Hard-nosed Fed sends global markets reeling

What has emerged since the acrimonious Fed meeting on August 10 is that Bernanke was unable to marshal a consensus behind fresh QE. Seven members argued that Fed should not take such a drastic step until the economy was in serious trouble, according to Wall Street Journal Fed-watcher Jon Hilsenrath.
They settled on a compromise that the Fed should roll over holdings of bonds as they reach maturity to avoid passive tightening. But there was no deal on further action. Philadelphia’s Charles Plosser grumbled that the Fed had sent “a garbled message”.
More ominously, some Fed officials fear the central bank is already “pushing on a string” and does not have the means to revive the economy. Whether or not they are right, this comes as a psychological shock for investors schooled by the “Greenspan Put’ into thinking that there is a deus ex machina in the wings.
Market tensions have been simmering for days. They erupted on Tuesday when Japan’s yen smashed through resistance against all major currencies, reaching a 15-year peak against the US dollar. The Nikkei index buckled below 9,000 as yen strength pushed Japan’s export industry deeper under water.
Yields on 10-year bonds fell to 0.92pc in Japan and record lows of 2.23pc in Germany and 2.88pc in the UK. They hit 2.47pc in the US, a Depression level. Irish spreads ballooned to the highest since the launch of EMU. Greek spreads neared 900 basis points, as if the EU’s €110bn bail-out never happened.
“This has been one of the most interesting days in finance ever,” said Andrew Roberts, head of credit at RBS. “We are right at the tipping point. Yields are about to collapse even further, equities are about to turn over. The end game approaches, probably in next few weeks.”
In the US, the 27pc collapse in existing homes sales in July leaves no doubt that America’s property market cannot stand on its own feet without the prop of homebuyer tax credits. “Home sales are in free-fall. These are truly dismal numbers,” said Teunis Brosens from ING.
The overhang of unsold homes has jumped from 8.9 months’ supply to 12.5, higher than at any point during the Great Recession. Over 20pc of mortgage holders are already in negative equity and home default notices hit 325,000 in July.
The Richmond Fed’s manufacturing index showed a plunge in August expectations on Tuesday, with shipments dropping to 7 from 40 two months earlier, and the backlog of orders dropping to -1 from 22. This follows the Philly Fed’s crash last week to -7.
Stephen Lewis from Monument Securities said bond yields have dropped further than they did in the “flight to safety” extreme of late 2008, a sign that markets fear that underlying conditions are even worse today than they thought then. “Now they fear the global economy will remain in the mire for decades,” he said.
For the Japanese this has become a nightmare. Their V-shaped rebound has been cut off short of its 2008 peak. Growth stalled to just 0.1pc in the second quarter. Unemployment has been rising for four months.
Yet it is their curse to have a currency that strengthens at the wrong time, pushing them deeper into deflation. The Japanese repatriate their foreign wealth in storms, driving up the yen. The dollar-yen rate hit ¥83.6 yesterday, prompting ever warnings from Toyko that intervention nears. Finance minister Yoshihiko Noda said the moves were “disorderly” and posed a threat to stability. “I am watching currencies with great interest,” he said.
Goldman Sachs said the yen was now overvalued by 20pc, or two “standard deviations” out of kilter. It was even more over-valued against the dollar in the mid-1990s but that is scarcely relevant. Over 60pc of Japan’s rebound in exports has been driven by Asia, and only 13pc by the US. What matters is the yen rate against China’s yuan. That has reached a crucifying ¥12.4. The vice grips ever deeper.
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Christian Owens, schoolboy entrepreneur, on making his first million at 16

By Mail Online ReporterLast updated at 7:45 PM on 13th August 2010

He has vowed that he will not stop building the business he established only a year ago until it is worth £100million.
But hard-working Christian Owens can afford to pause for at least a moment’s celebration after making his first £1million aged just 16.
The schoolboy entrepreneur used his pocket money to fund his first venture, website Mac Box Bundle at just 14 – which has taken £700,000 since its launch in 2008.

Eight employees: Christian Owens in his office - the teenager has pledged to keep building his business until it is worth £100milliion

He then launched advertising pay-per-click company ‘Branchr’ a year later and worked on the business after school and at weekends.
Branchr was a smash hit with internet sites; made a staggering £500,000 in its first year; and now counts betting site William Hill as a client.
That is despite the fact that Christian is too young to place a bet there.
Social networking site MySpace has also benefited from his company’s services.
Christian, from Corby, Northamptonshire, currently employs eight staff – all adults – around the UK and America as sales and technical assistants, and plans to open two Branchr offices in the next year.
The youngster, who lives with his parents, company secretary Alison, 43, and factory worker dad Julian, 50, said he was inspired to go into business after observing the immense success achieved by Apple chief executive Steve Jobs.
Runaway hit: Mac Bundle Box, Owens’ first big idea, has taken £700,000 since its launch in 2008

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ITV to launch HD channels on Sky

3 August 2010 Last updated at 05:06 ET

ITV is moving into pay-TV after agreeing a deal to launch high definition versions of the ITV2, ITV3 and ITV4 channels on Sky.
The move is part of an overall strategy to increase revenues from non-television advertising sources.
Chief executive Adam Crozier said ITV needed to change “substantially”.
The news came as the broadcaster reported a pre-tax profit of £97m for the first half of the year, compared with a £105m loss a year ago.
Continue reading the main story
“Start Quote

We expect to move to a position whereby around half of our revenue base is derived from non-television advertising sources”

End Quote Adam Crozier ITV chief executive
ITV1 HD is already available on Freesat, Freeview, Sky and Virgin.
ITV2 HD will launch in October, with ITV3 HD and ITV4 HD launching shortly afterwards.
“Pay television has seen continual growth over the last decade and this deal is a great example of how a new, subscription-based launch can complement ITV’s existing free-to-air channels,” said Mr Crozier.
The broadcaster also said it would launch an ITV1+1 channel in January 2011.
‘Re-shaping economics’
ITV, which was hit by a slump in advertising in the recession, said that advertising revenues were up 18% on the first half of 2009. June was a particularly strong month with the World Cup attracting additional advertising.

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Star Artemis manager William Littlewood switches from cash to shares

“Cash is going to continue to yield you very little. Bonds under our
scenario of inflation later will be a very poor investment and will offer
extremely low returns,” he said. “In some ways we are being forced
into equities where price to earnings ratios are not too high. Corporate
profitability has also been extremely robust given the recession we’ve had.”

With Mr Littlewood bullish on valuations rather than equities per se, he has
been favouring large cap defensive stocks which do not necessarily require a
lot of economic growth to thrive. He has also cut down his cash holding from
as high as 25pc in April.

“Our net position in equities is the highest it has ever been [since May
2009], after we closed a number of shorts on UK domestic cyclicals in the
last few weeks. And cash, at 9pc, is as low as it has been since launch,”
he said.

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Nuclear industry supplier websites launch

Separate pre-qualification websites aimed specifically at potential suppliers
in Somerset,
Norfolk and Suffolk
were launched last week by EDF Energy, which plans to build up to four new
nuclear plants. The NIA site is designed for national companies based
outside these counties.

Keith Parker, the association’s chief executive, told potential suppliers to
EDF Energy in Somerset last week: “The supply chain in nuclear is now
international and there’s no guarantees UK companies will get the work. They
have to be competitive.”

However, he added that suppliers could invest with confidence that the work
will happen. “We are reassured that New Nuclear Build will go ahead and
the Coalition [government] will not put any obstacles in the way of that
programme,” he said.

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Strong growth in number of contactless payment cards

Last updated at 4:32 PM on 5th July 2010

The number of Visa contactless payment cards being used in the UK looks set to soar to 12 million by the end of this year, it has been announced.Visa Europe said it had increased its estimate for the number of contactless debt, credit and pre-pay cards that would be in circulation by the end of December from 10 million.The revised estimate comes after the number of contactless cards being used in the UK broke through the eight million barrier in June.The group expects there to be a further strong increase during the second half of the year as more banks introduce them for their customers.

As if by magic: Contactless payment means the user no longer has to enter a pin

It added that the number of transactions carried out with a contactless payment card had doubled during the past six months.
Contactless payment cards enable people to pay for items simply by
holding their card against a reader, without having to enter their pin.
Visa increased the maximum value of an item that can be paid for in
this way from £10 to £15 earlier this year, and the average value of a
contactless transaction is £4.30.
Around 26,000 outlets across the UK accept contactless payments,
including Subway, Pret A Manger, some Boots outlets, selected branches
of Spar, Ikea and a number of independent convenience stores.
Mark Austin, head of contactless at Visa Europe, said: ‘Since its
launch in 2007, contactless technology has grown in popularity and is
fast becoming an everyday way to pay.
‘This is demonstrated by the fact that the average value transaction
is currently £4.30, showing that people are more and more confident,
and keen, to use cards for smaller amounts rather than carrying cash.
‘Consumers are becoming increasingly familiar and confident with the
technology as the number of retailers accepting contactless (payments)
continues to grow.’

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Cash machines that only dispense £5 notes to be rolled out across Britain

By
Daily Mail Reporter
Last updated at 11:30 AM on 28th June 2010

Cash machines that only dispense £5 notes regardless of how much money is withdrawn are to be installed across Britain.The nationwide introduction of small fund-only ATMs comes after support by Bank of England bosses.They want to increase the circulation of the notes so that less crumpled fivers are handed out as change in shops.
Fivers aplenty: The circulation of £5 notes will be boosted by small sum-only ATMs
Shoppers also found it easier to budget their money when the machines were trialled at two locations in London.Now Bank Machine, a firm based in Hatfield, Hertfordshire, has installed 21 machines across the country.The group said their two existing machines were currently putting around 100,000 £5 notes into circulation each month.Managing director Ron Delnevo said: ‘Whether you withdraw £50 or £5 at our machines it will all be in £5 notes.‘There is cast iron proof that cash - and small denominations in particular - help people to budget, especially now during these financially stretching times.’Andrew Bailey, chief cashier at the Bank of England, said: ‘The Bank has several projects under way to meet public demand for more £5 notes.‘One of these aims at encouraging the industry to include £5 notes in their ATMs - the front line of cash provision to the public.‘Bank Machine’s launch of a network of £5-only ATMs across the UK is thus a very welcome move.’The new ATMs will be at locations across Britain, including Manchester, Stroud, Oxford, Cardiff, Portsmouth and Banchory in Aberdeenshire.Bank Machine operates nearly 3,000 ATMs, including more than 700 that are free to use. 

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Freeview to lose Sky Sports News

Sky Sports News was launched on Freeview in 2002

BSkyB has announced that Sky Sports News is to become a pay-TV channel, after eight years of being available on Freeview.

Sky said the move would allow the channel to benefit from “continued growth in subscription revenues”.

The move would take place “later this year”, Sky added. From then the channel will only be available via Sky, Virgin Media or Talk Talk TV.

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THE INTERVIEW:

By
Simon Watkins And Lisa Buckingham
Last updated at 10:20 PM on 12th June 2010

It sounds like a hiding to nothing, but Brian Hartzer wants you to love Royal Bank of Scotland. As head of retail banking at RBS, the 43-year-old American-born banker is the man behind the group’s latest attempt to reinvent itself in the eyes of the British public. The launch this weekend of the RBS Customer Charter is a public declaration of minimum service standards. More marketing hot air? Hartzer says it is much more and will make a difference to customers of State-owned RBS and NatWest, the bank’s two retail brands that together boast about a fifth of all British current account holders. The commitments, such as ensuring no one waits more than five minutes in a queue, will be monitored by RBS’s auditor Deloitte. In six months the bank will report on how well it has done, though Hartzer admits it does not have the mechanisms to measure some of the performance targets and no plans to compensate customers for failing to meet them.

Major rethink: Brian Hartzer says retail banking ‘threw itself off a cliff’

‘The real pressure will come in six months when we publish that
report. I will front that and I fully expect we will not have got
everything right on day one. I am OK with that. That is the pressure we
want,’ says Hartzer who speaks with a gentle American accent tempered
by 15 years living in Australia where he worked for ANZ bank.
He holds joint American and Australian citizenship and it was Down
Under that Hartzer says he learnt the lessons that need to be taken on
by British banks whose reputations have been shredded. (’I won’t use
that word,’ he says referring to the disgraced former boss of RBS, Sir
Fred ‘The Shred’ Goodwin, who last week resurfaced as the new owner of
a £3.5 million mansion originally built for former Rangers and
Liverpool manager Graeme Souness.)
‘Banking should be a balance between the interests of the
shareholders, the employees, the customers and the community,’ he says.

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OFT launches new inquiry into fees for rights issues

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Investment banks are under fresh pressure over the way they treat clients
after the Office of Fair Trading opened a new investigation into rights
issue fees.

The inquiry comes on top of a separate study on the same subject begun last
month by the Institutional Investor Council, which represents the UK’s
largest institutional investors.

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