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The newspapers this morning

Written by Roberta Murray and Sharecast

Friday, 17 October 2008

UK morning news roundup featuring Prudential and Lloyds TSB and Gradient Capital.

One of London’s best known hedge funds, Gradient Capital Partners, is on the brink of collapse after dropping nearly 42% in value last month. The City-based European equity fund, which had $2.5bn under management at its peak, is now down over 63% so far this year, leaving investors fearful it will be forced to close.

The “blow-up” is a mighty fall for the founders, Ivor Farman and Scott Pagel, who famously paid themselves £100m each over two years after producing stellar returns to their investors, writes the Telegraph.

A consortium of Asian steel makers, understood to include Nippon Steel, JFE Steel, Sumitomo Metal Industries, the Itochu trading house, the South Korean steel giant Posco and several other Japanese smelters, is seeking to buy a 40% stake in Nacional Minerios – a company that produces around 20m tons of iron ore about 10% of total Japanese annual demand, reports the Times.

Two major mortgage lenders have increased their tracker mortgage rates to new customers by up to half a percentage point despite last week's cut in the Bank of England base rate. Lloyds TSB (LON:LLOY) and Woolwich said they were forced to raise their rates because the half point cut in base, rate to 4.5%, has not been reflected in the benchmark London inter-bank offered rate -Libor - which banks charge each other to borrow money, reports the Telegraph.

Prudential (LON:PRU), one of the biggest UK life assurers, was on Thursday night forced to deny that it was planning an imminent rights issue, as worries about the global economy spread to the plight of insurers, reports the FT.

Shares in Prudential fell almost 20% on concerns that it might need to raise capital – concerns initially sparked by a note from Goldman Sachs, one of its corporate brokers. The Pru said: “We have no intention of doing a rights issue. Our capital position is extremely strong.”

Legal & General, one of the UK’s biggest life assurers, also insisted its financial position remained strong as it revealed the extent to which the global turmoil is damaging savers’ confidence. Tim Breedon, chief executive, described L&G as “very solvent”. He said the life assurer had no plans to raise capital, and was continuing with its £1bn share buy-back, the FT added.

The Telegraph says that the Financial Services Authority admitted that it is talking to the insurers about their solvency positions amid fears that the financial crisis was spreading to the insurers. A spokesman at the regulator said: "In light of the current market conditions we are of course working with all our major companies to assess the implications for them."

Lord Adair Turner, the recently installed chairman of the Financial Services Authority, has warned that Britain’s banks face a hard-line regime of regulation going forward. Lord Turner said that the FSA had been guilty of trying to supervise Britain's big banks "on the cheap." In an interview in The Guardian he emphasised that in the wake of the credit crunch and global bailout of financial institutions, the days of light-touch regulation were gone.

Google, owner of the most popular Internet search engine, said third-quarter profit climbed more than 25% as more customers used Web search ads to spur sales in a slowing economy. The company saw net income rise to $1.35bn from $1.07bn, a year earlier. The figure beat the estimate of Wall Street analysts says the Telegraph.

Oil slumped below $70 per barrel yesterday, hitting a 14-month low – the price has halved in the last three months – and prompting the world's oil-producing countries to call an emergency meeting next week to discuss cutting back on production. Abdalla Salem El-Badri, the secretary general of the 13-strong Organisation of Petroleum Exporting Countries (Opec), announced that the group would meet next Friday, instead of in mid-November as planned, reports the Independent.

Gordon Brown has threatened petrol companies with an inquiry under competition laws if they refuse to pass on lower oil prices to motorists. The Prime Minister warned that he would call in the Office of Fair Trading (OFT) to investigate their prices if firms failed to reduce the cost at the pumps within the next few days, reports the Independent.