4% and 4.5%.

The announcement by the OFT came as a top Bank of England official attempted to justify his claim that bad lending by the Britannia building society was the cause of the £1.5bn capital hole in the Co-operative Bank, which merged with the mutual lender in 2008.

Andrew Bailey, deputy governor of the Bank of England, wrote to the Treasury select committee to set out the cause of nearly £1bn of losses on loans at the Co-op.

Bailey provided the analysis of the Co-op's losses following evidence given to the committee last week by Neville Richardson, the former head of Britannia which merged with Co-op in 2008. Richardson, who ran the combined entity until 2011, told MPs that he had left the organisation with "no issues" and insisted that Britannia's loan book was well managed and in line with other lenders.

In a letter obtained by the BBC, Bailey tells the committee's chairman Andrew Tyrie that some 75% of the £970m of bad loan losses at the Co-op between the beginning of January 2012 and the middle of 2013 were in the bank's non-core book, which in turn is made up of between 85% and 90% of former Britannia loans in 2013 and around 75% in 2012. Of the £970m, £288m were from the core lending book and £682m from the non-core book.

Article Source : http://www.guardian.co.uk

Tuesday, 10 September 2013

UK GDP growth limited to 1% in longer term, economists warn

IEA paper predicts a post-crisis era of sluggish growth, tempering recent good economic news stories

Britain's economic growth will be limited to just 1% in the longer term as higher government spending, dwindling North Sea oil stocks and an ageing population all take their toll on the country's potential output, a group of economists has warned.

Tempering the recent spate of upbeat news on the UK and chancellorGeorge Osborne's assertion that the economy has "turned a corner", a new paper predicts a post-crisis era of sluggish growth.

The long-term, sustainable growth rate in the UK may be only 1%, compared with the 2.5% that the Treasury thought standard from the 1980s to the 2000s, according to a discussion paper for free-market thinktank the Institute of Economic Affairs (IEA). "Until 2008 the UK had got used to our economy doubling in size every 25 years: unless action is taken it will now only double in size every 70 years," says the group of economists, which includes former Treasury adviser and UK Independence Party candidate Tim Congdon, and Andrew Lilico, the managing director of Europe Economics, an economics consultancy.

They highlight the weakest recovery in "industrial history" and blame a lack of growth for the government's deficit reduction plan being off target.

Commenting on the analysis, the IEA's editorial director, Philip Booth, said: "People shouldn't get too excited about better growth figures and recent forecasts from groups such as the OECD [Organisation for Economic Co-operation and Development]. We still have a long way to go before we recover the loss of output from the 2008 crash. Furthermore, the medium-term prospects for growth do not look healthy unless the government determinedly reduces government spending and regulation."

Following a string of positive indicators on the fledgling UK recovery, the OECD has lifted its forecast for the country's economic growth in 2013. The upgrade to projected growth of 1.5% this year came after stronger-than-expected growth of 0.7% in the second quarter, falling unemployment, and survey evidence suggesting the strongest growth in manufacturing output for almost two decades.

But the economists writing in the IEA paper painted a gloomier current economic picture, noting that five years on from the start of the financial crisis in 2008, GDP is still 3% below its peak. "That is unprecedented in 170 years of shocks that have hit the UK economy since industrialisation," sais the paper, "Will flat-lining become normal?"

Predicting sluggish growth rates, the IEA authors blame higher government spending and tax as a proportion of GDP, more regulation of energy and financial services, the depletion of North Sea oil, higher debt levels for government, business and households relative to GDP. They also note demographic pressures from an ageing population as well as the effects of "low-productivity immigrant workers being added to the working population", though the IEA stressed this was an analysis of the impact of much of the UK's immigrant labour being relatively unskilled, not an argument against immigration.

The paper advocates "bold" reforms if the UK wants to get back to sustainable growth rates of around 2% or more over the long run, including: the rolling back of government activity and influence; the regeneration of affordable credit channels to unencumbered households and businesses; and the implementation of radical supply-side measures.

Booth added: "Britain's growth problem is a productivity problem and not a problem caused by insufficient government borrowing. The government should take note. The solutions lie in its hands."

The comments from the free-market thinktank contrast with remarks from the leader of the UK's trade union movement, Frances O'Grady, on Monday. In her first speech to the annual congress as TUC general secretary, O'Grady called for the implementation of a political action plan to stimulate growth, paid for by taxing the rich, whose wealth had increased dramatically in the past few years.

Article Source : http://www.guardian.co.uk

Wednesday, 4 September 2013

UK economy upgraded by OECD

Organisation for Economic Co-operation and Development gives vote of confidence, revising growth forecast from 0.8% to 1.5%\

Paris-based thinktank the Organisation for Economic Co-operation and Development has lifted its forecast for UK growth in 2013, in the latest vote of confidence for the fledgling recovery.

In May, when it last released projections for the world's major economies, the OECD was expecting 0.8% growth in the UK for 2013. On Tuesday, it said recent survey evidence suggested GDP would expand by 1.5%, grouping the UK with the US and Japan as economies where, "activity is expanding at encouraging rates".

The upgrade from the OECD comes after a string of positive indicators for the UK, including stronger-than-expected growth of 0.7% in the second quarter, falling unemployment, and survey evidence suggesting the strongest growth in manufacturing output for almost two decades.

Alongside revising up its forecast for the UK, the OECD used its interim economic assessment to warn that while a moderate recovery is underway in many major economies, global growth remains sluggish, and there are still risks to the upturn.

The OECD's economists single out the impact of the Federal Reserve's plans to phase out its massive programme of quantitative easing as creating particular problems for some economies.

"In many emerging economies, loss of domestic activity momentum together with the shift in expectations about the course of monetary policy in the United States and the ensuing rise in global bond yields have led to significant market instability, rising financing costs, capital outflows and currency depreciations," it said.

Countries including India, Indonesia, Brazil and Turkey have been battling to control a potentially destabilising decline in their currencies since the Fed chairman, Ben Bernanke, announced his plans to "taper" QE in May.

The OECD's experts warn that the slowdown in emerging economies – which have been major drivers of world growth in recent years – would offset the improvement in advanced economies, so that the global recovery would continue to be, "sluggish".

In the US, the OECD expects growth to be 1.7% in 2013, slightly down on its May estimate of 1.9%. It also warns that the crisis in the eurozone is far from over, saying: "The euro area remains vulnerable to renewed financial, banking and sovereign debt tensions. Many euro area banks are insufficiently capitalised and weighed down by bad loans."

Article Source : http://www.guardian.co.uk

Tuesday, 3 September 2013

GSK ran hospital bribery programme, say Chinese police

State media report claims wrongdoing was part of GlaxoSmithKline's corporate strategy and not caused by rogue salespeople

Chinese police claim to have found evidence showing GlaxoSmithKline organised a bribery programme targeted at major hospitals at a company level in China, dismissing suggestions that abuses may have been the result of overenthusiastic or rogue sales staff, according to a state media report.

An increasing number of individuals reputedly involved in corrupt payments are said to have made confessions, according to the Xinhua news agency. "As the investigation is moving on, it is becoming clear that it is organised by GSK China rather than drug salespeople's individual behaviour."

GSK issued a statement denying that wrongdoing had been part of a sanctioned corporate strategy. "The issues identified would be a clear breach of our corporate values and we have zero tolerance for any behaviour of this nature."

GSK accepted in July that some of its executives appear to have "acted outside of our processes and our controls to both defraud the company and the Chinese healthcare system". The drug firm is accused of funnelling up to 3bn yuan (£312m) to travel agencies to facilitate bribes to doctors and officials.

The GSK chief executive, Sir Andrew Witty, told investors the company's headquarters had "no sense" of the "shameful" and "deeply disappointing" allegations.

Tuesday's report from the Xinhua news agency quoted Huang Hong, a general manager for GSK in China and one of the detained executives, saying the company had set goals for annual sales growth as high as 25% – 7% to 8% higher than the average growth rate for the industry.

"Huang admitted that the growth rate of sales could not reach such a high number only by the efforts of the salespeople themselves if there was no dubious corporate behaviour," Xinhua reported.

Chinese police reportedly claim to have evidence that GSK China "went through the motions in internal auditing so as not to discover these violations".

The Xinhua report followed an article in the official People's Daily newspaper that quoted Guo Jianhua, head of recruitment at GSK China, saying the company had turned a blind eye to illegality.

"When the problems were exposed, the company pushed all responsibilities to individual employees," Guo said. It was unclear to which problems Guo was referring or if he was one of the detained executives.

Official media routinely get access to detainees in China. Other detained GSK executives have been interviewed on state television.

Bribes in China's drug industry are reportedly commonplace, fuelled in part by low salaries for doctors. A number of other multinational drugs firms are facing investigations similar to the GSK inquiry as whistle-blowers have come forward.

GSK's continuing controversy in China comes after the drugmaker last year reached a $3bn (£1.9bn) deal with criminal prosecutors in the US, pleading guilty to a raft of offences linked to the illegal promotion of drugs. Many of the allegations related to extravagant travel provided to doctors whose business GSK was courting.

Article Source : http://www.guardian.co.uk

Monday, 2 September 2013

Stock markets soar on positive world manufacturing surveys

UK order books and output grew at fastest pace in 20 years while China's year-long contraction ended

Stock markets soared on Monday as surveys of manufacturing output around the world gave the strongest indication yet that the richest countries are finally shaking off the after-effects of the financial crisis.

British manufacturing order books and output grew at their fastest in almost two decades while China, which has suffered a year-long contraction in manufacturing output, saw activity expand in August. Factory sectors in Spain and Italy returned to growth for the first time since 2011. Only France and India among the world's biggest economies experienced falls in production and Paris will be comforted by indications that some areas of manufacturing stabilised during the summer.

India, though, appeared to be heading into deeper trouble after a fall in the rupee failed to arrest the country's first contraction in manufacturing for more than four years.

The FTSE 100 jumped almost 100 points to 6507 with mining groups leading the charge. Rio Tinto and Anglo American saw a sharp rise in their values as investors bet on a more widespread use of iron, coal and nickel. The French Cac and German Dax also rose strongly.

George Osborne has taken comfort in recent months that the UK's long-awaited recovery in manufacturing is under way. The services sector has expanded for more than a year, but the economy was unable to push ahead while construction and manufacturing contracted. Since the beginning of the year those sectors have stopped being a drag on growth and in recent months have added momentum to the growth figures.

The monthly snapshot from the Chartered Institute of Purchasing and Supply/Markit said the return of confidence, a rosier outlook for exporters and demand for new products had all helped UK factories in August.

The purchasing managers index (PMI) rose from 54.8 in July to 57.2 last month – its highest level in two and a half years.

The PMI is made up of various measures of industrial activity including orders, output, employment, stock levels and inflationary pressure.

Rob Dobson, senior economist at survey compilers Markit, said orders and output were growing at their fastest since the summer of 1994, a period when the UK was recovering from recession.

He said: "The UK's factories are booming again. Orders and output are growing at the fastest rates for almost 20 years, as rising demand from domestic customers is being accompanied by a return to growth of our largest trading partner, the eurozone."

Meanwhile, Britain's high streets have performed well this year and the British Retail Consortium said the trend continued into August. Sales rose 3.6% on a year ago as shops expanded to cope with rising demand. The BRC said the figures augured well for the autumn because they were strong enough to show an improvement on last August, when the Olympics was at its height.

Strong manufacturing growth has been accompanied by an increase in price pressures, the Markit report said. Companies reported rising costs for fuel and raw materials, with its input prices index up by 10.4 points on the month – the second highest rise in the survey's history.

The potential for a rise in inflation, coupled with analysis showing that much of the boost to the economy has been based on consumer spending while investment remained on hold, has persuaded some analysts to conclude that the quickening recovery is unsustainable.

Trevor Greetham, a director at Fidelity Worldwide Investment, accused the government of "unleashing the beast" of cheap mortgages to foster a dash for growth before the 2015 election.

He said a large part of the current recovery could be traced back to the government's Funding for Lending Scheme, which offers cheap money to banks, and the housing market scheme Help to Buy, which have channelled money into mortgages at the expense of business lending.

The TUC said the benefits of the recovery were being swallowed up by business managers and shareholders, leaving workers worse off.

Speaking before the TUC's annual conference next week, general secretary Frances O'Grady pointed out that UK workers have suffered a huge squeeze on their incomes over the last five years, with average pay falling by 6.3% in real terms.

She said many have remained on frozen or low pay while inflation has jumped, leaving someone earning £26,000 a year more than £30 a week worse off in real terms.

The study, part of the TUC's Britain Needs a Pay Rise campaign, compared hourly pay rates in 2007 (at 2012 prices) with those in 2012, and "shows the extent of the pay squeeze being felt by families across the UK as incomes fail to keep pace with rising prices".

O'Grady said the north-west was the hardest hit region in the UK following a fall in average hourly pay from £11.43 in 2007 to £10.52 in 2012 – an 8% drop in real terms.

France, India and Russia struggle

France's manufacturing sector is struggling to recover after a difficult year of redundancies at the state-backed car makers Renault and Peugeot Citroën and high-profile steel works closures.

While eurozone manufacturing activity expanded for a second successive month in August, in France the purchasing managers index was confirmed at 49.7, where a figure below 50 shows activity contracted. It was the only eurozone country where the measure of activity failed to improve.

However, output has fallen in France over the last four years far less than some other eurozone countries, and the slow rate of contraction was read by many analysts as a sign that the recession is bottoming out.

India also suffered a slowdown in manufacturing output in August, though much of the blame was heaped on the administration of prime minister Manmohan Singh, a former economics professor, who has run the country since 2004 and was re-elected in May.

The HSBC manufacturing purchasing managers' index fell to 48.5 after a drop in domestic and export orders. In the last two years GDP growth has more than halved to 4.4% and investment funds have flowed out of the country. The central bank has hiked interest rates, making it tougher for businesses and consumers to borrow.

India was not alone among the "Bric" countries to suffer a contraction in manufacturing. Russia's output also fell, largely because of government neglect and a high rouble. A drop in oil revenues exposed the weakness in manufacturing weakness, leading Vladimir Putin to suggest he may free several jailed business leaders to boost output and growth.

Article Source : http://www.guardian.co.uk

Now supermarkets want you to live over their shops

Supermarket-built schemes may ease housing shortages, but will they actually be good places to live?

In Streatham, south London, builders are hard at work addressing the capital's dire housing shortage on a site next to the suburb's railway station. Their employer, however, is not a housebuilder such as Bovis or Barratt but Britain's biggest supermarket: Tesco.

Bustling about in hard hats and fluorescent jackets, they are putting the finishing touches to a 60,000 sq ft Tesco store and 250 apartments that sit above, behind and beside it. Living above the shop is very much back in fashion as supermarkets lead the development of thousands of homes in their latest tactic to secure new sites. As a consequence, the race for market share among the UK's largest retailers is inadvertently helping London chip away at a housing shortfall that equates to at least 32,000 new homes per year.

Tesco alone is building more than 800 homes in London in 2013, close to 5% of all the non-local authority homes being built in the capital. Its huge projects in Woolwich, Highams Green and Streatham are merely paving the way for a wave of supermarket-led home building projects which will flood across the south-east. More than 4,500 homes are being planned by the big five grocers in London alone over the coming years, according to property advisor CBRE, while construction market analyst Glenigan estimates supermarkets will be laying the foundations for more than 2,100 homes in 2014. Sainsbury's is likely to be responsible for the bulk of those, as it begins projects involving more than 1,500 homes next year. But Morrisons has planning permission for nearly 400 homes, while Asda is already involved in the building of 100 above its new store in Barking. Even Waitrose and Lidl are getting in on the act.

In the last couple of years, the big five seem to have woken up to the idea of developing homes alongside their retail portfolios, says Robert Davis, research director of Glenigan. He estimates that between them Tesco, Sainsbury's, Waitrose, Asda and Morrisons completed just 267 units in 2012, but that this will soar to more than 1,000 this year and double again next year. Some of these projects were first dreamt up nearly a decade ago but the complexity of gaining planning permission and assembling the sites mean that they are only now coming to fruition.

Helped by an upturn in the housing market, some enormous development projects are about to hit the street, such as Sainsbury's partnership with Barratt to redevelop the site of its supermarket in Nine Elms, in south London, involving nearly 700 homes, an 80,000 sq ft shop and a tube station. But supermarkets are also involved in small-scale urban developments, such as transforming moribund pubs into local convenience stores with a few flats above.

Most of these projects are in London, partly because that's where there is demand for the kind of flats easily built above a shop. Building over a busy supermarket is also relatively expensive, so such pricey apartments are more likely to find buyers in places like London where house prices are recovering rapidly.

But supermarkets have also been pushed into building in the capital because of planning guidance which encourages all new retail developments to include a residential element unless there is a very good reason not to do so. "There is a massive shortage of housing in London. Planners saw supermarkets wanted to grow and they are capitalising on that to force them to help solve the problem," says CBRE's John Witherell.

Local authorities outside London are also looking how they can capitalise on the trend. But Witherell believes these building schemes are more difficult to get off the ground outside the south-east because of lack of demand and the relatively high cost of such homes.Sainsbury's completed a development involving 100 homes in Leek, Staffordshire, this year and Tesco recently completed student accommodation block in Gateshead with nearly 1,000 bedrooms, but such projects, so far at least, have proved more rare.

Supermarkets are looking at a variety of solutions to make above-store building more cost effective, including putting pre-fabricated structures on top of existing shops, according to Witherell. Kathy MacEwen, head of programmes for Cabe, says: "There are many benefits to mixing supermarkets and housing. It makes more efficient use of land, while having residents supports activity and natural surveillance of streets, particularly when the store is closed."

Yet some concerns have been raised about the design and quality of the housing supermarkets are building, given the main purpose of the development is usually to open a new store.

Is it really wise to hand over the development of whole urban communities to the supermarkets? MacEwen says careful design is needed to avoid noise, smells and the sight of unattractive activities like waste storage and removal, deliveries and everyday operations.

But Witherell and Peter Sloane at property company Savills, who is leading sales at Tesco's Woolwich site, says the flats are selling well, which has boosted the prospects for more schemes. Tesco says it is in its interests to build quality homes which are popular with tenants.

"After building we remain the main tenant and occupier for years, so we have an added incentive to make sure these are developments of the highest quality. They need to last and be great places to live, work and shop," a spokesman says. With many more supermarket-backed homes appearing in the next few years, retailers will have to deliver the goods.

Article Source : http://www.guardian.co.uk

Thursday, 29 August 2013

Markets hit by fears that Syria attack could raise fuel prices

FTSE down but Shell and BP shares boosted while petrol retailers warn of grim outlook for consumer

Mounting prospects of a US-led military strike on Syria sent shock waves through the energy and financial markets on Wednesday with oil hitting its highest level for six months and drawing predictions that it could reach $150 (£97) a barrel.

The move in the value of crude, reflecting fears that wider Middle East output could be disrupted, gave a major boost to the share price of Shell, BP and other oil companies but sent the stock of heavy fuel-users such as easyJet and International Airlines Group, the parent of British Airways, into a nosedive.

The Petrol Retailers Association also warned motorists that it was only a matter of time before the price of petrol at the pump would have to rise and the outlook was "grim".

Motorists are warned petrol prices will rise as oil hits its highest level for six months, with investors worried the Syrian conflict could affect neighbouring countries.

The FTSE 100 index fell further in London as investors worried about the potential for a wider conflict involving Iran and even Russia wading in on the side of the embattled government of Assad.

There was a slight rally in prices as David Cameron indicated he would first seek some kind of United Nations approval for an attack on Syria but not before shares in Dubai – the most important financial market in the Middle East – had slumped 7% and the index in Kuwait had fallen by 6%.

Michael Wittner, head of global oil research at French bank Société Générale, said the North Sea crude oil benchmark, Brent Blend, could rise from Wednesday morning's six-month high of $117 a barrel to as much as $150 if the war spread from Syria to key important oil producers such as Iraq. The US crude price, for West Texas intermediate oil, hit a two-year high, rising above $112 for the first time since May 2011.

"We believe that in the coming days Brent could gain another $5-$10, surging to $120-$125, either in anticipation of the attack or in reaction to the headlines that an attack had started," Wittner said in an investment note to clients.

"If the regional spillover results in a significant supply disruption in Iraq or elsewhere, Brent could spike briefly to $150," he added.

Syria is not an important oil producer or transit country but the wider area including Saudi Arabia produces 35% of the world's supplies. If Iraq or Iran were affected by any fallout from a military strike on Syria, the global oil market would rely on extra output from Saudi Arabia, the only member of the Organisation of the Petroleum Exporting Countries with significant spare oil production capacity.

"The Saudis could handle most likely scenarios, but the markets will look at the shrinking spare capacity that remains after any disruption is made up, and that would be bullish [for higher oil prices]," said Wittner.

The oil price spike was a boost to Shell, whose share price rose almost 4% to £22.25, and BP, whose shares rose by more than 1% at 452p.

The wider FTSE 100 index of leading companies fell by nearly 0.5% early on , adding to an already 3% slump since the middle of the month on the back of fears about Syria, allied with concerns that the US would finally halt a long-running government economic stimulus package.

Stock markets in continental Europe were also down, as was the Nikkei index in Japan, which fell by more than 2% to 13,264 points, with companies such as Toyota and Sony down up to 3%. The Dubai Financial Market index closed at 2,549.61 points, with Emaar Properties leading the rout. Shares in the developer that built Dubai's Burj Khalifa, the largest freestanding structure in the world, fell almost 8.5%.

Most mining companies based in London, such as Glencore Xstrata, were hit by the political uncertainty, but the price of gold – seen as a haven – continued to rise as did the US currency. The dollar strengthened 0.5% against the Japanese yen and 0.3% versus the euro.

Ishaq Siddiqi, London-based market strategist at ETX Capital, explained the dangers to the wider economy of higher crude values on the back of foreign aircraft strikes on Syria. "Once filtered through to the real global economy, the increase in oil prices will put a halt to the pace of economic momentum we are currently experiencing in major parts of the world.

"It's plausible that Brent oil prices could be over $120 a barrel in the coming days and, if oil prices spike even higher, it wouldn't be out of the question for the US Federal Reserve to hold off on tapering stimulus measures this year."

Threats of a $150 oil price take the markets back to July 2008 when Brent briefly traded at US$147.50, the highest intraday price on record. This was the height of the economic boom, which was followed by the autumn collapse of Lehman Brothers and then a full-scale banking crisis.

Crude then crashed to $40 but has largely been priced at over $100 since the middle of 2010, despite a relatively slow recovery in the world economy. Prices have been pushed upwards due to a mixture of stronger demand and supply problems. Oil supply from Opec producer Libya has already been reduced to a trickle after an armed group shut down a pipeline linking its largest western oilfields to the ports.

Article Source : http://www.guardian.co.uk

Friday, 23 August 2013

Nasdaq shutdown renews fears over stock market stability

Glitch at Nasdaq results in unprecedented shutdown and halts trading amid calls grow for greater regulation of markets

A glitch in the Nasdaq stock market resulted in an unprecedented shutdown of trading of over 2,000 major US stocks and options for more than two hours, creating confusion around the shares of the biggest companies in America and resulting in calls for greater regulation.

Nasdaq shut down for over three hours in the middle of the day as it investigated the outage. Trading resumed at 3.25pm ET.

The company said the the failure resulted from a glitch in software that publishes the prices of stocks listed on the exchange. Some of the largest American companies, including Apple and Facebook, are listed on Nasdaq; about 20% of the S&P 500 companies call Nasdaq their home exchange. Despite the closure the exchange ended the day up 38 points or 1.1% at 3638.71.

Because other exchanges depend on Nasdaq's pricing software for accuracy, the outage affected a host of other exchanges, ranging from NYSE Euronext to systems that serve primarily professional investors who trade in large blocks of thousands of shares at a time. By one estimate, the halt locked up roughly $5.7tn in shares.

Nasdaq said it would not automatically cancel any pending stock trades, instead advising investors to cancel their own trades before the system goes back up.

The Securities and Exchange Commission, which regulates stock exchanges, said it is monitoring the situation.

"The market being down for an hour is just shocking. It's not the kind of thing that's happened before," said David Lauer, an independent consultant on the technical aspects of stock markets. "You're not going to have confidence in the markets and keep your life savings and retirement in the markets if you keep seeing this happen."

"It's really shocking. We're stuck," said Ramon Verastegui, head of global engineering and strategy at Société Générale. "If we want to trade Apple, we can't."

The outage refocused attention on a series of prominent failures in market technology that have shaken the nerves of investors. Earlier this week, Goldman Sachs made a mistaken options trade that rippled across the markets and affected a number of financial institutions. Nasdaq opted to cancel the mistaken orders.

Similar glitches have been if not common, then recurring since the famous 2010 "flash crash" that resulted in short-term panic but no long-term changes to trading practices.

"I would not want to speculate other than to say this is huge. Everything is halted in the market," said Sal Arnuk at Themis Trading in Chatham, New Jersey. Options trading was also halted, the exchange said.

The failure is sure to refocus attention on regulatory efforts to strengthen the technological backbone of the major stock exchanges.

Currently, exchanges can voluntarily choose to have their backup plans reviewed by the SEC, which then audits their technological systems. One potential rule, known as Regulation SCI, would require major exchanges to submit to the audits. That regulation is pending comment.

Lauer said the shutdown should be a wake-up call to regulators to monitor exchanges, which he said have not kept up with the speed of current technology. "We have an overly complex system, and it's complex to the point of dysfunction," he said.

When Facebook floated in May last year, early trading was delayed for hours as the exchange systems seemed unable to cope with the scale of the share offering and failed to send electronic reports to traders to confirm whether stock had been bought and sold. Swiss banking group UBS later launched a lawsuit against the exchange claiming it lost £240m in the bungled listing.

"I can't remember this happening in recent memory," said Christopher Nagy, president of consultancy firm KOR Trading and a former head of trading at TD Ameritrade.

The US financial regulator, the Securities and Exchange Commission, said it was monitoring developments and was in touch with the exchanges on the matter.

The failure at Nasdaq is the latest of several high-profile glitches to hit US markets. The incidents – including the "flash crash" in 2010, errors related to the Facebook flotation and Knight Capital's disastrous trading blowup last year – have undermined market confidence. Earlier this week, a problem at Goldman Sachs resulted in a flood of erroneous orders being sent to US equity options markets.

Article Source : http://www.guardian.co.uk