Markets rise on US recovery hopes

World stock markets have risen after US central bank chief Ben Bernanke said the world’s biggest economy was nearing the start of a recovery.

Ben Bernanke said the recovery is likely to be relatively slow at first

 

“The prospects for a return to growth in the near term appear good,” Mr Bernanke told a conference in Wyoming.

On Wall Street, the Dow Jones index rose more than 1%, while European markets were also sent higher.

But the Fed boss said unemployment, which is expected to top 10% in the US, would fall “only gradually”.

However, European Central Bank president Jean-Claude Trichet expressed concern at what he saw as premature talk of a full recovery. 

After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad Ben Bernanke, Federal Reserve chairman

“I am a little bit uneasy when I see that, because we have some green shoots here and there, we are already saying, ‘well, after all, we are close to back to normal’,” he said, speaking later at the conference.

‘Slow at first’

Central bankers were speaking as data showed sales of existing US homes rose by more than 7% in July.

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Fewer lenders dominate home loans

Six mortgage lenders increased their hold over the market for new UK home loans in 2008, according to Council of Mortgage Lenders (CML) data.

Buyers have a far smaller choice of mortgage deals than before

 

The top six, led by the Lloyds banking group, accounted for 78% of all new loans, compared to 72% the year before.

The CML said the credit crunch, which started in 2007, had dried up the supply of mortgage finance.

Overall new lending fell by 28% last year, with some specialist lenders being driven out altogether.

“The lending community itself has undergone… dramatic changes,” the CML said.

“With so many lenders either merging or ceasing lending, this year’s largest lenders’ table has changed more than in other years,” it added.

Driven out

A key factor was Northern Rock dropping out of the top-ten mortgage lenders as a result of its insolvency in 2007, when it accounted for 8% of all new lending.

In 2008 it lent just 1.1% of new mortgage funds.

But the CML said another factor was that specialist lenders – those which did not depend on savers’ money to finance their lending – had fallen from a 7% share of new lending to just 2%, and of a much smaller market.

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Retail banking 'set for losses'

The retail arms of the UK’s High Street banks are likely to see losses in the second half of 2009, a survey suggests.

Retail banking is still struggling, despite big profits in investment banking

 

The KPMG UK Banks Performance Benchmarking Survey says that despite modest profits in the first half of the year, bad loans would lead to losses.

It says losses from bad loans will not peak “until 2010 or beyond.”

Three of the four major High Street banks reported profits in the first six months of the year, boosted by their investment banking operations.

“Retail banking is just profitable at lower levels, but with rising impairments. It seems probable that it will fall into loss making in the second half of the year,” says KPMG.

It adds that competition for savings accounts and the increased cost of lending between banks has impacted retail banking.

Looking ahead, KPMG says that continued uncertainty in the mortgage market will make life difficult for retail banks.

sourced from The BBC

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Turnaround 'will not be simple'

The world has begun to recover from recession but the process will not be simple, the International Monetary Fund (IMF) has warned.

Serbia has been particularly hard hit by the global recession

The recession had “left deep scars, which will affect both supply and demand for many years to come” said IMF chief economist, Olivier Blanchard.

His comments came after Japan this week followed France and Germany is seeing their economies return to growth.

The IMF said in July the economy was “starting to pull out of recession”.

‘New shape’

In this latest report, Mr Blanchard predicted that global output may also remain lower than it had been before the crisis.

Countries must rebalance their economies to make it sustainable, Mr Blanchard said.

Economies dominated by consumption – such as the US – would have to focus more on exports, while Asia turned more to imports, he said.

He also said that dysfunctional financial systems in many advanced countries would need “a long time to find their new shape”.

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Tories want end of bonus culture

sourced from the BBC dated 15/08/09

A Conservative government would seek to stop the payment of large bonuses across the banking system, shadow chancellor George Osborne has said.

The shadow chancellor wants a tougher regulatory system

He told the Guardian that handing out big awards backed by state guarantees was “unacceptable”, even for banks that were not part-owned by the taxpayer.

Such guarantees were meant to allow banks to rebuild balance sheets and aid lending, not reward bankers, he said.

Mr Osborne also renewed his calls for a new financial regulatory system.

“It is totally unacceptable for bank bonuses to be paid on the back of taxpayer guarantees,” he told the paper. “It must stop.”

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'Fragile recovery' for UK economy

The Bank of England has warned that the UK economy still has some way to go before it recovers from the effects of the financial crisis.

In its latest quarterly Inflation Report, the Bank warns that any recovery in 2010 will be “fragile”.

The report will be bad news for the chancellor, who has predicted that the UK will rebound sharply in the future.

If it does not, then his record budget deficit of £175bn will be even bigger, with a greater need for spending cuts.

View BBC video

“Any 2010 recovery will be fragile”

 

On the outlook for inflation, the Bank said it was “more likely than not” that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn and stay low until the end of its two-year forecast period.

This implies, unless something changes, that interest rates could stay at 0.5% until well into 2011, BBC economics reporter Steve Schifferes says.

‘Uncertain pace’

The Bank has recently added another £50bn of new money to the economy, as part of its programme of quantitative easing (QE) to spur economic growth.

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Barclays profit up to almost £3bn

Profits at Barclays’ investment banking arm doubled Barclays has announced an 8% rise in first-half profits, boosted by its investment banking division.

Pre-tax profits for the first six months came in at £2.98bn ($5bn), although this was slightly below analysts’ forecasts.

Its investment bank Barclays Capital saw profits double to more than £1bn, having picked up some still-successful operations from Lehman Brothers.

But profits at Barclays’ UK retail banking arm more than halved.

Profits at Barclays’ investment banking arm doubled

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Ten US banks fail recession test

May 8 2009

US banks would need a total of £50 billion in additional funds to survive if the recession deepens, the results of government “stress tests” showed.

An assessment of the robustness of the sector found that 10 of the 19 largest banks would need to find extra capital to see them through the bad times.

Bank of America faces the largest potential shortfall of £23 billion.

It joined a list of institutions that also includes Citigroup and Wells Fargo.

The stress tests were designed to gauge whether America’s 19 largest banks have enough capital to see them through a deepening of the recession.

After Bank of America, Wells Fargo was found to have the second largest shortfall of £9.1 billion, followed by GMAC with a potential £7.6 billion black hole.

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UK economy shrinking at fastest rate in more than 50 years

Downward revisions to official statistics show output fell 2.4% in the first three months of the year and the recession started three months earlier than thought

The recession facing Britain is even deeper than had been thought and started more than a year ago, it was revealed today.

National income fell in the first quarter of this year by 2.4%, the biggest drop since 1958, as the Office for National Statistics revised its initial estimate of 1.9%.

The figures are much worse than expected. Extended to the whole year, the drop in output in the January to March period is now equal to 4.9% – the worst since records began in 1948.

“We hope the recovery comes as soon as possible but sadly we now know this recession has been longer and deeper than we had thought,” said shadow chancellor George Osborne.

“This also means that in the future unemployment will be higher and Labour’s debt crisis will be even worse.”

Although GDP fell 2.4% in the third quarter of 1979 and first quarter of 1974, statisticians said these were rounded from 2.36% or 2.37%. The figure for this year was exactly 2.4%.

The revision is one of the biggest ever made by the ONS and it said the reasons were changes to its estimate of the construction and services sectors.

The ONS also revised down its figure for the second quarter of last year to -0.1% from zero, meaning the recession started earlier than previously thought. And the fourth quarter of 2008 figure was revised down to a fall of 1.8%.

“The recession, which now begins in the second quarter of 2008 rather than the third, is now thought to be quite a bit deeper than previously thought, and is looking ominously like the early 1980s vintage,” said Danny Gabay of Fathom Consulting.

Critics of the Bank of England who called for big interest rate cuts in the first half of last year, will feel justified by the data, since the Bank’s monetary policy committee argued into last autumn that there was little likelihood of a recession occurring and delayed rate cuts until October. In fact, the economy had entered one last spring.

Separately, the Trades Union Congress said that while there were signs of “green shoots” in the economy, this was more to do with an easing of the pace of the fall in output rather than that a big recovery was under way.

“This recession is already worse than the 1990s one and is likely to be worse than that of the 1980s,” said Richard Excel, TUC labour market expert. “It has been very severe and we are probably only half way through. It will be quite some time until employment and growth return to pre-recession levels.”

Paul Gregg, labour market expert from Bristol University, noted that unemployment had started rising earlier in this recession than in previous ones and was “encouraged” that monthly rises in the claimant count appeared to be slowing down.

sourced from The Guardian

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We are in a recession, we have a labour goverment so that all strike

Cadbury workers ‘vote on strike’

Cadbury’s produces some of the UK’s best known chocolate bars Cadbury workers begin voting on possible strike action on Saturday, according to the union Unite. Ballot papers consulting on action will begin to arrive at the homes of workers at the UK’s best-known chocolate maker, it said. Unite claims that Cadbury is breaking a long-standing pay deal with workers at its Bourneville, Chirk, Marlbrook and Somerdale plants. About 1,300 people work across the sites, the union said. The ballot will run to 18 August, it added. sourced from THE BBC Postal staff set to strike again The union has warned a national strike could take place Industrial action at the Royal Mail is set to escalate with strike action scheduled for three days next week, the BBC has learned. The strike action on 25, 27 and 28 July comes on top of Friday’s one-day walkout by 12,000 Royal Mail employees. The escalating action is in defence of workers who, the Communication Workers Union (CWU) say, are being unduly pressured by Royal Mail managers. The Royal Mail has accused the union of standing in the way of modernisation. ‘Illogical cuts’ Union members in London and other selected regions are to down tools in the dispute over job cuts and working conditions. This could result in no deliveries of mail on Saturday 25 July, and no work at Royal Mail’s London distribution centres on 27 and 28 July, says BBC business correspondent Joe Lynam. The CWU has accused Royal Mail managers of trying to “break the union for good” and accused them of “illogical and arbitrary” job cuts. Deputy General Secretary of the CWU, Dave Ward, said his union recognised that the Royal Mail is “facing huge problems” but said that it had a very different view of what modernisation is needed. The vision that Royal Mail has put to workers involves “endless job cuts, hugely damaging cuts to the service and continuous cuts in our members’ pay, pensions and conditions,” he said. Paul Tolhurst at the Royal Mail countered that with “mail volumes falling and our profits under huge pressure, there is no real opportunity for us to stop [making] the changes.” “Particularly,” he added, “as these changes we are trying to put in were agreed with [the union] in 2007.” Earlier on Friday, about 400 employees marched on Westminster to deliver letters of protest to the Business Secretary Lord Mandelson. Sell off The Royal Mail is suffering from a big drop in demand for letters as more and more people use the internet to communicate. The government announced last month that it was delaying controversial plans to sell a stake in the postal service to a private company. It maintains that the partial sell off of Royal Mail is required as part of measures to tackle the company’s finances – in particular a pensions deficit said to be near £8bn. Lord Mandelson has said the company cannot survive without the sale. The Royal Mail employs more than 150,000 people in the UK, most of whom are represented by the CWU. sourced from THE BBC

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