London fights for its future
David Cameron on Monday defended his use of the British veto at last week’s European Union summit as in the “national interest”, but the strains placed on his coalition government were laid bare when his deputy, Nick Clegg, refused to sit alongside him in the House of Commons, the FT reports. Mr Clegg, leader of the pro-European Liberal Democrats, claims the veto was bad for British business and would leave the UK isolated. But the prime minister was cheered by Tory MPs who claimed he had shown “bulldog spirit”. Mr Cameron’s refusal to agree an EU treaty change to reinforce eurozone fiscal discipline in the absence of safeguards for the City of London continues to cause anger across Europe. That could be further inflamed by Britain’s refusal to take part in an urgent €200bn funding boost for the International Monetary Fund to tackle the crisis. The Wall Street Journal reports that the financial services industry is all concerned that the EU will pursue new regulations requiring certain types of business to be transacted within the euro zone, cutting London out of the equation.
On Tuesday we asked what rules should govern entry to the FTSE UK indices. We launched our consultation in response to a similar survey from the FTSE Group, which sought market feedback on the free float rules for its various indices. This followed investor outcry over oligarch-owned Russian companies (Evraz, Polyus Gold and Polymetal) seeking to list on the main market while keeping control out of public hands.
Britain is bracing for defeat in Brussels on a critical piece of financial regulation, which would force it to cede control over the shape of key markets in the City of London, home to more than three-quarters of Europe’s derivatives trading, the FT reports. George Osborne, UK chancellor, is insisting that European Union finance ministers next week continue to debate new requirements for clearing derivatives, in spite of his counterparts making clear that London is alone in opposing the package. Mr Osborne is expected to break from next week’s Conservative party conference in Manchester and travel to Luxembourg to seek a reprieve over the derivatives regulation, as well as press his European colleagues for action on the eurozone crisis and fight a proposed financial transaction tax that would hit trades that are overwhelmingly routed through the City of London.
China is for the first time to give formal backing to moves by British banks to turn the City of London into an offshore trading centre for the renminbi, UK government officials have told the FT. As George Osborne, the chancellor, prepares to hold talks in London with Wang Qishan, the Chinese vice-premier, on Thursday British officials say a joint statement by both countries backing the growth of renminbi trading in London is set to be the centrepiece of their meeting. Meanwhile Chinese officials told EU business executives that the yuan will achieve “full convertibility” by 2015, Bloomberg reports, according to EU Chamber of Commerce in China president Davide Cucino. Mr Cucino declined to identify the officials, saying only that the information was conveyed at a meeting, and said the move to convertibility would be taken in steps.
China is for the first time to give formal backing to moves by British banks to turn the City of London into an offshore trading centre for the renminbi, UK government officials have told the Financial Times. As George Osborne, the chancellor, prepares to hold talks in London with Wang Qishan, the Chinese vice-premier, on Thursday British officials say a joint statement by both countries backing the growth of renminbi trading in London is set to be the centrepiece of their meeting. British banks and financial institutions have for some time been pressing for London to become an offshore trading centre for the Chinese cuurrency. Treasury officials say British banks and financial services institutions increasingly want to trade in the renminbi, seeing this as a rapidly growing market in foreign exchange and bond issuance.
Yesterday the Merkozy plan for a Financial Transaction Tax caused some hefty damage for London-listed exchanges and brokers. Not a surprise really. The analysts at Adam Smith Institute were hopping mad on Thursday:
Wednesday’s AGM statement from ENRC, the Kazakh mining group and FTSE 100 constituent: The Chairman, Dr Johannes Sittard, announced that the Group has initiated a comprehensive review of its corporate governance. This review will be conducted over the next three months, with the intention of establishing a Board structure that can best support the Group whilst complying with UK corporate governance best practice. At the conclusion of the corporate governance review any changes to the composition of the Board will be announced to the Market.
We knew that China’s efforts to internationalise the RMB were moving along nicely, but thus far CNH deposits (yuan held offshore in Hong Kong) are still a relatively small part of China’s total deposit base. But a new paper from RBS notes that as a percentage of Hong Kong deposits, they’re becoming a big deal indeed, and quickly:
Comment, analysis and other offerings from Tuesday’s FT, Philip Stephens: The banks get away with it, again There are a couple of things to say about Britain’s banks, says the FT columnist. They still pose a serious threat to the nation’s long-term stability and prosperity. They rely for their profits – and for the huge bonuses paid to senior staff – on the fact that taxpayers are underwriting the risks. Thus public subsidy is turned into private profit.
Weekend headlines from the FT and other UK media:* From The FT,- US exchanges in $11bn NYSE bid- Electrical retailers fear overload- Retired chiefs, Daniels, Rose and Varley, eye chairs- Standard Life sets out new targets- Domiciles create problems for UK shareholders- Report rejects reversing Lloyds-HBOS deal- UK reform offers blueprint for range of services- Avocet switches its focus to West Africa- Court slashes Hays price-fixing fine- 3i adds to downbeat UK outlook- BP expands in Indonesian methane fields- Xstrata agrees record thermal coal contract- UK must not shy from bank reform- Deltex, China Shoto lead small cap risers- Sugar swing whets Real Good Food demand
In case you missed these stories, weekend headlines from the FT and other UK media:* From the Financial Times- Alpha agrees to buy Massey for $8.5 billion- Minister to reveal Tote bidding shortlist- Carlyle creates dental amalgam- Davidson replaces Locke as Mecom head- REG shares up 30% after rejecting takeover- Britannia saves Pontin’s from administration
An interesting press release via Mondo Visione on Wednesday (our emphasis): Sucden Financial has announced that it will be launching a new service geared towards institutions to capture brokerage opportunities in the Delta One and Equity derivatives and finance arena with effect from January 2011.
Comment, analysis and other offerings from Monday’s FT, Wolfgang Münchau: Berlin’s goal is limited liability I have been observing the European Union for a while, but I have rarely seen a political victory as total and far-reaching as that of Angela Merkel, the German chancellor, last week, the FT columnist writes. As one seasoned observer put it, Ms Merkel was the only one in the European Council who knew what she wanted. And she got exactly that. She got an amendment to the Lisbon treaty, which says that any crisis mechanism can only be triggered as a last resort option. She got agreement on her nine points on a future crisis mechanism – intergovernmental, with preservation of the national veto, with collective action clauses to wipe out bondholders, and with strict conditionality. And she utterly defeated any attempt to extend the ceiling and the scope of the existing crisis mechanism. Not one of the other leaders dared suggest a eurozone bond. Last week, the EU became a fully paid-up subscriber to the German version of crisis management – adjustment through deficit-cutting, and if necessary, through deflation.
Weekend headlines from the FT and other UK media*: From The FT,- Asil Nadir held in London for bail breach- UK house prices drop- Watford confirms takeover talks with unidentified suitor- New chief rings the changes at TalkTalk- United Utilities investor, Invesco’s Woodford, pulls plug- Overseas buyers lift Berkeley- Homeserve to probe phone campaign- Lavendon rejects second TVH approach- Bloomberg inks deal for City headquarters- Walter Energy seals C$3.3 billion Western deal- Continent in grip of tabloid panic after freeze- Walmart sues CVS over top executive- Chinese officials behind Google attack- Google courts media with Widevine buy- Microsoft buys stake in IBM accuser TurboHercules- Bidders set to make call in Phones 4U sale- Santander to recapitalise property fund:- UBS chief financial officer to step down
Geneva will leave London behind and become the world’s most important trading hub for physical energy commodities, including oil, as leading companies relocate dozens of traders to Switzerland, according to industry executives, the FT reports. The transfers threaten the UK capital’s leadership in physical crude and oil products, first established in the late 1980s, and come amid broader financial industry complaints about stiffer regulation, higher taxes and poor transport infrastructure in London. The Geneva Trading and Shipping Association, the industry body, believes the Swiss city now “ties with London as Europe’s number-one oil trading hub”. But oil executives said the balance was turning in the favour of the Swiss city.
Weekend headlines from the FT and other UK media*: From The FT,- Even a bail-out can’t mask Ireland’s fundamental woes- Holiday group Pontin’s goes into administration- Hornby dented by late-running Chinese trains- Strong sales buoy Electrocomponents- Home fortunes at mercy of global affairs- Misys to buy rival Sophis for £235 million- Rolls-Royce profit hit by A380 woes- GMG chief to focus on flagship news titles- Carl Icahn raises Dynegy stake to block sale to Blackstone- Groves mines ground where others fear to tread- Daimler faces Russian inquiry- Casino acquires Carrefour’s Thai supermarkets- Tina Brown to tackle Newsweek revival- BT recovery puts Livingston in upbeat mood- Pinnacle races for advantage over rivals- China and Eurozone worries rattle investors- G20 shuns US on trade and currencies
Readers will have heard the case against real-estate and commercial real-estate investments. But here, courtesy of Patrick Moonen of ING IM, is a more optimistic view on Wednesday: Real estate outperformance could continue in 2011. ING IM says there are a number of supporting factors for this prediction – notably that many real estate listed companies have refinanced and that the underlying commercial property is at a turning point on vacancies and rents, while dividend yields in the developed markets are attractive.
Weekend headlines from the FT and other UK media*: From The FT,- F&C gets boost from acquisition- Judge rules on Hands damages in EMI case- G4S loses deportation contract to Reliance- UK Home Office replaces contract with security giant- Horseracing levy crisis comes to head- Forth Ports buoyed by Tilbury tonnage- Bridgepoint in talks to retake Alliance Medical- N Rock chief’s resignation in pipeline- UK and France to sign formal defence treaty- Premium traffic behind BA’s flight to profit- BP and Halliburton face bigger claims- Enel’s IPO falls short of target- Brazil deepwater well hits huge oil reserve- Co-founder of YouTube to step down- Acer set to launch app store next year- MGM lenders approve restructuring plan- Black wins partial US court victory- Ohio asks Wells Fargo to stop foreclosures
Weekend headlines from the FT and other UK media*: From The FT,- Resolution buys Bupa unit for £165 million- Elisabeth Murdoch to sue Northern & Shell- Hargreaves Lansdown’s Gorham promises ‘business as usual’- NESV completes Liverpool deal- Old Mutual stunned as HSBC shuns Nedbank- Retailers seek lines of defence to combat VAT- Enel sets price range for green unit IPO- Gulf Keystone raises $175 million for Iraq project- ACS seeks capital boost for Hochtief bid- Biocompatibles delays Novabel relaunch- GE third-quarter profits drop 11%- Mozilo agrees to pay $67.5 million to settle SEC charges- SEC opens probe into US banks’ foreclosures- Sahara tipped to buy Grosvenor House- Moshi gets real to ape monster success
Weekend headlines from the FT and other UK media: From The FT,- Hammerson and Oman in London sale talks- New Look expected to further delay float- UK spread bet groups scout for punters- Deals on the menu for UK restaurant groups- LSE in talks over London clearing house- Hicks in bid to keep Liverpool FC- Banks rediscover taste for buy-out financing in CVC/Sunrise deal- Size of Petrobras issue rises to R$134 billion- Hochtief turns down ACS offer- Prada sales increase 30%- EU urges online ad groups to self-regulate- FASB fills its board vacancy- TPG, Carlyle, eye stake in Hero Honda
Whether you’re an increasingly impecunious chief executive at a mid-ranked UK company, or one of the City’s increasingly flush “AVPs” (assistance vice-presidents), some – interestingly timed – reports on Monday are telling us a few things. First, Reuters reports that the average pay of junior executives in London’s financial sector rose sharply over the summer.
Just to recap events from late last week, here are weekend headlines from the FT and other UK press:* From The FT,- Shortage of first-time home-buyers threatens housebuilders- Southern Cross rejects TowerBrook offer- Tullow Oil misses out on Uganda licence- Marshalls’ profits almost double- UK restaurants have taste for takeovers- Phoenix proposes higher dividend payments- Dana buys more time against KNOC bid- Recovery spurs German union demands- Intoll board backs A$3billion bid from Canada fund- Microsoft co-founder starts patent lawsuit- Google faces probe over bid for ITA- Intel warns amid global PC slowdown- Swedish regulator revokes HQ Bank’s licence- Business leaders back Scottish bank Airdrie