IMF warns on UK recession Britain is facing the deepest recession of any big industrialised economy, the IMF signalled Wednesday as it predicted the UK economy would shrink 2.8% this year. The forecast came in a gloomy IMF report that said the world economy would suffer its worst performance for more than 60 years this year. It coincided with a report from the International Labour Organisation that said the global recession would cost at least 18m-30m jobs worldwide, and could claim more than 50m. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51817/imf-warns-on-uk-rece
| Fed leaves rates unchanged The US Federal Reserve on Wednesday expressed fresh concern about deflation as it left the key Fed funds rate unchanged. Noting the economy had "weakened further" since last month, the Fed hinted at further targeted actions to revitalise securitised lending markets - but the Treasury bond market sold off sharply as it failed to move significantly closer to buying government securities. Instead the Fed signalled its interest in expanding targeted lending programmes and held out the prospect of extending a scheme through which it is buying mortgage-backed securities issued by Fannie Mae and Freddie Mac at a rate of $300bn per quarter. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51816/fed-leaves-rates-unc
| US banks surge on Geithner remarks Beaten-down US bank stocks surged Wednesday as new Treasury secretary, Tim Geithner, played down talk of nationalisation, fuelling hopes for a comprehensive clean-up of toxic assets on terms palatable to investors. Geithner said the Obama administration was "looking at a range of options" for dealing with toxic assets clogging up bank balance sheets and hoped to lay out a viable programme "relatively soon." Investors reacted by sending bank stocks soaring in New York amid growing belief that the government will announce the creation of a so-called "bad bank" that would acquire the toxic assets, leaving banks free to concentrate on new lending. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51815/us-banks-surge-on-ge
| Democrats pass US stimulus bill The US House of Representatives on Wednesday night approved its version of the proposed US fiscal stimulus with overwhelming Democratic support but, in an early setback for Barack Obama, not a single Republican backed the $825bn plan. The president has spent much of his first week in office reaching out to Republicans in a bid to forge a bipartisan consensus behind the stimulus but the House vote indicated that opposition is hardening. The White House welcomed the 244-188 vote as an "important first step" towards final legislation, which Obama wants to sign into law by mid-February, but the president also made clear he was open to changes as debate shifts to the Senate. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51814/democrats-pass-us-st
| Xstrata, Cookson set for rights issues Shares in Xstrata tumbled 9% Wednesday as the Swiss mining group prepared to launch a large equity fundraising which could be as much as $5bn and come as early as Thursday. UK companies have been lining up to tap shareholders for cash over the past week to bolster balance sheets strained by the downturn and to offset debt markets drying up. Also, Cookson, the FTSE 250 engineering group, will on Thursday announce a deeply discounted rights issue aimed at raising more than £200m. The highly dilutive offer is aimed at heading off the growing risk of a breach of banking covenants amid bleak prospects for global steelmaking. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51813/xstrata-cookson-set-
| Yea steps down as 3i chief Philip Yea, chief executive of 3i, parted ways with Europe's biggest listed private equity group on Wednesday after its shares fell by almost three-quarters in a year. The surprise move came as the only private equity group in the FTSE 100 said it had written down the value of its 50 biggest investments by 21%, or £682m, as a result of the downturn. The group said the departure of Yea, who will be replaced by 3i veteran Michael Queen, had been a "mutually agreed decision taken after proper discussion". He is expected to receive a severance package worth about £1m, in line with the £1.05m salary he received in the year to March. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51812/yea-steps-down-as-3i
| BofA bonus deferral anger Bank of America is planning to defer bonus payments to investment banking staff this year – a move certain to inflame tensions between its employees and those of newly acquired Merrill Lynch. Andrew Cuomo, New York attorney-general, is investigating Merrill's decision to accelerate the payment of nearly $4bn in bonuses – mostly in cash – to its employees, just days before its sale to BofA on Jan 1. With that probe under way, BofA was expected to tell investment banking staff on Thursday it would defer 2008 bonuses of $50,000 or more, say executives familiar with the decision. They will be paid the first third of their bonuses in February 2010, with the remaining thirds paid in 2011 and then 2012, the executives said. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51811/bofa-bonus-deferral-
| Hedge funds offers to price in gold A hedge fund has begun offering investors the chance to have their investment denominated in gold, amid concerns that governments are debasing their currencies by printing money. Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than dollars, sterling or euros. The move follows investor demand for small gold bars and coins held by individuals and gold-backed ETFs that are holding a record amount of bullion. This week London spot gold prices rose above $900 an ounce and set all-time highs in sterling and euro terms as investors rushed into the metal. On Thursday gold was trading at $886.75 an ounce. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51810/hedge-funds-offers-t
| Legg Mason posts $1.5bn loss Legg Mason said Wednesday it had suffered its biggest loss in at least 25 years after writing down the value of its private client and hedge fund businesses by $1.2bn. The US money manager lost $1.5bn in the three months to December, compared with a profit of $155m a year earlier. It is Legg's fourth consecutive quarterly loss, and worse than analysts expected. Investors withdrew $77bn in the quarter, continuing a year-long trend that helped reduce the group's assets under management to less than $700bn, 30% lower than a year ago. The group's Permal hedge fund group, which had largely escaped redemptions, began to be hit by outflows from September, said Legg. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51809/legg-mason-posts-15b
| Wells Fargo hurt by Madoff fallout Wells Fargo emerged as a surprise victim of the Bernard Madoff scandal on Wednesday, revealing a $294m loss caused by clients who defaulted on loans from the San Francisco-based bank after losing money in the alleged fraud. The Madoff-related charge was revealed as Wells reported a $2.5bn loss in the last three months of 2008 – its first quarterly loss since 2001. The charge at Wells, which prides itself on prudent lending policies, suggests that the effects of the alleged Madoff fraud may have touched a wider-than-expected range of financial institutions. People close to Wells stressed it had no direct exposure to Madoff's brokerage firm, whose "Ponzi scheme" allegedly lost $50bn for clients. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51808/wells-fargo-hurt-by-
| UBS cuts bonus pool UBS, the European bank with the highest losses from the credit crisis, cut its bonus pool for 2008 by more than 80%, reports Bloomberg. Variable compensation for the bank's employees excluding brokers in the US is being reduced, a spokesman said Thursday. The pool will be less than 2bn Swiss francs ($1.75bn), based on the 9.5bn francs UBS has said previously it paid out for 2007. UBS reduced bonuses after it was forced to accept a $59.2bn government aid package in October. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51807/ubs-curs-bonus-pool
| Lloyds to review offers for life business Lloyds Banking Group is gearing up to consider offers for some of its life assurance assets as it starts to integrate HBOS, the UK's biggest mortgage lender. Lloyds, which with the acquisition of HBOS has become the UK's biggest life assurer, wants to build its position with a strategy to integrate Clerical Medical, the HBOS life assurance arm. However, Lloyds would consider offers for the part of the business that sells through independent financial advisers, say people familiar with the matter. The news came as Lloyds shares jumped 50% to close at 100.9p after analysts predicted the bank might not need to raise additional capital if it used the government's new insurance scheme designed to ring-fence toxic assets. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51806/lloyds-to-review-off
| Corus to sell stake in UK plant Corus is nearing agreement to sell a majority stake in a large UK steel plant on Teesside for about $450m, securing about 2,000 jobs at the site. The deal should give the Anglo-Dutch steelmaker some breathing space as it implements a difficult restructuring plan. Under the deal, Corus will transfer a stake of about 75% to an Italian-led partnership of two non-UK steelmakers, Marcegaglia of Italy and Dongkuk of South Korea, leaving Corus a stake of about 25%.The new ownership arrangement – in which Marcegaglia would hold an overall stake of 40-45% – would provide Corus much needed cash. Earlier this week Corus, owned by India's Tata group, announced 3,500 redundancies. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51805/corus-to-sell-stake-
| Rio Tinto: Equity-raising an option Rio Tinto has admitted it will consider selling equity to help repay $10bn of debt, in response to reports that it is gauging shareholder backing for a A$6bn (£2.8bn) rights issue. The mining group's statement on Wednesday, triggered by a query from the Australian Stock Exchange, comes two weeks after Tom Albanese, Rio's chief executive, said the group would not need to launch an emergency rights issue unless economic conditions deteriorated further. Dual-listed Rio said Wednesday its boards in the UK and Australia did "not rule out the potential to issue equity", the first time it has stated publicly it would consider such an option. Lex says that Rio should have few problems raising funds and that incoming chairman Jim Leng "deserves" a capital cushion. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51804/rio-tinto-equity-rai
| Anglogold sells Australian stake Newmont Mining, the world's second-biggest gold miner, is paying $1bn to buy out Anglogold Ashanti's minority share in what is set to become Australia's biggest gold mine. The transaction will give Colorado-based Newmont 100% control of Boddington Gold Mine in Western Australia. For Anglogold, formerly the gold arm of mining giant Anglo American and the world's third-largest gold producer, the bulk of the cash will be used to pay down a "substantial" part of the $1bn bridging loan it agreed with a syndicate of banks late last year. The Johannesburg-based miner is also looking to divest what it sees as non-core assets. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51803/anglogold-sells-aust
| Starbucks hastens global retreat Starbucks, the world's biggest coffee shop chain, is to close more stores, sell a newly delivered $45m corporate jet and slash jobs, headquarters staff and worker benefits as it battles a slump in sales that has tracked the broader collapse in global discretionary spending. The company said Wednesday it would shut 300 more "underperforming" locations – 100 of them outside the US – after a 9% fall in comparable sales in the last three months of 2008. It announced a first wave of 600 US store closures last summer. The move will result in about 6,000 job losses, while an additional 700 corporate and support jobs will also be cut – half of them at its Seattle headquarters. See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51802/starbucks-hastens-gl
| Overnight markets: Optimistic Asian stocks climbed on Thursday led by Japan and Hong Kong after US stocks rose overnight, extending a global rally as President Barack Obama prepared to set up a so-called bad bank to absorb toxic investments, boosting banking stocks, and Yahoo and Germany's SAP reported better-than-estimated earnings.
Asian markets (Thurs - HK open)
05:20am GMT
Nikkei up 114.95 (1.42%) to 8,221.24
Topix up 10.70 (1.33%) 815.03
Hang Seng (Fri): up 688.17 (5.47%) at 13,266.77 US markets (Wed)
DJIA up 200.72 (2.46%) at 8,375.45
Nasdaq up 53.44 (3.55%) at 1,558.34
S&P500 28.38 (3.36%) at 874.09 European markets (Wed)
FTSE100 up 100.79 (2.4%) at 4,295.20
Eurofirst 300 up 25.18 (3.21%) at 810.82 Currencies
05:24 GMT
€/$ 1.3114 (1.3236)
$/¥ 89.88 (89.14)
£/$ 1.4158 (1.4268) Commodities
05:27 GMT
Brent Crude (Mar09) down $0.65 at $44.25
Light Crude (Mar09) down $0.64 at $41.52
100 Oz Gold (Feb09) down $4.70 at $883.50
Copper (Mar09) down 5.00 at $3,315.00 10-year government bond yields (%)
US 2.69 (2.54)
UK 3.64 (3.66)
Germany 3.24 (3.25)
Japan 1.27 (1.25) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/29/51798/overnight-markets-op
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