UK watchdog to probe profit warnings Leading British and multinational companies are being probed by the FSA financial watchdog over possible failures to disclose key data to the UK stock market, in a sweeping crackdown that threatens fines and prosecutions for "market abuse", reports the FT. Top City lawyers note a surge in inquiries by the FSA about whether businesses - including Rentokil Initial, the support services company, and Rok, the building group - kept investors properly informed ahead of profits warnings that sent shares tumbling, particularly those falling by 10% or more. The growing regulatory focus on disclosure could lead to disputes with companies over what information should have been revealed and when. More than 40 FTSE 250 companies saw their shares fall by 10% or more on profits warnings in the 11 months to November. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50739/uk-watchdog-to-probe
| Obama plans $300bn in tax cuts President-elect Barack Obama plans to include about $300bn in tax cuts for workers and businesses in his economic recovery programme, advisers said Sunday, as his team seeks to win over Congressional skeptics worried about his focus on government spending, reports the NYT. The legislation Obama is developing with Congressional Democrats will devote about 40% of the cost to tax cuts, including his centerpiece campaign promise to provide credits up to $500 for most workers, costing roughly $150bn. The package will also include more than $100bn in tax incentives for businesses to create jobs and invest in equipment. The overall package, of $675bn-$775bn, is taking shape as Obama begins trying to build support for his fiscal stimulus plans. However, reports the FT, congressional leaders warned the package is unlikely to be passed before Obama's Jan 20 inauguration. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50738/obama-plans-300bn-in
| Italian bond scandal could ensnare banks Several high-profile banks, including Deutsche Bank and UBS, could be caught up in lawsuits over lending agreements with Italian local governments, reports the Daily Telegraph. According to some estimates, Italian authorities could be sitting on €35bn (£33bn) of liabilities relating to bonds they took out in the 1990s, which could turn into Italy's biggest financial scandal since the Parmalat fraud. Milan has said it is considering legal action against a group of lenders – Deutsche Bank, JP Morgan Chase, UBS and Dublin-based Depfa, part of Germany's Hypo Real Estate. The group struck a deal to help Milan manage repayments on €1.7bn of bonds it bought to finance public spending. Milan is losing money on the derivatives contract it took out with the banks. Italian police are also investigating the banks' Milan offices. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50737/italian-bond-scandal
| UK bank rescue fails to spur loans A new UK lending survey shows banks sharply tightening credit to households and companies, intensifying worries that the government's £500bn ($725bn) bank-rescue plan is failing to get money flowing into the economy, reports the WSJ. The Bank of England's credit-conditions survey shows banks becoming increasingly conservative in lending practices, reducing maximum credit lines and cutting the size of mortgage loans as a percentage of home values. Banks said they were scaling back mortgage lending even as demand for new mortgage loans remained stable. The report highlights the challenge for banks as they try to recover from heavy losses while providing new loans to borrowers. It could also increase pressure on UK chancellor Alistair Darling to ask taxpayers and politicians to support more financial aid to banks. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50736/uk-bank-rescue-fails
| Brown plays down second bank injection Britain's banks may need another injection of capital from the taxpayer, Gordon Brown acknowledged Sunday, but the prime minister insisted the prospect was not seen as a matter of urgency. Brown and Alistair Darling, chancellor, are instead working on a package of measures intended to boost business lending, and are expected to give details later this month. There is growing speculation in the City - fuelled last month by Charles Bean, deputy Bank of England governor - that the £37bn taxpayer injection last October may prove insufficient. But Brown argued that lack of capital is not the main reason that banks are failing to supply adequate credit to business. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50735/brown-plays-down-sec
| Pfizer eyes possible merger with rival Pfizer, the world's biggest pharmaceutical group, is considering acquiring a large rival drugs company to improve its financial health, in a move that could trigger a fresh round of mergers in the sector. Jeff Kindler, chief executive, said Pfizer was "open to opportunities and constantly looking at those which are big, small and inbetween." Pfizer's peers, meanwhile, have increasingly focused on small-scale deals and partnerships, shunning the "mega-mergers" that created industry groups such as Pfizer, AstraZeneca, GSK and Sanofi-Aventis. But many are now awaiting the US giant's move before responding with deals of their own. Investors argue that Pfizer could strengthen its expansion into biological medicines by purchasing Amgen, the largest independent quoted US biotech group. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50734/pfizer-eyes-possible
| Investment fears in VC shake-out The US venture capital industry, a key source of capital for technology start-ups worldwide, is facing a severe shake-out that will lead to a contraction in future investments, according to some top Silicon Valley financiers. The warnings follow one of the weakest years ever seen for profit-taking by start-up investors, and come amid predictions of an even worse period ahead. Only six companies backed by venture capital went public last year, the lowest since the 1970s. The number of entrepreneurial companies to float had fallen sharply even before last year's IPO drought. Fewer than 50 companies went public each year between 2001-2008, compared with about 180 a year between 1991-1998. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50733/investment-fears-in-
| Wall Street saw 'red light' on Madoff Large Wall Street firms privately harboured suspicions about Bernard Madoff's investment business, in some cases steering clients away from dealing with him, and were thus notably absent from the long list of victims of Madoff's alleged Ponzi scheme. But in some cases, they were reluctant to share their concerns with regulators, and in others, such as Merrill Lynch Investment Management, feared alienating clients who had invested with Madoff, say US bankers, noting that the large surviving investment banks did not put Madoff's funds on the recommended list of their investment arms and never dealt directly with him in their prime brokerage arm. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50732/wall-street-saw-red-
| Daiichi to post heavy losses on Ranbaxy Japanese drugmaker Daiichi Sankyo is expected to book more than Y300bn ($3.3bn) in losses stemming from the fall in the stock price of its Indian unit Ranbaxy Laboratories, the Nikkei business daily reported Monday, reports Reuters. The large valuation losses would likely force Daiichi Sankyo to post a net loss of about Y200bn, its first-ever net loss, for the year ending in March, the Nikkei said. Daiichi bought Ranbaxy in November for about Y490bn and the sharp fall in Indian drugmaker's share price since then is likely to result in a writedown of about Y300bn on Daiichi's earnings for the nine months ended December, the paper said. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50741/daiichi-to-post-3bn-
| Japan in share buy-back spree The stock market slump has driven Japanese companies to buy back their own shares in near-record numbers, despite their reputation for hoarding investors' cash. There were buy-backs at 587 listed companies last year – a 33% increase on 2007, according to data provider I-N Information Systems. While the value of these buy-backs fell by 17%, this was less than the 42% fall in the Topix index – taking repurchases close to a record level, relative to the total value of Japan's stock market. The figures suggest that Japanese managers are heeding investors who criticise them for hoarding cash rather than returning it to shareholders - although some managers may simply feel their share price is too low. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50731/japan-in-share-buy-b
| Proposed Four Seasons merger rejected A merger proposal by UK acute-care specialist Priory Group to join with Four Seasons, the highly indebted nursing home business, to create the UK's biggest healthcare group has been rejected by creditors of Four Seasons, the company said, amid confusion over the extent of support for the deal. The proposal was made by the Priory Group in a series of letters sent to Four Seasons creditors last month after the Four Seasons' "special servicer" – a financial adviser representing all the company's creditors – rejected a merger proposal. This prompted Priory Group to put the proposal directly to the company's individual creditors. The merger proposal had the support of Royal Bank of Scotland, the largest creditor to both Four Seasons and Priory Group. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50730/uks-priory-in-bid-to
| Kyriakou eyes £2bn of media acquisitions Theodore Kyriakou, the Greek multi-millionaire, intends to amass a war chest of £2bn to target UK media acquisitions. Kyriakou said he would leverage the proceeds of the October sale of Nova, the Bulgarian assets of his Antenna TV company, to Modern Times Group of Sweden for €628m (£600m), to buy media companies, but "probably not newspapers". Kyriakou, 34, scion of a shipping family, said that despite bad credit market conditions, he was looking at "between €1.25bn and €1.8bn of firepower" from the deal. Including the cash sum realised by the sale of Nova, that would give Kyriakou more than £2bn. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50740/kyriakou-eyes-2bn-of
| Weekend catch-up In case you missed these stories: - Austria takes control of Bank Medici
Bernard Madoff's alleged $50bn fraud on Friday claimed its biggest victim to date as the Austrian government was forced to take control of Bank Medici, which might have lost $3bn-plus in the scandal. - FDIC poised for IndyMac sell-off
The Federal Deposit Insurance Corp has signed a letter of intent to sell IndyMac Bancorp to a group of investors led by Steven Mnuchin of Dune Capital Management and including JC Flowers, Paulson and Co, and four other investment funds for $13.9bn. - HBOS pension trustees challenge merger
Lloyds TSB's high profile rescue of HBOS faces a potential delay after the trustees of HBOS's pension scheme decided to press ahead with a legal challenge to the deal. - Starwood shares surge on takeover speculation
Speculation that Sam Zell, the Chicago property tycoon, may be positioning himself for a takeover bid for Starwood Hotels & Resorts, one of the world's largest hotel operators with 897 properties, pushed the company's shares up by more than 16% in trading in New York on Friday.
- Buffett's Berkshire sees worst performance in 30 years
Billionaire investor Warren Buffett's Berkshire Hathaway slumped 32% last year, the worst performance in more than three decades, as the US recession forced down the value of the firm's equity holdings and derivative bets, reports Bloomberg. See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50729/weekend-catch-up-22
| Overnight markets: Up Asian stocks rose on Monday, pushing the regional benchmark index to its longest streak of gains since 2004, on optimism tax cuts and government asset purchases will alleviate the global recession. On Friday, US stocks reached a two-month high with the S&P500 gaining 3.2% after General Motors received its first cash infusion from the government and oil prices rallied. Asian markets (Mon, Japan half-day)
05:07am GMT
Nikkei (Mon) up 183.56 (+2.07%) to 9,043.12
Topix (Mon) up 16.67 (+1.94%) to 875.91
Hang Seng (Mon) up 188.06 (+1.25%) at 15,230.87 US markets (Fri)
DJIA up 258.30 (+2.94%) at 9,034.69
Nasdaq up 55.18 (+3.5%) at 1,632.21
S&P500 up 28.55 (+3.16%) at 931.80 European markets (Fri)
FTSE100 up 169.11 (+3.85%) at 4,561.79
Eurofirst 300 up 24.82 (+2.98%) at 856.79 Currencies
05:10GMT
€/$ 1.3878 (Dec 23: 1.4005)
$/¥ 91.96 (90.23)
£/$ 1.4467 (1.4843) Commodities
05:12 GMT
Brent Crude (Feb09) up $0.39 at $47.30
Light Crude (Feb09) up $0.76 at $47.10
100 Oz Gold (Feb09) down $8.00 at $871.50
3M 24HR Copper down $30.00 at $3,185 10-year government bond yields (%)
US 2.41 (Dec 23: 2.17)
UK 3.03 (3.13)
Germany 2.98 (2.94)
Japan 1.21 (1.22) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/05/50725/overnight-markets-up
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