Economy
Investors fear double-dip recession |
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| Economy | |
| Written by Catherine Murray | |
| Wednesday, 25 August 2010 | |
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Morning business news, Wednesday 25 August: Safety in gilts, Santander insider trading, emergency Budget, Rio Tinto. Investors fled to the safety of government bonds yesterday amid growing fears of double-dip recessions in Britain and America. A plunge in house sales in the US, coupled with downbeat comments from central bankers, triggered a flight from riskier securities, including shares. In London the FTSE 100 closed down 79 points — or 1.5%— at 5,156, while on Wall Street the Dow Jones industrial average and the Nasdaq lost more than 1%, reports the Times. Yields on 10-year gilts dropped to record lows yesterday as capital markets threw their weight behind gloomy predictions for the British economy and the expectation of very low interest rates for the foreseeable future. Government bond yields fell by almost 10 basis points to an intraday low of 2.839% following comments from Martin Weale, a newly appointed member of the Bank of England's Monetary Policy Committee, casting doubt on the Bank's growth forecasts for 2010 and warning of a "significant" risk of a double-dip recession, adds the Independent. Santander exec charged with insider tradingA senior Banco Santander executive was on Tuesday night charged with insider trading by the Securities and Exchange Commission in relation to the hostile $39bn bid by BHP Billiton, the mining company, for PotashCorp, the fertiliser producer. Juan Garcia, 35, head of Europe equity derivatives research at Banco Santander, which is advising BHP on its bid, was charged by the SEC alongside Luis Sanchez, another Madrid resident, the FT reports. Emergency Budget to hit poorGeorge Osborne’s emergency Budget will hurt Britain’s poor more than the country’s wealthier families, casting doubt on the Chancellor’s claims that it is progressive, an authoritative analysis suggests today. The research argues that, while Osborne described his Budget as "fair", by 2014 the poorest group of households with children will suffer an average 5.2% reduction in their annual incomes. That compares with a 1.1% reduction to the income of the richest group of families, according to the research from the Institute for Fiscal Studies (IFS), the Times reports. Rio Tinto not counterbidding for PotashCorpRio Tinto is not planning to make a counterbid for PotashCorp, sources close to the company have said. This followed a report in Canada'sGlobe & Mail which said the mining group was planning to team up with a Chinese partner to make a bid for the fertiliser company, which is currently fending off a $39.6bn (£25.6bn) hostile offer from BHP Billiton. A spokeswoman for Rio Tinto said she would not comment on speculation, the Telegraph reports. Healthcare sector deal bonanzaBritain’s healthcare sector is in the throes of a deal bonanza with the Priory rehabilitation group and Alliance Medical both on the block. Blackstone, adviser to Alliance Medical, will put the hospital scanner business up for sale today. NM Rothschild has asked bidders to submit offers for the Priory by mid-September, the Times reports. Facebook valuationFacebook is now worth as much as $33.7bn based on secondary market transactions, giving the privately held company an implied valuation greater than the market capitalisations of publicly traded internet stalwarts such Ebay and Yahoo. Common stock in Facebook is trading as high as $76 a share as investors scramble to get a piece of the company before it files for an initial public offering, which analysts say could be the biggest technology IPO since Google’s $1.67bn flotation in 2004, the FT reports. Bonus calculated on Deepwater Horizon downtimeOne of the survivors of BP’s Deepwater Horizon explosion admitted that his bonus was in part based on how quickly repairs were carried out. Daun Winslow, who works for Transocean, the contractor that was operating the rig on BP’s behalf, told a US investigatory hearing that part of the bonus was calculated on the "down time" a rig experienced when it needed to be repaired, the Telegraph reports. Funding plan for insolvent employersThe Pension Protection Fund, the body that stands behind the retirement promises of insolvent employers, will on Wednesday unveil plans to generate enough cash to pay all future benefits. The PPF, which was established in 2005 after a series of high-profile pension schemes collapsed, is funded by employers who pay a fee based on the risk of default of their own scheme, the FT reports. |
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