Cityam 2011-11-02
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BUSINESS WITH PERSONALITY
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Issue 1,502 Wednesday 2 November 2011
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EUROZONE BY TIM WALLACE
THE GREEK government was on the verge of collapse last night as Prime Minister George Papandreou rejected calls for him to cancel the proposed referendum on the Eurozone rescue package. Early this morning, the cabinet agreed to back the referendum. In another shock announcement, the top brass in Greek’s armed forces were sacked en masse last night. The CIA warned in May that austerity measures risked provoking a military coup. A military junta ruled Greece between 1967 and 1974. Two socialist MPs defected, cutting the government’s majority to one. A further six leading socialists called for Papandreou’s replacement. Finance minister Evangelos Venizelos was hospitalised after stomach pains, missing crisis talks. “No one will be able to doubt Greece’s course within the euro” after the referendum, Papandreou insisted last night. A confidence vote is set for Friday, and the opposition from within Papandreou’s own party may cause the government to fall, prompting an election. Analysts believe the government’s fall would result in the IMF negotiating the ongoing bailout with governing PASOK and the opposition New Democracy party. The same process was undertaken in Portugal, allowing the state to avoid bankruptcy, whoever won the following election. French President Nicolas Sarkozy summed up the mood on the referendum: “This announcement surprised all of Europe,” he said. European Council leader Herman Van Rompuy and Commission boss Jose Manuel Barroso said: “We are convinced that this [rescue] agreement is the best for Greece. We fully trust that Greece will honour the
FTSE 100 ▼5,421.57 -122.65
ANALYSIS l Greek 10-year spreads over bunds are shooting up
30
5,834.51 Greece
6,200
15
6,000
10
0
5,800
Germany 2009
Apr Jul Oct
2010
Apr Jul Oct
2011
Apr Jul Oct
26 Oct
27 Oct
28 Oct
1 Nov
%
6
3,068.33
3,400
Italy
5
3,300
4
3,200
3
3,100
1 Nov
Germany
2 2009
Apr Jul Oct
2010
Apr Jul Oct
2011
commitments undertaken in relation to the euro area and the international community.” An emergency meeting was called in Cannes today ahead of tomorrow’s G20 conference. Papandreou will meet EU leaders and the IMF. Markets had risen on the EU’s package last week, but crashed on news of the referendum. The DAX tumbled five per cent to 5834.51. And early this morning Japan’s Nikkei share average took a bath, falling two per cent on opening. The yield on 10-year German
DOW ▼11,657.96 -297.05
26 Oct
Apr Jul Oct
27 Oct
28 Oct
31 Oct
bunds dropped 26 basis points (bps) to 1.77 per cent, as investors sought safe havens, while UK gilt yields fell 23bps to 2.21 per cent. Meanwhile the yield on ten-year Italian government debt rose 10bps to 6.19 per cent and Greek yields soared to 24.647 per cent. “By threatening a referendum, which could result in a disorderly default and exit from the euro, Papandreou is trying to extract better terms from Germany,” Schneider FX’s Stephen Gallo told City A.M. ALLISTER HEATH: P4
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CHANCELLOR George Osborne has serious doubts about whether a Tobin tax is viable even if it were applied globally, City A.M. can reveal. In a private letter sent to bank chiefs on Monday and seen by City A.M., the chancellor appears to contradict his public stance that he is firmly in favour of a Tobin or financial transaction tax (FTT) if only there were support to impose it globally. Responding to an industry-wide letter opposing the EU’s plans for a Tobin tax, Osborne assures them that “the necessary international consensus does not exist” to impose it. But he then goes further than his public stance: “Beyond this,” he writes, “I agree there would need to be further discussions about whether any FTT model offers an efficient mechanism to raise revenue.” The private reassurance to bankers that he remains unconvinced about even a global Tobin tax using “any FTT model”, despite his public support for one, will relieve many in the City but could leave him vulnerable to charges of hypocrisy. The City has mobilised to oppose an EU Tobin tax, which is supported by the European Commission and the French. Last night, the Archbishop of Canterbury backed such a levy. MORE: P6
Prime Minister Papandreou faces a rebellion within his socialist party. Picture: GETTY
Chancellor Osborne
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31 Oct
ANALYSIS l The CAC index dropped on the announcement
ANALYSIS l Italian 10-year spreads over bunds hit record high
7
1 Nov
6,400
20
5
EXCLUSIVE BY JULIET SAMUEL
ANALYSIS l German stocks fell on the news of the referendum
%
25
Osborne’s real views on Tobin tax ▲
GREECE CLOSE TO MELTDOWN
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4
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CITYA.M. 2 NOVEMBER 2011
Why the Archbishop has got it wrong EDITOR’S LETTER
ALLISTER HEATH I must confess that I’m glad not to be a member of the Church of England, an institution that has been hemorrhaging members ever since anybody can remember. While I have the deepest respect for the remaining band of Anglican churchgoers (though not for the CoE’s leadership), I can’t say I’m surprised by the Church’s latest woes. It has long since turned its back on its core competence of bread and butter theology and helping its members navigate life, preferring instead to turn itself into a politicised advocacy group. It is more interested in fighting
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means to achieve this. So it is sad that Williams, who clearly has never bothered to engage with the arguments, books or research of his intellectual opponents, still speaks as if he had a monopoly on morality and wisdom. It pains me to say this – but he and the protesters deserve each other.
GREEK TRAGEDY THERE are three lessons from yesterday’s nonsense. Greece will probably default and quit the euro; sacking military chiefs and calling a high-risk referendum smacks of desperation. Second, watch Italian government bond yields: if they rocket above 7 per cent, we will be in real trouble. Third, the current bailout plans are useless. Expect another summit – and eventually, when all else fails, the European Central Bank to start printing money and political tensions to keep on rising and rising. If this sounds bad, that’s because it really is. [email protected] Follow me on Twitter: @allisterheath
M&A BY HARRY BANKS PRIVATE equity company KKR & Co is in exclusive talks to buy most of Samson Investment Co, a privately held US oil and gas company, in what could be the biggest buyout of the year. The private equity firm is not likely to want Samson’s Gulf of Mexico assets, one source said. While the whole company could be worth $8bn to $10bn, KKR’s bid without the Gulf Of Mexico assets is likely to be in the range of $7bn, that source said. KKR is still doing due diligence and the deal could fall apart, sources said. But if it succeeds, the takeover could be the biggest-ever leveraged buyout of an oil and gas company. Family-owned Samson, based in
Tulsa, Oklahoma, operates more than 4,000 wells and has interests in more than 11,000 wells, according to the company’s website. It has access to potentially lucrative shale gas assets that may have tempted KKR to enter the oil and gas sector, which has been generally avoided by private equity until recently due to its links to volatile commodity prices. The sale process of Samson has been underway for months. Sources said last month that the company hired investment bank Jefferies Group to advise on the process.
António Horta-Osório, the chief executive of Lloyds Banking Group who joined the lender at the beginning of the year, is poised to step back from his role as chief executive due to health reasons, the Financial Times reported this morning. The paper claims it will be revealed at a board meeting today that HortaOsório, who joined the bank from Santander, has been told by his doctors to step down from the role on grounds of stress.
Madoff trustee loses JPM case A US judge last night threw out most of a $19.9bn (£12.46bn) lawsuit against JP Morgan Chase and a $2bn case against UBS by the trustee seeking money for victims of epic swindler Bernard Madoff's fraud. The decision is one of the largest setbacks for the trustee, Irving Picard, who has spent nearly three years liquidating Bernard L Madoff Investment Securities LLC. JPMorgan had been Madoff’s main bank for two decades. The decision wipes out about $19bn of Picard’s case against the largest US bank, a person familiar with the matter said.
Rupert Murdoch’s News Corporation came under pressure after new evidence yesterday
News Corp papers emerge NEWS CORPORATION agreed to pay hundreds of thousands of pounds to an early phone-hacking victim because it recognised that evidence from the case was “fatal” to its claims of innocence, new evidence released yesterday claimed. Briefing notes and emails between News Corp lawyers and handed over to the parliamentary committee investigating the scandal make it clear that
several senior executives were aware of the problem in 2008. News Corp’s senior counsel Michael Silverleaf QC told his clients that there was “a culture of illegal information access” at the media group involving “at least three” of its reporters. The evidence suggested that lawyers for News Corp agreed to a huge pay-off to the victim, soccer players’ union boss Gordon Taylor, who had got hold of a evidence that implicated that other News of the World journalists were involved as well as Glen Mulcaire.
FOSTER REVEALS PLAN FOR THAMES AIRPORT TO RIVAL BORIS ISLAND
CAMERON FACES REBELLION OVER PETROL PRICES
ZIMBABWE FIELD CLEARED TO EXPORT DIAMONDS
Britain must capitalise on its Victorian heritage and the experience of booming Asian economies to overhaul its transport system, the architect Lord Foster of Thames Bank will argue today as he unveils plans for a new hub airport in the Thames Estuary. The four-runway airport, built partly on reclaimed land, will be served by the country’s busiest railway station with high-speed connections to London, the North and mainland Europe.
David Cameron is facing the prospect of a backbench rebellion over petrol prices, after more than 80 MPs supported calls for the Government to tackle rising fuel tax. The issue will be debated in parliament within two weeks, following a campaign against next year’s 3p increase in duty led by Robert Halfon, a Conservative MP.
Diamond regulator Kimberley Process has given the green light for exports of stones mined in Zimbabwe’s Marange fields, ending a standoff between supporters of the deal and critics who warned the sales could fuel human-rights abuses.
QATAR TO HOLD NATIONAL DEMOCRATIC ELECTIONS FOR THE FIRST TIME
Hakan Ates, chief executive of DenizBank AS, is proud to say he is the cost-cutting “peasant” of Turkey's banking industry; it has made his bank a winner from two economic crises. Half a dozen buyers are interested in acquiring DenizBank, one of Turkey’s fastest-growing banks, from Dexia SA, the troubled BelgianFrench lender that is being broken up and nationalized, according to a person familiar with the matter.
Henry Kravis, co-chief of KKR, is in line to make the biggest buyout of the year if talks with Samson succeed
MEDIA BY KASMIRA JEFFORD
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word of God. There is no longer room in his church for conservatives, free marketeers or capitalists – or even for mainstream folk who work hard and honestly to better the living standards of their families and don’t want to feel bad about it. This is not a dispute about ethics – it is about a weirdly ignorant rejection of the foundations of our modern, prosperous societies. Everybody knows that the peculiar economic system that we had during the noughties – its strange combination of big government, free markets, rigged markets and ultra-low interest rates – failed and needs reform. My view is that we need to embrace the discipline of real capitalism – and banish the moral hazard and risk-taking that corporatism and bailouts guarantee – and return to sound money with properly priced credit. Others prefer different solutions. But everybody with a heart wants to fight unemployment, improve the prospects of the poor, and make the world a better place. It is just that we disagree on the
Horta-Osorio to quit Lloyds job
KKR nears a Samson deal ▲
Editor Deputy Editor News Editor Acting Night Editor Business Features Editor Lifestyle Editor Sports Editor Art Director Pictures
capitalism, calling for ever more government spending and higher taxes and jumping onto every fashionable left-wing bandwagon (the most recent being banker-bashing and Tobin taxes), rather than talking about God (whom its clerics presumably still believe in), the difference between right and wrong in personal decisions, and how responsible individuals can do good themselves through their behaviour, choices and private charity. Poverty is idolised, material gain demonised and envy rationalised. The collapse of the Berlin wall and the astonishing wealth-creation (for which capitalism and globalisation are entirely responsible) that has enabled scores of people in emerging nations to climb out of abject poverty has completely passed by the CoE’s establishment. Rowan Williams, the Archbishop of Canterbury, sounds more like an anti-growth environmental radical or a traditional, pre-Blair socialist Labour politician, rather than a man interested in spreading the
NEWS | IN BRIEF
WHAT THE OTHER PAPERS SAY THIS MORNING SNP REVIVES PLAN FOR A MINIMUM ALCOHOL PRICE BIG AREAS STILL LACK 3G, SAYS OFCOM Nearly 90 per cent of the UK’s land mass and a quarter of buildings are unable to receive all five 3G phone networks a decade after the introduction of the mobile licences, according to the telecoms regulator. In its first report on the UK’s communications infrastructure, Ofcom said that almost 7.7m homes and workplaces did not have a choice of all five 3G networks, which allow fast internet access.
QUESTION MARK OVER SECURITY COSTS OF THE OLYMPICS The full cost of Olympic security will not be known until after the games, a senior official has said, raising uncertainty over a key element of the London 2012 budget. Chris Allison, the national Olympic security co-ordinator, told the London Assembly: “I can’t tell you what the final costs are going to be. . . I just don’t know.”
A bill to set a minimum price for alcohol has been reintroduced by the Scottish government, despite warnings that the measure might breach European law. An earlier attempt by the Scottish National party government was blocked by opposition parties. Since then , in May elections, the nationalists have won an outright majority at Holyrood . The plan is likely to be passed by next summer.
JAPAN RESTARTS NUCLEAR REACTOR Japan was due to restart its first nuclear reactor on Tuesday after the Fukushima disaster in March, a symbolically important first step before dozens of idled reactors can be brought back online. However, hopes for confidence in the sector were hit early this morning when Tokyo Electric Power warned that it had detected a possible nuclear fission at its No 2 reactor at the Fukushima plant.
HIGH STREET COMPLAINS OF TESCO HAIRCUT Long the scourge of corner shops, Tesco is now facing the wrath of hairdressers, who say that its move to offer £12.50 haircuts in stores could threaten their livelihoods, the Forum of Private Business warned yesterday.
The Emir of Qatar, one of the world’s few remaining absolute monarchs, announced he would allow the holding of national democratic elections for the first time. Sheikh Hamad bin Khalifa al-Thani said there would be a vote for an advisory council in 2013, in line with a constitution introduced eight years ago. The decision is another victory for the Arab Spring.
TURKISH PEASANT BANKER FACES SALE
News
CITYA.M. 2 NOVEMBER 2011
Client money not separated at MF Global BANKRUPT US broker MF Global flouted rules on keeping client and company funds in separate accounts, the head of the Chicago Mercantile Exchange claimed yesterday. Under rules set by the CME and the Commodities and Futures Trading Commission (CFTC), companies must hold client assets separately from those belonging to the company, but the exchange said preliminary investigations had revealed shortfalls in some of MF’s customer accounts. “CME has determined MF Global is not in compliance with CFTC and CME customer segregation requirements,” said the exchange’s chief executive Craig Donohue. It is not yet clear whether any client money is missing or the apparent shortage is the result of bookkeeping errors. MF Global’s lead attorney, Ken Ziman, said all of the funds in the company’s broker dealer are account-
ed for. To management’s best knowledge, “there are no shortfalls” in brokerage accounts, he said in court. The firm, led by ex-Goldman Sachs boss Jon Corzine, filed for bankruptcy protection in the US on Monday. The previous week its stock and rating had been hit by huge losses on bets made on Eurozone sovereign debt, and it was forced to turn to Chapter 11 proceedings when attempts over the weekend to find a buyer failed. Work has already begun in the UK to close out creditor positions related to MF Global’s British arm, the first to be processed through the new Special Administration Regime. Sources close to the administrators told City A.M. they had been fielding calls all yesterday from worried clients.
FAST FACTS | MF GLOBAL ● MF Global, a US futures broker, held $7.3bn
(£4.5bn) in customer assets as of 31 August ● Its bankruptcy is the eighth-largest in the US in
the past 30 years. Lehman Brothers is the largest.
Jefferies said it walked away from MF offer ▲
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FINANCIAL SERVICES BY ELIZABETH FOURNIER
5
FINANCIAL SERVICES BY ALISON LOCK
Ex-Goldman Sachs boss Jon Corzine has led MF Global into bankruptcy
Picture: GETTY
MEET THE LAWYERS ADAM PLAINER WEIL GOTSHAL & MANGES
LAW firm Weil Gotshal & Manges has been appointed as legal adviser to the administrators to MF Global in relation to its UK operations, having applied late on Monday for the appointment of KPMG partners Michael Pink, Richard Fleming and Richard Heis to the role. The Weil Gotshal team will be led by restructuring head Adam Plainer, who has been advising creditors on the unwinding of several of the structured investment vehicles (Sivs) that went into receivership.
Plainer was locked in board meetings yesterday afternoon, but via email called the case “truly groundbreaking”. He will be supported on the case by 12 Weil lawyers, as well as by Martin Pascoe QC and Daniel Bayfield, both members of 3-4 South Square chambers. Much of Bayfield’s recent work has been advising the administrators to Lehman Brothers’ European operations – the bankruptcy that led UK regulators to introduce the Special Administration Regime that the MF Global case will test. The FSA is being advised by a multi-disciplinary team from Ashurst, including litigation partner Edward Sparrow, restructuring partner Giles Boothman and regulatory partner Rob Moulton. Elizabeth Fournier
JEFFERIES decided not to buy MF Global Holdings because the company’s high leverage and its bets on European debt made it a risky gamble, Jefferies chief financial officer Peregrine Broadbent said yesterday. Shares in the US bank tumbled as much as 14 per cent as investors feared that the investment bank, another relatively small Wall Street player, could get burned by bad bets on Europe the same way MF Global did, analysts said. Broadbent said he spent the weekend at MF Global offices examining its financial statements to see whether any of its businesses were worth purchasing. Meanwhile, trading companies that provided services to MF Global rushed to reassure investors that the demise would not badly affect them. Fidessa, which sold its trading platform technology to MF Global, played down the loss, saying it would not be materially affected by its closure, though analysts said it could lose up to £2m from its annual revenues. Software maker Patsystems, which said MF Global was an “important customer”, also admitted it would lose £3m of revenue and £300,000 in unpaid invoices from its collapse.
6
News
CITYA.M. 2 NOVEMBER 2011
St Paul’s protesters win pause in expulsion plans ▲
POLITICS BY TIM WALLACE
LEGAL action to remove anti-capitalist protesters from the area surrounding St Paul’s Cathedral was put on hold yesterday after discussions led to renewed cooperation between the church, the City and protesters. St Paul’s announced it wanted to “engage directly with both the protesters and the moral and social issues they wish to address, without the
threat of forcible eviction hanging over both the camp and the church.” Archbishop Rowan Williams (pictured right) warned that the row over the location of the protests means “we are at risk of forgetting the substantive questions that prompted the protest.” Writing in the Financial Times, he said “many people are frustrated at what they see as the disastrous effects of global capitalism” and it is time “we tried to be more specific” about the protest’s “vague” aims.
The City of London Corporation followed the cathedral and suspended its legal action affecting the highways until around lunchtime today. “We want to leave more space for a resolution of this difficult issue, while not backing away from our responsibilities as a highway authority,” said policy chairman Stuart Fraser. Protesters welcomed the move, adding they were looking forward to discussing “political, ecumenical and logistical issues”. THE FORUM: P31
The Archbishop of Canterbury has joined the debate, calling for a new focus on the aims the protesters and church can both work towards Picture: Rex
8
News
CITYA.M. 2 NOVEMBER 2011
G4S investors vent ire after ISS deal scrapped
Terra Firm set to leave RBS aviation sale ▲
▲
M&A BY PETER EDWARDS AND ALISON LOCK
CEO Nick Buckles
Picture: VISMEDIA
INVESTORS in security firm G4S started to call for the chairman’s scalp yesterday after the company abandoned its takeover of Danish cleaning group ISS at the eleventh hour. Shareholders welcomed the decision to abort the unpopular £5.2bn merger, but called for chairman Alf Duch-Pedersen to resign over his handling of the deal.
G4S pulled the deal just 48 hours before facing shareholders at a crunch vote. It would have received all proxy votes, and it is believed the result was so grim it decided to abandon the effort. G4S has not released any vote results. City A.M. understands that Schroders and Artemis were among those that voted against the deal, while Co-op Asset Management and hedge fund Parvus publicly opposed it. Parvus’ founder and portfolio manager Edoardo Mercadante, who spear-
headed opposition, said DuchPedersen’s position was “untenable”. “I didn’t speak to a single shareholder who didn't share our views,” he said. “I am very surprised that the chairman has not stepped down yet.” Others said G4S would need to reassure investors on strategy. “Shareholders will need to regain confidence that [chief executive Nick] Buckles himself doesn’t think the existing strategy has run its course. Our engagement will focus on the acquisition sign-off process on the board,” one investor told City A.M. G4S shares closed 0.4 per cent up. ANALYSIS l G4S PLC
245.20
1 Nov
p 250 245 240 235
26 Oct 27 Oct
28 Oct
@
31 Oct
1 Nov
M&A
TERRA Firma, the private equity firm run by Guy Hands, looks set to lose its place in the next stage of RBS’s £4bn auction of its aircraft leasing arm. The firm is not expected to improve its current bid in order to make it to the next round of the auction, Sky News reported last night. Hands’ non-binding offer was said to be “significantly lower” than other bids made. RBS is selling off its Aviation Capital arm, which owns and manages a total of 335 commercial jets and employs 69 sales executives, as part of a huge asset sale to help repay its debts to the UK government. Other firms linked with the sale during the first round of bids in September included Macquarie Bank and several other Asia-based players. Terra Firma and RBS did not respond to calls for comment last night.
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10
News
Legal & General’s chief executive Tim Breedon said cash generation was high
L&G sales flat but cash rises ▲
INSURANCE BY ALISON LOCK
RETIREMENT and insurance group Legal & General yesterday reassured investors with a bigger than expected figure for its cash generation so far this year, despite sales of products such as annuities staying flat. L&G said it added £25bn of new funds to its asset management arm in the first nine months of the year, while cash generation jumped 17 per cent to £736m compared to a year earlier. The solid figures were welcomed by analysts but L&G’s shares fell seven per cent, in line with the insurance sector across Europe, as investors sold out of financial stocks on fears over Greece. The strong cash generation raised L&G’s net cash by 15 per cent year-onyear to £631m, putting it on track to beat its full-year target. “We are significantly ahead of our plans and expect comfortably to beat the £700m net cash target for 2011 set in March this year,” L&G said. Sales of L&G’s savings products such as annuities fell one per cent to £1.3bn
compared to 2010, but the result was better than the two per cent drop analysts expected. Performance was helped by a deal to manage £1.1bn of assets from the closed Turner & Newall pension scheme and provide bulk annuities to its 30,000 members last month. But annuity sales remain generally weak as retirees put off buying them while both interest rates and stock market performance are low. Chief executive Tim Breedon was upbeat, saying he was “confident we can continue to grow from a position of strength”. ANALYSIS l Legal and General Group PLC p
114
102.60 1 Nov
112 110 108 106 104 102 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
News
CITYA.M. 2 NOVEMBER 2011
Nomura cuts to hurt London ▲
BANKING BY ALISON LOCK
A.M. understands staff will be told today how they will be affected. Nomura has come under pressure to cut down its lossmaking wholesale business, which made a pre-tax loss of 73bn yen, to focus on growing its Asian and US divisions. Jesse Bhattal, head of its wholesale division, likened conditions to the last financial crisis. “I’ve been in the business a long time, many decades, and I certainly can’t remember a time when there was a single quarter that we saw such adverse market conditions,” he said.
Danske Bank to reduce its headcount by 2,000 ▲
NOMURA, Japan’s biggest brokerage, outlined plans to dramatically scale back its European wholesale banking operations yesterday after a slump in its trading income in the past quarter. The broker said it would triple its cost cuts to $1.2bn (£747m) per year after it plunged to a worse-thanexpected net 46.1bn yen (£370m) quarterly loss, its first since 2009. “These cuts are aimed at establishing a structure that can still respond
even if the bad business environment remains intact for 18 months,” said its chief finance officer Junko Nakagawa. About 60 per cent of the savings will come from its European operations where its wholesale bank is based and is home to 4,500 staff, or 13 per cent of its global workforce. More than 1,000 jobs are expected to go in total. The move will raise fears for Nomura’s employees at its high-profile new headquarters at One Angel Lane, opened by chancellor George Osborne only in April this year. City
11
BANKING
DANSKE Bank is to cut costs by 10 per cent, axing 2,000 jobs in the process, after quarterly profit was wiped out by a drop in trading income, becoming the latest Nordic lender to combat slowing revenue growth and higher funding costs. The Danish bank, which wants to cut expenses by about 2bn Danish crowns (£231m) from 2012-14, also said
yesterday it had started looking for a replacement for chief executive Peter Straarup ahead of his retirement. July-September pre-tax profit fell to 10m crowns from 1.87bn a year ago, missing forecasts for 1.28bn. Net trading income collapsed to 267m crowns from 1.93bn, against a forecast for 1.4bn, while loan impairments fell to 2.80bn from 3.08bn. “This is not a result we will gladly remember,” Straarup said.
Credit Suisse slashes jobs in UK and US ▲
BANKING BY JULIET SAMUEL
Credit Suisse boss Brady Dougan said the bank would shift towards emerging economies
Picture: REUTERS
Swiss capital rules will prove final straw FOR all the furore over the rogue trading scandal at UBS, it is Switzerland’s notoriously strict capital requirements – not allegedly unauthorised trades – that is most hurting the country’s banks. That’s why the strategy unveiled by Credit Suisse boss Brady Dougan yesterday differs little from the one being pursued by UBS. The case of Kweku Adoboli is really just a sideshow. Of course, all banks are suffering from low levels of activity, but Swiss capital rules are proving to be the straw that breaks the camel’s back for UBS and Credit Suisse. While others must adhere to Basel III, which is also stricter than anything before it, these rules leave just enough room
for institutions to make a return on investment banking. Not so for Switzerland’s Credit Suisse, which yesterday effectively announced its exit from the ranks of bulge bracket investment banks. Instead, it will focus on niche investment banking that predominantly supports its private banking arm. UBS is expected to announce a similarly radical withdrawal at its investor day later this month. Anyone who doubts the scale of Credit Suisse’s move should look at just how drastically it is scaling back activity in fixed income, which historically accounts for roughly two thirds of global investment banking revenues.
Yesterday, Dougan said the bank would reduce by half the risk weighted assets (RWAs) in its fixed income division, as measured under Basel III, by 2014. In notional terms, that will see the firm cut approximately SwFr99bn (£85bn) from FICC, accounting for the lion’s share of 1,500 job losses. So as bankers worldwide rue the fact that regulators seem to know nothing of unintended consequences, they should consider this. It could be much, much worse. [email protected]
BOTTOMLINE
Analysis by David Crow
CREDIT Suisse has announced it will slash 1,500 jobs as part of an overhaul that will see it refocus away from its traditional European bond trading business and towards high-growth markets in Asia and South America. The losses will fall most heavily on its fixed income and credit business, following deep job cuts already in its equities division. And City A.M. understands that the job cuts in its London and New York offices are likely to run into the hundreds – one source familiar with the situation estimated cuts of 750 between the two cities. In all, the move will shave three per cent off its headcount globally and is meant to boost annual cost savings from SFr1bn (£704m) to SFr1.2bn. The decision came as the bank announced that nine-month pre-tax profits at its investment bank more than halved to SFr1.28bn. Chief executive Brady Dougan said: “I am convinced that being a first
mover in adapting to a new regulatory and market environment is a distinct advantage... We will allocate resources to faster-growing and large markets, especially Brazil, south east Asia, Greater China and Russia.” The bank now has a new target to draw a quarter of revenues from those markets by 2014, versus 15 per cent now. Credit Suisse’s private banking business also saw nine-month pre-tax profits drop by 28 per cent to SFr1.88bn. But earnings rose 44 per cent at its smaller asset management division, reaching SFr466m. ANALYSIS l Credit Suisse Group AG CHF
23.50
27
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26 25 24
26 Oct 27 Oct
28 Oct
31 Oct
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News
CITYA.M. 2 NOVEMBER 2011
Growth bounce for GDP but UK set to slow again
53.7 Canada
50.8 ▲
UK ECONOMY BY TIM WALLACE
ECONOMIC growth rebounded slightly in the third quarter, the Office for National Statistics’ (ONS) preliminary estimates revealed yesterday. Growth came in at 0.5 per cent, up from 0.1 per cent in the second quarter. Year on year, the ONS figures put growth at 0.5 per cent. However, October’s manufacturing
figures from Markit show the sector contracting into the fourth quarter. Services grew by 0.7 per cent in the third quarter, according to the ONS. Transport, storage and communications expanded by 0.9 per cent, led by telecoms and computing, and business services and finance followed, with 0.8 per cent growth. Manufacturing output grew by an estimated 0.5 per cent. Chancellor George Osborne
described the GDP expansion as “a positive step forward for the economy”. However, analysts from Deutsche Bank described the recovery as “worse than the Great Depression” as output remains almost four per cent below its pre-recession peak. Meanwhile, October’s manufacturing purchasing managers’ index (PMI) from Markit fell to 47.4 from 50.8 in September. Any figure below 50 indicates a contraction.
USA
46.5 Brazil
47.4 United Kingdom
News
CITYA.M. 2 NOVEMBER 2011
47.3 Eurozone
50.4 Russia
48.0 South Korea
53.3 Turkey
50.6 Japan
52.0 India
51.0 China
Double dip in industry may be avoidable
13
NEWS | IN BRIEF Australian interest rates cut Fears over the global economic slowdown yesterday pushed the Reserve Bank of Australia to cut interest rates for the first time since April 2009. The benchmark interest rate was cut from 4.75 per cent to 4.5 per cent. Governor Glenn Stevens pointed to “subdued demand conditions” and also explained that the Australian dollar’s strength helped contain inflation. The Bank expects inflation to fall back to its two to three per cent target in 2012 and 2013, allowing it some room to loosen monetary policy now.
Women losing out in pensions
Taiwan
▲
43.7
WORLD ECONOMY BY TIM WALLACE
47.4 Australia
OVER 50 = EXPANSION THE LARGER THE BUBBLE, THE LARGER THE EXPANSION OR CONTRACTION (RED)
MANUFACTURING output has continued to expand in the US, China and India, purchasing managers’ indices out yesterday revealed, though the UK, Brazil, Taiwan and South Korea all registered declines in October. Analysts believe a global manufacturing recession may be avoided. International data from Markit, and US data from the Institute for Supply Management (ISM) is an early gauge of economic activity, based on survey responses. Any result above 50 indicates output expansion. China moved from slight contraction into growth, rising from 49.9 to 51, whilst India’s growth accelerated from 50.4 to 52. US manufacturing expanded, but at a slowing rate than in September, falling from 51.6 to 50.8. Even this growth was described as
“lacklustre” by analysts at Capital Economics. “The fall in the index was disappointing,” said economist Paul Dales. “For the past four months the index has been at almost exactly the same level, which is consistent with annual GDP growth of around two per cent.” On the downside, UK manufacturing went into reverse, falling from 50.8 to 47.4. Brazil continued its decline, but at a slower rate, up to 46.5 from 45.5. Former Asian tigers South Korea and Taiwan also kept falling, at 48 and 43.7 respectively. “At an aggregate global level, so far industrial confidence appears to be stabilising at a weak point consistent with industrial stagnation rather than recession,” said Julian Callow from Barclays Capital. “This could be an early sign that a double dip recession in the manufacturing sector has been averted.”
Almost half of women over 40 who live with a partner have no independent pension, research out today by Prudential reveals. Fifty-six per cent of couples of the same age have not worked out how much money they will need to live once they have retired, the study found. Prudential warns they “could be sleepwalking into poverty” just because “British couples seem reluctant to discuss with each other the finances that will support them in later life.”
Drop tax relief for rich says paper Tax relief on pension lump sums disproportionately benefits the wealthy at taxpayers’ expense, claims a report out today from liberal think-tank CentreForum. From 2012/13, wealthy retirees will still be able to take £375,000 from a £1.5m pension pot, taxfree. The think-tank argues instead that individuals taking lump sums above the higher rate income tax threshold (£42,475) should have to pay higher tax, as they would on any other form of income.
14
News
CITYA.M. 2 NOVEMBER 2011
Russian IPOs in spotlight as FTSE probes free float ▲
CAPITAL MARKETS BY ALISON LOCK AND DAVID HELLIER
COMPANIES that float only a small proportion of their shares in London could be barred from FTSE stock indices in future under new proposals from the index group yesterday. FTSE is to consult on whether to make UK-based firms list at least 25 per cent of shares, rather than the current 15 per cent, to join its indices. Its move follows growing unease
among fund managers about the number of companies that want to benefit from being included in indices such as the FTSE 100 but keep most of their shares in private hands. Managers voiced alarm last week after Russian miner Polyus Gold said it would list just 13 per cent of shares – now raised to 20 per cent – as they fear low free floats can leave them with little control over decision-making that can run counter to good governance. Similar firms include Kazakh miner
ENRC, which listed just 18 per cent of its shares in 2007; Fresnillo and Essar Energy with 23 per cent; and Glencore, which listed 20 per cent in May. George Dallas, director of corporate governance at F&C Asset Management, welcomed the probe. “It’s positive news that this has been opened up for discussion and debate. We’ve seen a lot of commentary and the issues of corporate governance seem to concern a lot of market participants,” he told City A.M.
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From top left (clockwise): Ivan Glasenburg of Glencore, Felix Vulis of ENRC, Prashant Ruia of Essar and Jaime Lomelin of Fresnillo
© Rob Verrill Abstracted Landscape I
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Covered Warrants, Super10s and Turbos are leveraged products and suitable for sophisticated retail investors. The underlying assets may be volatile and both gains and losses could be greater than those incurred by the underlying asset itself. As the issuer, any failure by Societe Generale Acceptance N.V. to make payments due may result in the loss of all or part of your investment. This is a marketing document issued in the UK by the London Branch of Societe Generale. Societe Generale is a French credit institution (bank) authorized by the Autorité de Contrôle Prudentiel (the French Prudential Control Authority). Societe Generale is subject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request. Any reproduction, disclosure or dissemination of these materials is prohibited.
ING Discerning Eye, Mall Galleries, London SW1Y 5BD – 10-20 November, 10am to 5pm, entrance free. Follow us on Twitter : INGDiscEye and join our Facebook group : ING Discerning Eye Terms and conditions The winner will be entitled to choose a painting from the ING Discerning Eye exhibition up to the value of £1,000. The prize is non transferable, non negotiable and no cash alternative is offered. Entry to the prize draw is free and is open to anyone aged 18 years and over and resident in the UK, except employees of ING Bank N.V. (“ING”), their families, agents or anyone else professionally associated with the draw. Only one entry per person is permitted. The closing date is midnight on Sunday 6 November 2011. The winning answer will be drawn at random from all eligible entries received and the winner will CF OPUJʔFE PO .POEBZ /PWFNCFS5IF XJOOFS NVTU CF BWBJMBCMF PO UIF FWFOJOH PG5VFTEBZ /PWFNCFS BU UIF .BMM (BM leries in London to choose their painting. ING assumes no responsibility and is not liable for any costs, charges or expenses which the winner may be required to pay at any time in connection with the prize. By entering the competition you agree to receive further information and similar promotions from CityAM and Discerning Eye. The winner, by accepting the prize, agrees to participate in non paid publicity accompanying or resulting from this draw if required. The Editor’s EFDJTJPO JT ʔOBM */( SFTFSWFT UIF SJHIU UP TVTQFOE DBODFM PS BNFOE UIJT QSPNPUJPO BOEPS SFWJFX BOE SFWJTF UIFTF UFSNT and conditions at any time without giving prior notice and by continuing to take part in the promotion subsequent to any revision of these terms and conditions, entrants shall be deemed to have agreed to any such new or amended terms.
CITYA.M. 2 NOVEMBER 2011
News
15
Serious Fraud Office boss Richard Alderman in our mock up of a poster for its new tip-off service
SFO: help us to unmask fraud THE SERIOUS Fraud Office (SFO) yesterday unveiled a new service it hopes will “unmask fraud and bribery” in the City. SFO Confidential is an online whistle-blowing tool that allows City workers to anonymously tip off the watchdog to any activity they think may be suspect. The service, which also includes a telephone hotline, promises to keep the identity of anyone offering information secure. SFO boss Richard Alderman said: “I want people to come forward and tell us if they think there is
fraud or corruption going on in their workplace. Executives, staff, professional advisors, business associates or trade competitors can talk to us in confidence. I have set up a special team to make the SFO readily accessible to whistleblowers. I want SFO Confidential to help flush out fraud.” The watchdog has come under fire in recent weeks after sensationally dropping a two-and-a-half-year probe into collapsed hedge fund Weavering Capital. It is also facing questions from property tycoon Vincent Tchenguiz, who was arrested in a dawn raid earlier this year but later released without charge.
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AC23264
▲
ENFORCEMENT BY STEVE DINNEEN
16
News
CITYA.M. 2 NOVEMBER 2011
Supermarkets vie to promote value for money BRANDINDEX
STEPHAN SHAKESPEARE
W
ITH the economic outlook still looking bleak and consumers (as shown by YouGov’s Household Economic Activity Tracker) increasingly price conscious it is not surprising
that a number of big supermarkets are keen to emphasise their value. Sainsbury’s launched its “live well for less” advertisements on 15 September and Tesco’s “Big Price Drop” campaign came out a week later. With two of the big companies going with similar messages in such a short space of time it is interesting to look at BrandIndex and compare their success. Both saw immediate rises in buzz after the launch but Sainsbury’s has been successful in building on this, whereas Tesco dropped back almost immediately. Sainsbury’s was at +17 on 15 September and has steadily climbed to +28 this week. Tesco went from +5 to +10 in the first fortnight
but fell just as quickly and are now again at +5. And what of the message that they were trying to convey? The value scores show that neither brand has had much success in shifting its value perceptions; indeed if anything the movement has been downwards, with Sainsbury’s going from +26 to as low as +17 and Tesco from +28 to +22, although both have recovered to some extent over the last week. A month later Morrisons launched its “Morrisons Millions” campaign – not as distinctly linked to value as the other two but along the same lines. Like Sainsbury’s it has seen a rise in buzz over the two weeks of the cam-
biggest winner) but all will need to work harder at conveying a message of value to todays hard-pressed consumers. Stephan Shakespeare is the chief executive of YouGov
paign (from +16 to +23) but value has dropped slightly from +34 to +30. So all three supermarkets have achieved some success in creating positive buzz (with Sainsbury’s the ANALYSIS l Buzz chart 35.0
ANALYSIS l Index chart 40.0
Sainsbury’s
30.0
30.0
25.0
25.0
20.0
Morrisons
10.0
15.0
Sainsbury’s
10.0
5.0
5.0
Tesco 1 Jul
Tesco
20.0
15.0
0
Morrisons
35.0
5 Aug
9 Sep
0
7 Oct 28 Oct
1 Jul
5 Aug
9 Sep
7 Oct 28 Oct
NEWS | IN BRIEF Lamprell wins North Sea work
Soco slows ramp up in production
Lamprell, an engineering firm serving the oil and gas industry, has been awarded two new construction contracts by Nexen Petroleum UK worth in excess of $200m. The first of the contracts relates to the Golden Eagle Development in the North Sea and will involve the construction of a two level Wellhead deck. The second contract is for a production, utilities and quarters deck, weighing about 10,000 tonnes.
British oil firm Soco International has delayed a ramp up in production at its oil field off the Vietnam coast but said it was confident of achieving target output during 2012. Soco, which in August said it could reach its target of producing 55,000 barrels of oil per day (bopd) from its Te Giac Te oil field by the end of 2011, said it wanted to understand the field better before upping output to that level.
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18
BHP and Mitsubishi to put $4.2bn into Australian coal mining sector ▲
MINING
BHP Billiton and Mitsubishi Corp will invest a total of $4.2bn (£2.6bn) to expand coal mining in Australia and are looking at further investments, BHP said yesterday. The project initially will add 8m tonnes per year capacity in exports of metallurgical coal used in making steel, with an expectation of a rapid, low-cost expansion to 10m tonnes per year, BHP said. BHP and Mitsubishi operate a 50-50 joint venture covering seven mines in Australia’s Bowen Basin region and will each contribute $2.1bn to the work. The work will require development of a new mine, Caval Ridge, and
expansion of the alliance’s Peak Downs colliery. Production will start in 2014 and run for more than 60 years, BHP said. “This is a continuation of BHP Billiton’s strategy of investing in large, low cost, expandable mines with long lives,” BHP’s metallurgical coal division president, Hubie van Dalsen, said in a statement. “Additional expansion projects are being advanced to follow this investment in due course,” he said. Mines owned under the BHPMitsubishi alliance have a combined output capacity of more than 58m tonnes per year of mostly metallurgical coal, representing about a fifth of annual global trade.
Bakrie in $1bn Bumi sell-off ▲
MINING BY JOHN DUNNE
INDONESIA’S Bakrie group has announced a $1bn (£626.5m) deal to sell half its stake in London-listed coal miner Bumi – its venture with Nat Rothschild (pictured) – to help tackle its debts. The stake is being bought by Indonesian rival Borneo Lumbung Energi and will allow Bakrie to avoid a default on $1.35bn of loans after talks with commodities giant Glencore over a sale stalled. Under the deal, which insiders said Rothschild welcomed, Bakrie Group will transfer its 47.6 per cent stake in Bumi to a 50-50 joint venture with Borneo. The process is expected to be completed by the end of next month. Bakrie will use the cash to pay off loans arranged by Credit Suisse. Borneo Lumbung Energi is backed by Indonesian investor Samin Tan, a powerful fig-
“
” |
|
ure in the country. Talks between the Bakrie Group and Glencore fell through because lenders were not comfortable with the structure of the proposal, while the price was also seen to be an issue. Bakrie group chairman Nirwan D Bakrie said: “In forming this partnership, Bakrie Group has strengthened its balance sheet and returned stability to its shareholding in its Indonesian listed flagship PT Bakrie & Brothers Tbk and in Bumi, also highlighting the intrinsic investment value in the LSE listed company.” Tan, a former partner at accountant Deloitte, had failed in an attempt to buy a stake in 2006. Meanwhile Bumi is to double its coal production over the next two years. It was listed on the LSE in January this year.
CITYA.M. 2 NOVEMBER 2011
EDITED BY HARRIET DENNYS Got A Story? Email [email protected] Follow The Capitalist on Twitter: @dennysharriet
The Capitalist
19
THE SHOW MUST GO ON SAYS FOREX FINANCIER DIGITAL downloads decimating album sales, Russian oligarch Len Blavatnik poised to swoop on the UK’s last major domestic music label – it’s fair to say the music industry has seen better days. Here to help the sector’s financially challenged artistes make the most of their remaining revenue sources – touring, merchandise and ticket sales – is currency millionaire Peter Ellis, who is helping bands such as Thin Lizzy beat the banks on their forex transactions. Ellis, who made his £50m fortune by founding Foreign Currencies Direct, credits Planet Rock investor Malcolm Bluemel with alerting him to the “large volumes of forex traded in the music business”. “It is about getting the most out of the markets,” Ellis told The Capitalist on his “competitive exchange rates” that save rock bands up to 20 per cent on each transaction. Ellis also has Bluemel to thank for asking The Doors’ bassist Phil Chen to authenticate the handwritten lyrics to Break On Through that he bought for £600 without knowing if they were genuine. Turns out they were – a £15,000 bonus for the City’s biggest music fan.
Left: Thin Lizzy are among the bands taking financial advice from Peter Ellis Picture: REX Above: Gibson Custom Guitars and Aston Martin are backing the first Gibson City Blues Jam at Boisdale
I’M WITH THE BAND OR SHOULD that be the City’s second biggest music fan? Jeremy Pacifico, who left Investec to focus on his session musician firm Specific Music and his band Pacifico Blues, must come a close second. Pacifico last night gave the City the chance to be in his band “without the commitment” at the sold-out Gibson City Blues Jam at Boisdale of Canary Wharf, where bankers from BGC Partners, Bank of America Merrill Lynch and Barclays Capital played alongside Pacifico Blues in the first of what promises to become a monthly event. One for the A&R men to keep an eye on is Urban Society, the band formed by
UBS Investment Bank’s capital markets head Cesar Gueikian with his colleagues Anton Alvarez and Nat Zilkha, who rattled out their greatest hits as Pacifico played blues harmonica.
MONEY TALKS CANTEEN food prices have been curbed and a McDonald’s-style Employee of the Month scheme has been introduced at the Bank of England in an attempt to distract staff from the fact their salaries have been frozen until 2013. But no amount of morale-boosting incentives can stop the exodus of economics talent at the Bank, which has just been notified that Simon Wells, a star
operator in Spencer Dale’s monetary analysis division, is off to join the research team at HSBC Holdings. It’s not the first time HSBC has poached from the Bank, having attracted officials John Butler and Karen Ward in previous years, while Goldman Sachs lured Andrew Benito to the more generously remunerated private sector only this June. Money, as they say, talks.
LESS IS MORE SIZE ISN’T everything, says the Tory MPturned Telegraph Media Group executive chairman Lord Black of Brentwood. He means marketing budgets, of course, speaking as lead judge of the advertising industry’s annual IPA Effectiveness Awards, which this year scaled back the budget of the campaigns entered to £2.5m to reflect the mayhem in capital markets. “The industry continues to deliver fantastic results in spite of continuing pressure on budgets,” said Black as he awarded the evening’s star prize to an ad that showed “profound insight” by encouraging Colombian terrorists to lay down their arms.
20
News
CITYA.M. 2 NOVEMBER 2011
New watchdog: we don’t care if London is competitive or not ▲
REGULATION BY JULIET SAMUEL
THE NEW regulator charged with protecting consumers should not have to take into account the competitiveness of the City when making decisions, its incoming chief Martin Wheatley said yesterday. Appearing before the influential Treasury Select Committee, Wheatley, who will run the Financial Conduct Authority (FCA)
when it is created next year, said that the body should be able to ban financial products pre-emptively without regard for the City’s attractiveness as a financial centre. “People are attracted to a well regulated structure – safe secure transparent markets that they can have confidence in,” he argued. “All of that enhances competitiveness. But that’s quite different to having a specific objective that would be used to argue against
things that would otherwise be sensible measures.” He added that if the FCA were to not take action due to fears about harming the business environment of London, “it would be a very strange outcome”. The FCA will have sweeping new powers to intervene to protect consumers before firms’ actions have yet been proven to be problematic, on the basis that they could be likely to become so.
Clockwise from top left: committee chair Peter Lilley MP, RBS chief Stephen Hester, Barclays chief Bob Diamond and HSBC chief Stuart Gulliver Pictures: REUTERS/PA
Bank CEOs hit back at ethics accusations ▲
BANKING BY JULIET SAMUEL
BANK chiefs clashed with a committee of MPs and peers yesterday to defend the industry from what they called unfounded “generalisations”. Responding to an accusation from the Conservative peer Lord Maples that the crisis had involved “a failure of ethics… particularly within investment banking”, Barclays chief Bob Diamond said that the query was rife with “many generalisations”. “I certainly bristle when I hear people refer to what we do for our customers as casino banking without the courtesy to come in and watch our operations and show me where the casino is,” he said. “I think there’s a lot of generalisa-
tions picked out of specific firms and applied to the industry and I don’t think that’s necessarily helpful.” He was joined in his defence by rival bank chiefs, HSBC’s Stuart Gulliver and RBS’s Stephen Hester. “What you’re talking about doesn’t apply to the banks we’re running,” said Gulliver. “We’re not condoning it in any way, shape or form. We’re just saying it doesn’t happen in our banks.” The committee, examining the government’s draft financial services bill, also asked what banks make of new capital rules. In a veiled swipe at the UK’s attempt to gold-plate the regulations, Diamond emphasised the need to achieve “a balance so that no country is super-equivalent...If [our rivals are] on a different measure of capital than us, it will create inefficiencies.” In association with PoliticsHome.com
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News
CITYA.M. 2 NOVEMBER 2011
BofA in U-turn over debit fees
Pfizer beats forecast with $3.4bn profit
19.45 1 Nov
$ 19.8 19.5 19.4 19.2 19.0 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Picture: REUTERS
US auto sales growth is at its best rate for year TRANSPORT BY HARRY BANKS US CAR sales rose to near their highest level of 2011 in October, early sales results showed, although shares in General Motors and other automakers tumbled yesterday on concern that the industry’s slow recovery could falter. Chrysler posted a 27 per cent gain in October US sales – its best result in four years – as major carmakers reported results pointing to the strongest showing for industry-wide vehicle sales since the start of the calendar year.
General Motors posted a sales gain of two per cent in October, a weaker gain than some analysts had expected for the top US carmaker. GM said that it expected industrywide sales of light vehicles would top the 13.3m sales rate the industry saw in February of this year. US auto sales, which are tracked as one of the earliest snapshots of consumer demand, slipped in the spring and early summer amid concerns about the prospect of a renewed downturn in the US economy and supply disruptions triggered by the March earthquake in Japan.
BANK of America has scrapped plans to charge a $5 per month debit fee, handing a victory to consumers and protesters angry with big banks. The second-biggest US bank said yesterday that the move was in response to customer feedback and competition. BofA was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards. Last week JP Morgan Chase and Wells Fargo cancelled test schemes.
Revenues lifted at Dollar Thrifty TRANSPORT
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ANALYSIS l Pfizer Inc
US car companies have reported encouraging car sales
▲
PFIZER reported better-than-expected quarterly results yesterday, helped by the weaker dollar and strong performance of the nutritionals and animal health businesses it plans to sell or spin off. The world’s biggest drugmaker, whose top-selling Lipitor cholesterol fighter will face generic competition in the US from 30 November, boosted its full-year 2011 profit forecast and predicted 2012 earnings will be little changed from this year. The company said yesterday profits were $3.74bn (£2.35bn) in the third quarter, including a $1.3bn after-tax gain on the recent sale of its Capsugel business. That compared with a profit of $866m in the year-earlier period, when the company took a big charge for asbestos litigation. Global revenue rose seven per cent to $17.1bn, well above Wall Street expectations of $16.4bn. But revenue
would have risen only one per cent if not for the weak dollar, which increases the value of sales in overseas markets. Pfizer’s earnings and share price have been in the dumps for most of the past five years due to worry over Lipitor’s impending collapse and the company’s inability to create big-selling drugs. But a handful of promising new drugs now working their way through late-stage trials have restored some faith in the company’s laboratories.
BANKING
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PHARMA BY HARRY BANKS
21
DOLLAR Thrifty Automotive Group posted strong third-quarter results that beat estimates on higher car rental revenue yesterday, and the company forecast fourth-quarter rental revenue growth of about one to two per cent. The company posted a third-quarter net income of $66.6m (£41.8m), compared with $49.2m a year ago. Revenue rose to $451.7m from $443.5m. Vehicle rental revenue for the quarter was up 2.4 per cent.
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22
News
CITYA.M. 2 NOVEMBER 2011
WERE IMPERIAL’S FIGURES IN LINE WITH EXPECTATIONS? TINA COOK | CHARLES STANLEY
“
Imperial Tobacco continues to demonstrate resilience with strength in emerging markets helping to offset headwinds in Spain and the UK. The main positive surprise is a continuation of shareholder friendly actions with a 13 per cent increase in the dividend on a slightly larger than expected hike in the payout ratio to 50.6 per cent.
”
JONATHAN JACKSON | KILLIK & CO
“
By Kasmira Jefford
MARTIN DEBOO | INVESTEC
“
With the numbers well-guided, Imperial's full year has come in very close to our and consensus expectations.... At the divisional level, it's hard to put a cigarette paper between the out-turn numbers and our forecasts, if one will excuse the phrase. Spain was weaker than we thought on the top line...UK was almost entirely in line with our forecasts.
” ”
Imperial Tobacco released its results for the year ending 30 September 2011, which were in line with market expectations. The numbers support our positive view on the shares, which are proving to be very resilient at a time of economic uncertainty and market volatility...The business remains highly cash generative.
Imperial Tobacco, led by Alison Cooper, raised its dividend by 13 per cent
Imperial ups dividend as profits rise ▲
CONSUMER BY KASMIRA JEFFORD
IMPERIAL Tobacco group, the cigarette-maker behind JPS, Davidoff and Gauloises, was upbeat about the ending of a price war in Spain yesterday, as it reported annual profits in line with expectations. The world’s fourth largest maker of cigarettes saw profits rise 1.2 per cent to £3.1bn in the year to 30 September as increasing demand in emerging markets helped offset a slump in the company’s Spanish business. Chief executive Alison Cooper said the tough economic environment, combined with excise duty increases and Spain’s extended smoking ban, imposed in January, had created “the perfect storm” in Spain. “I would argue that it was quite unique in terms of its extremeness because of the relative brand positions compared with other parts of the world,” she said. Imperial, which has a 30 per cent share of the market in Spain with brands like Fortuna, said annual revenues fell by 16 per cent to £497m, after cutting prices to compete with other market players.
“We are seeing a more stable position in Spain with prices back or above those seen at the start of this year, so we see a better year in Spain in 2012,” Cooper told a conference call. In the UK, Imperial saw profits fall from £614m to £577m due to the impact of tax and VAT increasess. A strong performance in the emerging markets of eastern Europe, north Africa and Russia, helped lift overall sales by 3.7 per cent to £29.2bn for the year. The group increased its annual dividend by 13 per cent to 95.1p a share and raised its payout ratio from earnings to 50.6 per cent. Shares closed unchanged at 2,275p. ANALYSIS l Imperial Tobacco Group PLC 2,320
2,275.00
p
1 Nov
2,300 2,280 2,260 2,240 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Rathbones adds Reuters beats £307m in funds results forecast WEALTH manager Rathbone Brothers showed it had continued to pull in clients over the summer, as it said yesterday that net new funds going into the firm hit £307m in the three months to September. However, falling markets meant funds under management were £15.1bn, a 3.2 per cent drop over the period. “We expect markets to remain nervous for the remainder of 2011 as inflation expectations and European sovereign debt uncertainties continue to dominate the headlines,” said chief executive Andy Pomfret.
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FUND MANAGEMENT
FUND MANAGEMENT
MEDIA group Thomson Reuters yesterday posted results ahead of forecast as its professional information business offset sluggish growth in its markets division. Sales to legal, tax and accounting professionals jumped 10 per cent, buoyed by strong sales of its WestlawNext software. But growth was subdued in the unit that caters to banks and other financial institutions, with sales rising one per cent. Overall third quarter revenues rose five per cent to $3.26bn (£2.04bn), while operating profit jumped 12 per cent to $717m.
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24
News
CITYA.M. 2 NOVEMBER 2011
Kuwaitis to buy up Hammerson asset ▲
PROPERTY
KUWAITI property firm St Martins Corporation is close to buying 60 Threadneedle Street at the heart of the City from Hammerson in a deal said to be worth more than £175m. The offices, which were completed in 2009, are 99 per cent let, producing £8.8m of rent a year from tenants including Talbot Underwriting and the Toronto Dominion Bank.
Year-on-year house price growth has hit positive territory for the first time in six months Picture: REUTERS
The deal will see St Martins, the property investment arm of Kuwait’s sovereign wealth fund, begin to deploy some of the more than £750m it raised from the sale of non-core assets over the last year into prime assets, according to reports yesterday. The group this year sold more than £750m of secondary retail, office space in UK and Europe, in a process nicknamed “Project Blue”. St Martins declined to comment.
House prices edge up in a soft market ▲
ECONOMICS BY HARRY BANKS
HOUSE prices nudged up last month, beating expectations for no change, driven by sales in more affluent areas, data from mortgage lender Nationwide showed yesterday. House prices rose 0.4 per cent in October having risen 0.1 per cent in September, pushing them 0.8 per cent higher than a year ago, the first time annual house price growth has been in positive territory for six months, Nationwide said. “Given the challenging economic backdrop, October’s data is encouraging, but it doesn’t fundamentally change the picture of a housing market that is treading water,” said Robert Gardner, chief economist at Nationwide. Data released on Monday showed a slowdown in mortgage lending with approvals of home loans -- a gauge of house prices six months down the line -- and net mortgage lending weakening in September, pointing to a further softening in the housing market. Howard Archer, an economist at IHS Global Insight said the underly-
ing trend “remains soft”. He added: “We maintain the view that house prices are likely to fall by around five per cent from current levels by mid-2012 in the face of low consumer confidence, persistently weak economic activity, rising unemployment and muted earnings growth.” He said these factors would likely outweigh the boost to the housing market coming from the extension of very low interest rates. Meanwhile, the average price of a London home slipped by 1.9 per cent in the three months to the end of September to £295,024, according to Nationwide. although prices are still up 0.5 per cent compared to this time last year. Although the capital is still the most expensive region in the country to buy a house, there are large differences between boroughs, Nationwide said. In Hammersmith and Fulham, one of the most expensive areas in London, prices have gone up by 12 per cent compared to last year, while Ealing homes are five per cent cheaper on average. The average UK price is £165,650, Nationwide said.
DTZ says City H&M swoops offices resilient on Carnaby St OFFICES in London’s Square Mile offer one of the best defensive plays for property investors seeking to safeguard total returns if the panEuropean sector is dragged into a second recession by the Eurozone debt crisis, research by DTZ claims. The property consultancy carried out research based on a worst-case scenario, with the 20 per cent possibility of a Eurozone debt crisis unfolding. Total returns for City offices from 2011-16 would be 6.6 per cent, against 7.7 per cent if the economy continued its current muted rebound.
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PROPERTY
RETAIL
SWEDISH Fashion retailer H&M yesterday signed for the first UK standalone stores for its Monki and Cheap brands on London’s Carnaby Street. West End property company Shaftesbury has let its two newlybuilt stores for a ten year term, which will produce a total rental income of £965,000 per year. Last month H&M took full control of FaBric Scandinavien, the owner of the girlswear brand Monki and Cheap Monday, a jeanswear brand which is sold in almost 40 countries and 1,800 stores, including Selfridges.
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26
News
CITYA.M. 2 NOVEMBER 2011
Wolfson swings to $10m loss ▲
TECHNOLOGY BY STEVE DINNEEN
agement chips as customers scrapped products due to lack of demand. It also faced a separate $3.5m restructuring charge. ANALYSIS l Wolfson Microelectronics PLC 117.50
113.25
p
1 Nov
115.00 112.50 110.00 107.50 105.00 26 Oct
27 Oct
28 Oct
31 Oct
1 Nov
▲
WOLFSON yesterday swung to a $10m (£6.3m) third-quarter loss and said weak demand meant it would not return to profitability until well into next year. The firm, whose audio chips are in Samsung handsets, also slashed its revenue forecast for the final quarter to $35-$40m, down from $46.1m. Chief executive Mike Hickey said order intake has stabilised after a sharp slowdown in the summer but at lower levels than expected, reflecting muted consumer demand for
electronic products apart from smartphones. He added that the group’s standalone audio chips, which deliver better quality sound than that provided by a central processor, should help drive a recovery in 2012. Investors, however, are losing patience, with the Edinburgh-based company’s shares, which have lost 60 per cent of their value since the start of the year, falling 3.75 per cent. A host of chipmakers, including Texas Instruments and STMicroelectronics , have said the key Christmas period will disappoint this year. Wolfson took a $3.5m hit on some of its discrete and power man-
Olympus lays out plans it hopes will quell scandal TECHNOLOGY
OLYMPUS yesterday announced a plan it hopes will help put an end to the scandal that threatens to drag the business to its knees. The endoscope and camera maker named six men, including a former Japanese supreme court justice, to investigate past M&A deals, which have been under intense scrutiny after record-breaking advisory fees were brought to light. None of the six, including lawyers
ARM snaps up American design firm
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ADVERTISING giant Aegis yesterday outperformed the industry, smashing analyst growth forecasts. The UK firm was buoyed by a strong performance in the US, where rivals including WPP have struggled in the last three months. It posted organic revenue growth of 11.2 per cent, compared with analyst forecasts of 7.5 per cent. Aegis said it expects organic revenue growth to slow in the fourth quarter and noted that, as is historically the case, revenue will be weighted towards that period. It also said some staff costs had risen, which would keep underlying operating profit in line with forecasts. The firm, which this month closed the sale of its Synovate market research unit for £529m, now expects to fend off any potential suitors after proving itself as a smaller outfit. Havas has long been seen as a potential bidder for Aegis, a position that was strengthened by the sale of Synovate. Havas chairman Vincent Bolloré, who is also the biggest shareholder in Aegis, is a long-term admirer of the company.
▲
A strong US performance boosts Aegis ADVERTISING BY STEVE DINNEEN
TECHNOLOGY BY STEVE DINNEEN
Chief executive Jerry Buhlmann said: “We’re making good progress on all fronts at Aegis and the business has considerable momentum.” He said the group was benefiting from new systems and management put in place, which had energised the firm. He said he also expected its ability to take work off rivals and its presence in faster-growing regions to help it through 2012. It also has a lengthy list of acquisitions that it is working on after completing 15 deals this year. WPP last week cut its 2011 outlook after slowing growth in the US. Omnicom posted third quarter organic growth of 7.2 per cent, Publicis 6.4 per cent, Havas 7.3 per cent, WPP 4.7 per cent and IPG 8.7 per cent. ANALYSIS l Aegis Group PLC p
135.40 1 Nov
142.5 140.0 137.5 135.0 132.5 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
and an accountant with experience investigating governance at a bank, have had any previous association with the company. The all-Japanese committee will look into $687m (£430m) in fees paid to a financial adviser over the $2bn purchase of British medical equipment maker Gyrus in 2008 – the biggest such payment ever – and the acquisition of three companies that Olympus, under chairman Tsuyoshi Kikukawa’s decade-long reign at the company, later largely wrote off.
Warren East says ARM is stronger as an independent company Picture: Laura Lean / CITY A.M.
ARM Holdings yesterday snapped up US design software firm Prolific, as chief executive Warren East reiterated his belief that the firm would suffer if it was subject to a US takeover. And East’s bullish attitude appeared justified later in the day, as HewlettPackard unveiled plans to develop extremely low-energy servers, utilising ARM technology. The Silicon Valley giant is working with Austin-based start-up chipmaker Calxeda -- which uses the ARM technology in its microprocessors -- to create servers aimed at companies running large-scale remote computing operations such as Twitter and Facebook. Meanwhile, it was confirmed yesterday that ARM has bought privatelyheld Prolific for an undisclosed – understood to be relatively low – sum. It hopes the company will enable it to design chips that are easier for its semiconductor manufacturer customers to produce. Ease of manufacture is an increasing concern as ARM designs ever smaller and more energy efficient chips to power the world’s smartphones. Yesterday morning East said ARM’s status as a British company is beneficial to the business and a takeover by a larger US rival would “hamper” it. He told the Today programme: “ARM’s business model works on us being independent.”
Online gaming firm 888 cashes in as Perform Group reassures customers stay at home and gamble investors with solid results ONLINE gaming firm 888 expects 2011 earnings to be significantly ahead of estimates as squeezed consumers opted to stay home and gamble instead of venturing outside. Third-quarter sales grew 42 per cent to $86m (£54m), the highest quarterly revenue ever achieved in its history. It said it has more than 10m registered casino, poker and sport customer accounts, up 24 per cent from last year.
Deputy chairman Brian Mattingley said: “Trading has continued to be strong into the fourth quarter, and we expect that clean Ebitda for the financial year will be significantly ahead of current market expectations.” In August, 888 had said trading across all its business lines for the traditionally weaker third quarter was likely to remain robust. Rival Bwin.party, meanwhile, saw its shares rocket 12.4 per cent yesterday after it announced a partnership with casino operators MGM Resorts
International and Boyd Gaming. ANALYSIS l 888 Holdings 35.50
35.25 1 Nov
p
35.00 34.50 34.00 33.50 33.00 32.50 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
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GAMING BY STEVE DINNEEN
MEDIA BY STEVE DINNEEN
PERFORM yesterday continued its long journey to restore investor confidence after its disastrous IPO this year with a solid set of results. The media rights company posted year-on-year revenue growth of 55 per cent to £27.4m and said it is on track to hit full-year forecasts. Joint chief executive Oliver Slipper said: “We are very pleased to report that our strong performance has con-
tinued through the third quarter, with further growth across all our businesses and geographies. The funds raised on listing give us a substantial platform to growth through acquisition and this pipeline remains promising... We are on track to deliver strong growth in 2012.” Perform listed in April for 260p a share, giving it a market cap of more that £500m. However, it plunged as low as 150p a share over the summer before recovering to yesterday’s price of 200p.
News
CITYA.M. 2 NOVEMBER 2011
27
CITY VIEWS: HAS YOUR TRAIN CARRIAGE BEEN GETTING BUSIER?Interviews by Phoebe Torrance RON BARNES | MILES SMITH
CLIVE GILBERT | INCEPTA
“Yes, they have become so busy that it is unbearable. The new fast trains on my route have been allowed to increase fares more than others. There also seem to be more houses being built along the line, presumably because of such expensive housing closer to the City.”
“Yes, they have become noticeably busier. I've taken to travelling first class because it is getting harder to get a seat. I know they have cut back on the number of carriages, and also the fact that fuel is still so expensive means people prefer to commute by train.”
RISHI CHOUDHURY | TINDALL RILEY MARINE “Not particularly. Personally I think they have always been a busy, slow and inefficient service and I haven’t seen any obvious changes. I have noticed an increase in prices, but it is understandable why.” * These views are those of the individuals above and not necessarily those of their company.
Stagecoach, led by Sir Brian Souter, said it trains were doing well Pic: GETTY, Inset: Micha Theiner / CITY A.M.
Rail and bus firms deliver revenue gains ▲
TRANSPORT BY MARION DAKERS
TRANSPORT firms Stagecoach and National Express reported rising ticket sales yesterday as commuters looking to avoid the high cost of cars turn to buses and trains. Underlying revenue at Stagecoach’s domestic rail business, which includes South West Trains, grew 8.7 per cent in the 24 weeks to 16 October, while Virgin Rail Group, a joint venture in which Stagecoach owns 49 per cent, saw a 9.7 per cent sales jump. National Express, which operates the c2c and East Anglia routes, said third-quarter revenue at its UK rail division grew six per cent. The firm said a jump in passengers using Oyster cards on its routes more than offset the lower yields from Oyster-discounted journeys. Sales at the UK bus businesses of
▲
MULTINATIONAL car dealer Inchcape yesterday posted a rise in third-quarter revenue with an uneven global recovery in the car industry showing strong growth in Asia Pacific and the emerging markets, and a further weakening of consumer confidence across the UK and Europe. The British-based firm, which
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National Express and Stagecoach grew around two per cent. But both firms performed better overseas, with Stagecoach’s US coach operations posted a 12 per cent leap in like-for-like revenue while revenue at National Express’s America school bus business rose 10 per cent. Shares in National Express closed down 1.9 per cent to 225.8p yesterday, faring slightly better than the rest of the FTSE 250, while Stagecoach dropped four per cent to 238.3p. ANALYSIS l Stagecoach Group PLC 248
238.30
p
1 Nov
246 244 242 240 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Inchcape turnover gets lift from Asia Pacific as Europe weakens TRANSPORT
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sells and distributes cars for manufacturers such as Toyota, MercedesBenz and BMW in 26 countries, said yesterday it was maintaining its guidance for the full-year. Inchcape’s revenue increased by 2.2 per cent to £1.46bn in the three months to 30 September, with likefor-like revenue up 4.1 per cent. That took revenue to £4.39bn in the nine months to 30 September, down three per cent on last year.
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28
CITYA.M. 2 NOVEMBER 2011
CITY MOVES | WHO’S SWITCHING JOBS
Edited by Harriet Dennys
Marsh The insurance broker and risk adviser has appointed David Batchelor as head of its international division, comprising all operations outside North America. Batchelor, who will relocate to New York from London early next year, will remain chief executive of Marsh’s EMEA region throughout 2011. Batchelor began his career in 1976 at Bowring, which was acquired by Marsh & McLennan Companies in 1980. He took up his most recent role as chief executive of Marsh’s EMEA region in April 2008.
Xchanging The technology services provider has appointed Geoff Unwin, the former chairman of United Business Media and
executive chairman of Hoskyns, as chairman. He will join the board on 1 December, initially as a non-executive director, before replacing Nigel Rich as
To appear in CITYMOVES please email your career updates and pictures to [email protected]
chairman on 1 January 2012 after Rich stands down on 31 December. Unwin is currently chairman of Taptu, RD Card Holdings, OpenCloud and Halma.
Intertain The parent company of the Walkabout bar chain has appointed David Myers as its new chairman, succeeding Stephen Lambert. Myers, the former chief executive of Avebury Taverns, will retain his current positions as nonexecutive chairman of Premium Bars & Restaurants and La Tasca.
Carmignac Gestion The fund manager has hired Mark Dunn, previously head of strategic business
The European-focused private equity investor has appointed Andrew Land as a senior member of its services sector team and a director of the firm. Land was formerly a managing director with Och-Ziff Capital Management.
Sun European Partners Sun Capital Partners has made three senior hires to its European arm: Jerome Nomme joins from Ernst & Young as a principal on the transaction team, Tim Stubbs joins from the Sapa Group as a managing director
ANALYSIS l Dixons Retail
p
68.00
01 Nov
90 85 80 75 70 Sep
HgCapital
on the operations team, and David Finnigan relocates from the Florida office to become a managing director on the operations team.
Eversheds The law firm has appointed senior Hogan Lovells M&A partner Richard Lewis as a partner in its London M&A practice. Lewis, who has been a partner since 2001, specialises in M&A and corporate finance deals.
Saffron Building Society Jon Hall has been confirmed as Saffron’s chief executive. Hall, who was previously finance director, replaces Andy Golding, who resigned earlier this month.
+44 (0)20 7092 0053 morganmckinley.com
To appear in Best of the Brokers email your research to [email protected]
ANALYSIS l Xchanging
Aug
development at LV Asset Management, as sales director.
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ANALYSIS l Wm Morrison Supermarkets
p
10.73
01 Nov
300
13
290
12
280
11
270
Aug
Sep
Oct
p
Aug
Sep
301.1 01 Nov
Oct
XCHANGING
DIXONS RETAIL
WM MORRISON
Panmure Gordon has upgraded the outsourcing company from “sell” to “hold” with a target price of 70p, seeing long-term value in the business, whose shares have lost more than 30 per cent in the last three months. The broker says good progress has been made this year since the appointment of Ken Lever as chief executive, which should result in cleaner, more visible cash generative earnings.
Nomura rates the electronics retailer as “neutral” with a target price of 16p, and says the challenging first quarter, when it saw UK like-for-like (LFL) sales fall 10 per cent, has been followed by an uncertain trading environment due to squeezed consumer spending. Despite a forecast for a 7.3 per cent drop in first half LFL sales, the broker expects stable losses before interest and tax of £12.2m.
JP Morgan rates the supermarket group as “underweight” with a target price of 302p ahead of its third quarter trading update on 10 November. The broker says WM Morrison should maintain its position at the top of the leader board among food retailers on like-for-like sales, but says the gap is flattered by its limited non-food exposure. JP Morgan sees like-for-like sales growth of 2.3 per cent excluding food and VAT, and expects space growth of 2.4 per cent.
Shock of Greek referendum Torrent of EU news sends financial stocks down batters Wall Street THELONDON REPORT
F
INANCIAL stocks led Britain’s FTSE 100 sharply lower yesterday, after the Greek Prime Minister’s call for a referendum on the bailout package agreed last week sent shockwaves through markets and heightened tensions over debt contagion. London’s blue chips fell 122.65 points or 2.2 per cent to 5,421.57, echoing similar falls across the globe as investors deserted riskier assets on concerns a Greek ‘no’ vote could be catastrophic for the euro and the banking system. “By calling a referendum, Papandreou has given 12m Greeks a decision that has massive and potentially devastating ramifications for the 500m inhabitants of the European Union,” Louise Cooper, markets analyst at BGC Partners, said. The Greek government faced possible collapse after Prime Minister George Papandreou shocked investors and angered fellow EU leaders by letting Greeks vote on the €130bn ($178bn) bailout package, with many voters already deeply disenchanted with austerity measures. Expressing concern at Papandreou’s snap decision to call a
referendum, Jean-Claude Juncker, the chairman of the Eurogroup countries said Greece could face bankruptcy if the population ends up voting against the bailout. German and French leaders are due to meet their Greek counterparts ahead of the G20 summit tomorrow. Having gained just over eight per cent in October, the UK’s benchmark has fallen 5.1 per cent in three trading days and back into the range -5,000 to 5,450 -- that it had previously struggled to breakout of between August and October, when investors were baying for politicians to bring an end to the Eurozone debt crisis. With gains having been capped at the 200-day moving average of around 5,710 on Thursday, the FTSE is now attacking the 50-day moving average support level of around 5,310. Investors responded to the uncertainty brought on by Greece by ditching risky equities and piling their cash into safer assets such as German and UK government bonds. Yields, however, in 10-year Greek and deeply indebted Italy and Spain government bonds rose as the risk that the countries would be unable to repay their debts grew. The FTSE volatility index, a gauge of investor fear, which had stabilised after the announcement of the EU rescue plan last week, shot up 25 per cent. Those with the most to lose should
EU countries begin defaulting fell furthest. Banks fell 3.5 per cent and insurers shed 7.2 per cent. Hedge fund firm Man Group, which has been struggling to retain client money amid relentless volatility, fell 9.3 per cent. Sentiment among financials was further dented as investors fretted over potential exposure to MF Global, which filed for bankruptcy protection on Monday. And the mood further darkened as Credit Suisse said it was cutting a further 1,500 jobs and scaling back its capital-guzzling investment banking business, as it dealt with tougher banking regulations and the impact from the Eurozone’s problems. Europes debt woes weighed too on global factory activity, which slowed down in October on weak demand for exports, raising the risk that the debt crisis could drag the global economy into recession.
ANALYSIS l FTSE
5,421.57
5,800
01 Nov
5,600 5,400 5,200 5,000 4,800 1 Aug
31 Aug
29 Sep
28 Oct
THENEW YORK REPORT
U
S stocks tumbled yesterday after investors were blindsided by a surprise call for a Greek referendum on an EU bailout plan, casting doubt on the sustainability of the recent market rally. The S&P 500 has slid more than five per cent so far this week in moves reminiscent of the stomachchurning market swings seen over the past two months and after investors thought the worst of the Eurozone debt crisis was over. The speedy pullback comes after stocks rebounded to post their best month in 20 years in October. The gains were fueled by hope for an eventual deal to rescue Greece, finally agreed upon at last week’s European Union summit. “The fact that we gave it back as quick as we did in two days is very concerning,” said Ari Wald, an analyst at Brown Brothers Harriman. “It looks very much as though it was a lot of short-covering, a lot of bears found themselves on the wrong side of the trade,” he said of the October rally. Analysts said if Greek voters reject the unpopular bailout in a vote pro-
posed by Greek Premier George Papandreou, it would likely result in a “hard default” by Greece, causing bigger losses for banks and raising the threat of systemic risk. The news slammed European stocks, particularly the region's banks, which slumped six per cent. US banks were also hit hard. Morgan Stanley, which investors worry has heavy exposure to Europe, fell eight per cent. The Dow Jones industrial average fell 297.05 points, or 2.48 per cent, at 11,657.96. The Standard & Poor’s 500 Index lost 35.02 points, or 2.79 per cent, at 1,218.28. The Nasdaq Composite Index dropped 77.45 points, or 2.89 per cent, at 2,606.96. The selloff came on sharp spike in volume with 10.3bn shares traded on the NYSE, the Amex, and the Nasdaq, 22 per cent above its 20-day moving average, while the CBOE volatility index jumped 16 per cent to 34.77, its highest since around mid-October. Nearly six stocks fell on the NYSE for every one that rose. Adding to the gloom, factory activity in Asia’s big export economies slowed to the weakest rate in nearly three years in October, while UK manufacturing suffered a sharp decline, reigniting fears of a global slowdown. The S&P 500 traded below its 14day moving average for the first time since 7 October, pointing to a possible shift in short-term momentum.
London 2012 OLYMPIC REPORT
29
The Olympic Park uncovered: The secrets that lie hidden beneath its green surface Atkins has used engineering expertise to transform a wasteland into a destination, says Marc Sidwell project Atkins brought people from many disciplines together, helping to create new ways of working for the next generation of construction professionals, integrating landscape design with infrastructure planning and environmental concerns.
COUNTDOWN TO THE LONDON OLYMPIC GAMES 2012
HEROIC SCALE
V
ISITORS to Stratford’s Olympic Park next year will be too busy attending magnificent sporting spectacles to give much thought to the work that was required to turn an East London industrial wasteland into a venue fit to receive the whole world’s attention. But Atkins, the engineering partner for the London 2012 Olympic and Paralympic Games, has been working on the project almost since the deal was signed in 2005. Mike McNicholas, Atkins 2012 Project Director, says that the immense effort to reclaim a contaminated site in Stratford stretching over 2 and half square kilometres is “the biggest show in my career” and is understandably proud of the results. The work Atkins has completed has been responsible for “creating the largest park since Victorian times”. It wasn’t always that way. Atkins has overseen the demolition of over 200 buildings and undertaken over 1.3m square metres of site clearance to make the park. What once
was an area of breaking yards, rundown industrial sheds and highly contaminated ground is now unrecognisable.
GREEN PLAYGROUND Old photographs are the only sign now of the decaying cars and towers of old tyres, the buildings with every window smashed, the forlorn railway car streaked with graffiti left in a jumble of weeds. Now the site has been returned to Londoners as a new green playground, and one not just for the spectacle of next year but for the long-term future. Organisers boast that 75 pence in every pound is being spent on lega-
1. THE SITE 102ha brownfield site criss-crossed with neglected waterways and bound by railway lines. Occupied by industrial activity prior to aquisition
2. CONTAMINATION LEYTON
A12
3. ANALYSIS Onsite borehole investigation
0.5miles
LIFTING LIZARDS While attention naturally focuses on the area around the Olympic stadiums, part of the project has been to develop the northern end of the park as an eco-realm with wildflower meadows and woodland. As well as all the heavy lifting, ecologists and archaeologists have been going over the ground by hand, the ecologists literally lifting lizards into their new territory. As well as lizards, some 4,000 newts and 100 toads call this biodiverse habitat home. Subtle details of the new ecosystem such as creating a living river edge not reinforced with concrete and metal are evidence that on this
4. REMEDIATION
5. ECOLOGY
Insitu remediation
6. COIR MATTING Mesh
7. PLANT TYPES
Preplanted grasses
Yellow iris
River Lea
N
A12
Contaminated Brownfield site Planned green areas
102ha
Coir mat
The Archeae bug, used for bio remediation
Contamination from over 200 years of
Teams were sent in as each of the
factory, landfill site and bus depot. All giving rise to an accumulation of diverse contaminants which had penetrated both soil and groundwater
adding to historic information already known about the site. Eventually 3000 borehole based investigations had been conducted
neglect. Previous business uses businesses left. They carried out full STRATFORD industrial including; waste tip, chemical works, glue investigation of the ground below
Position of stadium
extent of site
cy, and in Atkins’s work on the foundations of the Olympic Park that is especially true. It is visible in even the smallest details, such as helping to create footbridges that can be temporary “people motorways” during the bustle of next summer but then revert to thinner footways for the future so that people can meander over at their leisure – and stop to enjoy the view. It’s true too in many important engineering works that lie out of sight. Atkins has designed and overseen the installation of a new culvert that intercepts the overland flood route, putting almost 4,000 fewer houses at risk of flooding.
River Lea
200yrs 3000 industrial neglect
bore-hole based investigations
Soil hospital for worst contamination
The remediation strategy was to keep as much material onsite as possible. With both soil washing and bio remediation techniques used. 95% of demolition materials were reclaimed and reused with an overall cut and fill balance achieved across the site
80%
of soil retained and reused
Earth
Purple losestrife
Emergent grasses
Despite having more than 200 buildings this brownfield site also contained many wildlife havens. There were many interesting habitat sites for flora and fauna containing many invertebrates. Where ever possible these species were collected and relocated
After exhaustive testing coir pallet planting was found to be the most successful way of delivering native wetland plants back to this challenging River Lea and Thames estuary area. Seedlings are delivered to site ready planted in coir mats
45ha
380,000 15,000m2
of created habitat
Individual plants
graphic: www.paulweston.info
267 DAYS TO GO
But above all it is the scale that astonishes. Working within a living corner of the city and to very tight deadlines, Atkins had to construct temporary roads and utilities just to support the more than 11,000 construction workers involved at the peak of construction. Yet it also managed to hold itself to strict standards on reuse of the material on the site. Of the 500,000 tons of demolition material, 97 per cent has been reused. And thanks to an elaborate system of soil washing and decontamination, 80 per cent of the soil in the area has been replaced – now fresh and ready for the next thirty years. To those who do notice the Olympic Park’s skilfully-constructed foundations, perhaps it will help spark new interest in the industry – which is, after all, one of the UK’s historic exports. It’s certainly a wonderful showcase for the global audience that the 2012 Games is bringing to London. Mike McNicholas says: “I’m immensely proud of the work that Atkins has done and the role that thoughtful engineering has played in delivering on the ambition of London 2012, and everyone who has worked on the project will also be able to take the lessons they’ve learned and apply them elsewhere, creating an even greater legacy.”
Trails identified which species coped best with the sites tough conditions. These consisted mainly of emergent grasses, yellow irises and purple loosestrife. These should flower during the games
of planting
Source: Atkins, first appeared in NCE. Paul Weston
30
The Forum
CITYA.M. 2 NOVEMBER 2011
cityam.com/forum
It’s not just the Eurozone: A trade crisis is growing. The G20 must show leadership T
HE crisis spawned in 2007 has in many ways come to resemble Hydra – the mythical many-headed serpent of Ancient Greece, which grew two new heads every time one was cut off – already last Wednesday’s Brussels Summit shows no sign of marking a true turning point for the Eurozone. And while the euro-crisis commands attention, lurking just behind it is a growing – and almost unseen – trade crisis. Protectionism – the murky art of closing markets to foreign goods or services – is raising its head in some familiar places. In France, the surprise result in the Socialist primaries was that a candidate who advocates protectionism knocked former presidential candidate Segolene Royal into fourth place. In Washington, a bill currently sits before Congress which proposes to introduce punitive charges on Chinese imports unless Beijing re-values the renminbi. In Brazil, after months of complaining that currency movements were working to Brazil’s disadvantage, the new Brazilian government flexed its muscles by introducing preferential terms for local manufacturers competing for government contracts. Business is already feeling the very real effects of these shenanigans. Those trying to get into foreign markets are facing new obstacles to trade – not just higher tariffs, but opaque regulations, discriminatory procurement practices, hidden export subsidies, and the biased tax treatment of foreign investments. The reasons for this creeping protectionism are understandable: we have been passing through a time of almost unprecedented economic uncertainty, coupled with closelyfought electoral cycles in some key countries. For international business, it’s a dangerous concoction. Its all-too-tempting for a politician on the campaign trail to add another glug of protectionism, maybe with a dash of nationalist rhetoric. The problem is that what works on the campaign trail has disastrous effects
STEPHEN PATTISON
in practice. And if anyone needs reminding of the risks: it was precisely the rise of protectionism which tipped the financial crisis of the 1930s into a global depression. What’s particularly worrying here is that key global institutions are not gripping this risk. The World Trade Organisation (WTO) languishes, picking over the entrails of the nearly dead Doha round, and wondering what on earth governments will do when they turn up in Geneva for the WTO’s big jamboree in December. The G20 meeting in Cannes later this week risks being stuck with last year’s agenda when real life has moved a long way on. Add some buck-passing between the two and you have a good recipe for further global paralysis on trade. So of course, it is tempting, as Anthony Browne did in last week’s City A.M., to give up on
If anyone needs reminding, in the 1930s protectionism turned crisis into depression. the multilateral approach to trade liberalisation and join the chorus of voices arguing for more bilateral free trade negotiations. But bilaterals are easier to talk about than to deliver. They turn out quite often to be no easier to negotiate than multilateral agreements. It is not unusual for a bilateral deal to take close to ten years to complete – and these are mostly the easy ones. Worse, looking ahead, if you give up on the goal of a truly global trade deal there is the fundamental risk that the world will break down into regional trading blocs which have no real success talking to each other. Fine, if all your business is with the EU. But if you really want to go global you need something more powerful to open the doors. Doha may be dead – or at best comatose for the foreseeable future. But that doesn’t mean we
should give up. We need fresh thinking about how to use the multilateral machinery to counter immediate protectionist threats and to maximise future global growth. The answer should start at this week’s G20 Summit, with three simple steps. One, policy makers need to grasp that the dynamics of international trade have undergone a significant transformation over the past decade. The focus on collecting import-export statistics doesn’t really do justice to the complexities. For all the political huffing and puffing, the US and China might be in a symbiotic relationship which quite suits them. Two, the World Trade Organisation urgently needs to be given a new role to monitor countries’ trade policies to keep protectionist excesses in check. Three, the major global powers should recommit to new trade talks – starting with coalitions of the willing – on issues of fundamental importance to business. Prime candidates could include agreements on investment protection, e-commerce and services. The process of global trade liberalisation is impossible without clear leadership. This role has usually fallen to America, but nothing is likely to come out of Washington until after the presidential elections next year. But someone needs to step up to the plate right now. Maybe the G20 this week and the WTO Ministerial later in the year will show us just who. Stephen Pattison is the director of the International Chamber of Commerce UK.
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CITYA.M. 2 NOVEMBER 2011
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RAPID RESPONSES Simply complex In response to Gemma Godfrey [The EU’s decision process: It’s not rocket science, on Monday], I think we’ve outlived a time where the world economy worked mostly in a linear fashion that’s easy to grasp and extrapolate (e.g. if exports grow by X per cent, and unemployment falls by Y per cent, GDP will rise by Z percent). Instead, thanks to globalisation and an ever faster pace, the world economy has grown into an incredibly complex and complicat-
ed system where non-linear effects dominate. We could spend years building complex and expensive models for the world economy, mimicking weather forecasting and always lagging the fast pace of the economy itself. Or we could use physicists, economists and psychologists to scrutinise regulation and make sure that it addresses root causes, rather than symptoms, thus reducing the complexity of the entire
system. Gemma’s quote of Einstein saying “we can't solve problems by using the same kind of thinking we used to create them” is a very valuable reminder. All politicians (and other decision-makers) should have to recite this quote every morning before being allowed into their office. In that spirit, physicists, meteorologists, economists and psychologists unite and educate decision-makers. Tony Scott
Forcing others to obey is the issue, not greed BY JAMIE WHYTE
M
ANY of those occupying Wall Street and the City of London object to corporate greed. Yet greed is usually harmless. For example, I may well be greedy. I would like to earn more despite already earning what many of the protesters would consider more than enough. But my greed is harmless because I cannot force people to give me their money; I must persuade them to part with it. And I can do that only by offering them something they want in return. Given my impotence, my greed is beneficial to others. It inspires me to come up with valuable things to offer them. The anti-capitalists must really be worried about corporate power. And their language suggests they are. They claim that large multi-national companies “exploit” workers and “force” other firms out of business. They speak as if corporates use coercion to satisfy their greedy desires. Sometimes companies do wield coercive power but, ironically, never in the free markets that anti-capitalists despise. Imagine a subsistence farmer in a third world country working 70 hours a week to provide himself with about $5 worth of food and shelter a day. A clothesmaking factory opens nearby offering jobs that pay $1 per hour and a 70 hour week. He will probably take the job, since it doubles his income. If the factory had been opened by a local man using a subsidised micro-loan, those occupying the City would celebrate. If started by an American firm, however, they will claim the worker is being exploited. But where is the exploitation? If working for $1 an hour benefits the man when he is paid by a poor local, it
benefits him when he is paid by a rich American. And, in both cases, the job is taken voluntarily. Or take the greatest crime in the imagination of British anti-capitalists: a supermarket chain such as Tesco “forcing” a high-street butcher out of business. Where is the force? The supermarket’s scale allows it to offer shoppers lower prices than the butcher. They voluntarily switch suppliers and the butcher goes out of business. No one has been coerced. Sex may make the matter clearer. Tim is a local boy who all the local girls think is gorgeous and who enjoys the attendant benefits. One day a handsome American named Brad moves into town. Brad uses his superior “pulling power” to seduce the women Tim used to get. This is disappointing for Tim. But Brad has wielded no power from which people must be protected. Coercion is involved only when someone acts involuntarily. Deny this and you cannot distinguish seduction from rape, employment from slavery, or buying something from stealing it. It is, in fact, those who wish to protect the “victims” of free markets who would employ force. Tim and the local butcher can be protected from their disappointments only by preventing consumers from acting on their preference for Brad and Tesco. Anti-capitalists complain about cronyism but they do not object to it in principle. They merely dislike the most successful cronies of recent times: namely, those bankers that received bailouts. Propose that the government use its coercive powers to bestow gifts on school teachers, nurses or local shopkeepers and few occupying the City will complain. Like any greedy banker or corrupt politician, they are keen to replace voluntary exchange with state-compelled transfers when doing so benefits people they like. Jamie Whyte is a senior fellow of the Cobden Centre and author of Crimes Against Logic (McGraw Hill 2004).
31
We need to teach financial literacy in all UK schools I
T IS significant the e-petition calling for compulsory financial education in schools has this week become one of the first petitions to reach the threshold of 100,000 signatures and that the All Party Parliamentary Group (APPG) on Financial Education for Young People is the largest in parliament, with 224 cross-party MPs. We are a financially illiterate nation. The UK has the highest levels of personal debt per capita of any country in the G20 and the UK’s personal debt crisis has deepened by over 350 per cent in the last 10 years. We need to make fundamental changes to the way individuals manage their money, and we now have the popular support of both the public and parliamentarians to take this forward. Financial education is a long-term solution to the national problem of irresponsible borrowing and personal insolvency. It is time to teach people about budgeting, good and bad debt, and personal finance so that they are able to manage their money more effectively in an increasingly complex financial world. Ensuring that every child in the country gets a basic understanding of personal finance and consumer rights before leaving school would enable the next generation of consumers to make informed decisions. It will equip the workforce with skills to succeed in business and drive forward economic growth. Some schools already provide personal finance education, but provision is at best ad hoc. Schools face significant barriers to teaching personal finance education, including pressures on curriculum time, no statutory mandate, lack of teacher training, lack of teacher subject knowledge and confidence, and lack of awareness of suitable resources. It needs to be given curriculum time by government to guarantee that every child leaves school with at least a basic understanding of the financial decisions they will need to make
JUSTIN TOMLINSON as they embark on independent living, and the impact that these decisions will have on their wellbeing and future. The APPG on Financial Education for Young People has undertaken a nine-month inquiry into how financial education can be provided in the national curriculum. We have conducted an online survey of over 850 teachers, received 41 written submissions from the education sector, financial services industry, student representation bodies, and individuals, and examined 38 witnesses from the education sector across the UK, the financial services industry, and independent commentators. The inquiry’s report, to be launched on 12 December, will provide conclusions and recommendations intended to help the government and schools build a sustainable model of personal finance education that equips young people with the skills and knowledge they need to become intelligent and responsible managers of their money. We have the support for financial education, we have a framework of how it can be delivered, now is the time to debate this issue on the floor of the House and for the government to take this forward. Justin Tomlinson MP is the chair of the Financial Education for Young People APPG.
Wealth Management
32
DON’T TOE THE LINE OF CABLE COMPLACENCY
| Foreign Exchange
Japan can’t scare off
Interventions won’t BORIS SCHLOSSBERG stop the yen rising DIRECTOR OF CURRENCY RESEARCH, GFT against the dollar, OOKING at the carnage that is the Eurozone writes Philip Salter today from the comfort of a Canary Wharf office,
L
it is easy to feel superior. After all, the UK appears to be relatively immune to the chaos that’s currently occurring in European capital markets. With Greece “circling the drain” as some of my fellow analysts have so indelicately put it, and with shorts primed to skewer Italy next, euro-dollar is facing an all out assault from every angle. Meanwhile cable has remained above the fray, trading within the $1.5500$1.6000 range for the past two months. The pound has been the beneficiary of two critical trends. First, economic data over the past few months has been relatively stable, with business activity in the third quarter enjoying a rebound. In fact, the latest GDP reading released yesterday showed that the UK economy grew at 0.5 per cent, versus a 0.3 per cent forecast. Secondly, UK debt has been afforded a remarkable measure of respect in the credit market. The standard five year CDS contract costs only 91 basis points for UK – less than the much larger and arguably much more stable German economy, which was trading at 97 basis points. Contrast that with the 513 basis points that the market now charges for Italian debt and the question that you must ask is – is UK credit really five times as safe as Italian credit? I believe the answer is no. The UK economy remains laden with debt and is still very heavily reliant on the finance sector for growth. Furthermore, the latest economic data is signalling another stall in activity. Yesterday’s massive miss in the PMI Manufacturing report, which printed at 47.7 versus 50 eyed, caused a sell-off in cable, as traders were more concerned about decline in forward demand than the backward leaning GDP surprise. Therefore, this Thursday’s PMI Services report could be the tipping point for the pound. If the data prints below 50, signalling contraction in the critically important services sector, investor attitudes towards sterling could change in a heartbeat, as the rosy credit assumptions and growth prospects are challenged – threatening to send the pair to $1.50 by year end.
T
HE yen will continue to strengthen against major currencies. No matter the actions of Japan’s authorities, attempts to bring it down are destined to fail. It is not as though Japan’s leaders haven’t been trying – the economy has been mismanaged for decades. But interventions and gargantuan government debt have done nothing to dissuade the forex market from its instinct that in adversity, the yen is the place to be.
THE COST OF INTERVENTION On Monday, the Bank of Japan (BoJ) managed to dig the yen out of its record ¥75.35 against the dollar, but at an estimated cost in the region of $100bn (£64bn). This was a short-term fix and has since been trading in a tight channel just above ¥78. It won’t stay there for long. Chris Towner of HiFX thinks “the timing of the intervention was intentional.” He says “they patiently waited for the Europeans to come up with their plan and as risk-on returned to the market on the last day of October, they intervened.” Interventions have failed on its two previous attempts this year and the latest move will follow suit. “Back in August,” says FairFX’s Rishi Patel, “the ¥77 handle in dollar-yen was simply ineffectual.” The markets returned back to that level within a few days. He thinks although Monday’s “intervention was significantly
A stimulus to nowhere
more than the August intervention, so far the impact has been limited and there has been no follow through.”
A HARD RAIN The Eurozone’s leaders are forever claiming that its economies are better than the markets give them credit for. In contrast, Japan is in the rather peculiar position of trying to convince investors that they
79
125 ¥ 120 115 110 105 100 95
¥
78.50 78 77.50 77
90 85 80
76.50 76 75.50 26 Oct
have too much faith in them. In reality, both are in a significantly worse state than most are willing to admit – but for now, the Eurozone’s liquefaction takes centre stage. As Markos Solomou, risk manager at Easy-Forex explains, the seemingly never-ending Eurozone crisis and all of the ongoing uncertainty leads investors to seek safe havens. Towner thinks the Eurozone has caught Japan
ANALYSIS l A blip against a long-term trend (dollar-yen)
ANALYSIS l Monday’s dramatic intervention (dollar-yen) 79.50
Picture: GETTY
27 Oct
28 Oct
31 Oct
01 Nov
2007
2008
2009
2010
2011
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safe haven status between a rock and a hard place: “We have seen the Japanese yen strengthen due to risk aversion and then when risk aggression returns to the market, the US dollar weakens and by default the yen strengthens.” Deflationary Japan holds some security for forex traders. Yannick Naud of Glendevon King notes that as long as the inflation gap between Japan (year-on-year expected 2011 CPI of -0.2 per cent) and the US (3.2 per cent) remains wide, we should expect the yen to appreciate further in the medium term. Kathleen Brooks thinks the authorities will fail not only because the dollar-yen is a highly liquid trade in a $4 trillion market, but also due to the size of its economy, currency manipulation of the sort required would become a serious diplomatic matter. As Michael Derks, chief strategist at FxPro surmises: “In a world where many of the major currencies have serious doubts attached to them as a
reliable store of value and with question-marks over the safety and security of their banking systems, it is hardly surprising that the yen has so many friends.”
ON A DIME Traders had been speculating and guessing an intervention was coming says Spreadco’s Ian O’Sullivan. BoJ mutterings tipped off traders, however, he says “when it did happen, it caught most traders completely off guard.” For some this was no bad thing: “Anyone who had been buying dollar-yen in the last week of October just below ¥76, with a stop loss below ¥75.50, found themselves in a lovely position, as the stop escaped, just, before it launched over 300 pips skywards.” O’Sullivan says traders are willing now to close out and take the opposite trade – expecting the BoJ to eventually succumb to the pressure. Even though it is destined to fail in the long-term, traders need to
beware, as the BoJ is serious about interventions, which could upset trading conditions. Towner warns that Japan, in protecting its currency from strengthening, has unlimited reserves. It can print its own money to buy the dollars for the intervention. Derks advises that although “intervention always complicates trading, it is never a reason to avoid trading a particular currency. The answer”, he says, “lies in attempting to determine at what level the central bank will intervene, and neutralise positions beforehand.” Derks thinks Australian dollar-yen is also an interesting pair to keep an eye on: “If we now revert to risk aversion like we did through August and September, it is hard to see how this pair would not fall further.” Japan’s fiscal and monetary authorities are in a game of snakes and ladders, in which the snakes are out to get them and the ladders lead to nowhere.
THE TIPSTER EURO FALL LOOKING FOR TENDER LANDING
A
FTER a month long rally against the dollar, the euro wiped out almost half the gains falling 440 pips in one day, with the news of a Greek referendum and the European Central Bank’s consideration in cutting rates looming large. The euro-dollar pair is in freefall and will take a strong bit of positive news for the pair to bounce back any time soon. Capital Spreads quotes $1.3685-$1.3586. The risk aversion so far this week has seen a mass sell off in the riskier currencies. The Aussie dollar has retraced from almost touching $1.0800 back to $1.0300. Since breaching the 23.6 per cent Fibonacci retracement level, the pair could go lower to the 38.2 per cent level, which is at $1.0235. Capital Spreads quotes a price of $1.0300$1.0301 for Australian dollar-dollar. The market has been testing the Bank of Japan’s resolve since their dramatic intervention in the small hours of Monday morning. $78 is the battle ground for now, but there seems to be strong resistance once it heads towards $79. Look to sell on approaches to $79
and look to buy back again around $78, or below, should the market pressure buckle the Bank of Japan. Spread Co offers a spread on dollar-yen of ¥78.179-¥78.199. The euro plummeted yesterday on news that Greece was to hold a referendum on the latest euro debt bailout proposal. Euro-dollar dropped by around 500 points. Euro-sterling wasn’t quite as dramatic, falling around 200 points, before recovering to rise back above £0.8600. Spread betters were buying with limit orders set at £0.8700 and stops at £0.8550. Spreadex quotes £0.8606-£0.8609. It was a ghoulish Halloween for cable as it whipsawed between $1.6130 to $1.5965, back to $1.6160 and back down to $1.6065, all in the space of 24 hours. Despite stronger than expected UK GDP figures on Tuesday, cable plunged to test the $1.590 support area, a break which opens a run at $1.570. Spread Co offer a spread on sterling-dollar of $1.5908$1.5910. Philip Salter
FOREX ANALYST PICKS FOREX STRATEGIST
FOREX STRATEGIST
FOREX STRATEGIST
JOHN KICKLIGHTER
JOEL KRUGER
ILYA SPIVAK
My pick: Long dollar-Canadian dollar, short sterling-dollar Expertise: Fundamental analysis with risk management Average time frame of trades: 1 day to 1 week
My pick: Sell Australian dollar-dollar at $1.0310 Expertise: Technical analysis Average time frame of trades: 1 day to 1 week
My pick: Stay short euro-dollar Expertise: Global macro Average time frame of trades: 1 week to 6 months
We witnessed an incredible swing in risk trends preventing both my sterling-yen and Aussie-dollar setups from triggering. The dollar-Canadian dollar managed to hit the Ca$0.9970 short, but it was best to bail with a small take. Volatility and event risk is a big threat this week. I’m looking for a short-term long dollar-Canadian dollar above Ca$1.0025 if risk aversion sets in. There are a lot of options for that scenario, including sterling-dollar reversing trend below $1.5950. It’s high risk though.
We continue to classify the latest market rally as corrective, with the move putting in a lower top below the September high. The market is now rolling back over to keep the downtrend intact and open a bearish resumption. While selling rallies is probably too aggressive, we recommend being slightly more cautious and looking for confirmation on a break back below $1.0315. Look for the break below $1.0315 to then expose a fresh drop back towards $0.9385. Only a sustained break back above $1.0750 would negate.
I sold euro-dollar at $1.4328 on 29 July. Prices soared last week in the wake of the EU debt crisis summit, taking out my revised stop-loss at $1.3975 for a small profit. With the euphoria fading and the many gaps in the now third “comprehensive” crisis containment plan emerging, euro is on the defensive once again. I will look for a compelling new entry point to re-establish the position in the days ahead. Ideally on a bounce from support at $1.3707 back toward the $1.39 figure.
34
Wealth Management
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Lifestyle
35
THE CLOUD EXPLAINED IN GADGETS TOMORROW
Life beyond the web for a new age of daters A fresh wave of matchmakers is reinventing the way we search for love, says Zoe Strimpel
I
T’s been a long day and you’re tired. But when you get home you have another job to do: search through thousands of faces for your potential life partner and reply to a half-dozen or so relevant messages from fellow cyber loveseekers. Internet dating is no longer considered weird or sad – roughly 5.2m Brits set up dates this way – but it has lost some of its sheen. Despite the success stories (everyone has a friend that found The One online), there is a growing sense of exhaustion among digital daters. The term “online dating fatigue” has become de rigueur and an increasing number of relationship experts are discussing the “exhaustion” that is leading people to bin their profiles. A recent Wall Street Journal article was headlined: “Scary New Dating Site: The Real World”. Chicago-based psychologist and author of Relationships for Dummies Kate Wachs noted therein that people were finding internet dating “exhausting” and that they “burn out really fast”. Certainly, people have been at it for a while now. It’s 15 years since online dating hit the mainstream – Match.com, the first of the biggies, launched in 1994 in the US. The market has matured, allowing time for its exciting novelty, as well as its stigma, to fade. We all have friends who we encourage to go online without a single twinge – heck, many of us have given it a whirl ourselves. But – as well as concerns over how tiring it is – there is a growing cynicism about just how effective internet matchmaking is. In the last year, there has been a surge in criticism of the figures pumped out by websites, which are thought to be hugely inflated. Web dating services claiming so-and-so numbers of marriages per day do not invite peer review of their data, unlike in the scientific community. Nor are the figures balanced against the far greater numbers of internet daters who quit before finding anyone. And, as people are beginning to admit, despite sleek and cheerful TV ads and posters full of images of happy domestic endings, successful outcomes are the exception, not the rule.
Internet dating is far from over, of course – it is still one of the most lucrative businesses online. But a new wave of entrepreneurs is stepping into the disillusioned abyss enveloping web daters, offering something better and, quite frankly, nicer. Whereas traditional internet dating is all about choice, algorithms, photo perusal and messaging, the new format is far more personal and sells selectivity, exclusivity and less time behind a screen. Suze Cook, founder of The Picnic Project, a new “luxury matchmaking service”, got the idea for her company from her own experience of internet dating while working and travelling a lot as a high-flyer at Microsoft. “I did a bit of online dating and had a lot of fun, but there was a real disconnect between day life and evening life – I’d be busy all day and then going home and sitting in my bedroom chatting to randoms online. Also, it was very hit and miss – there were some really bad dates. The fun began to really wear off. Then I just thought Christ, if there’s a way of paying someone to help make the process more selective, it would be great.” Cook tried a range of upmarket matchmaking agencies but felt they were sorely out of date: “The emphasis on you as a woman was all about the biological clock, things you should be doing to snare a husband and so on. Plus, the people I was meeting were quoting 80s books and had poodle hairstyles.” So Cook struck out on her own, following the application-based, personal matchmaker model used by agencies such as the high-end Berkley International and Drawing Down the Moon. “We have to consider you interesting and presentable,” she says. “You could be stunning but have no personality – we wouldn’t select you. If you weren’t well groomed or had no interests, you wouldn’t make it. All our clients are attractive.” Fundamentally, Cook’s service challenges box-ticking. “We try to take people away from their lists – the starting point for any internet profile. You can’t do wildcards online, but sometimes those are the
best. In essence, we’re acting like friends of friends. Personal recommendation is the way things are going if you can afford it and you’re busy. After all, people have personal yoga teachers, nutritionists and now dating managers.” A consultant who prefers to go unnamed is yet another dating entrepreneur trading on exclusivity, whose business, the Shared Tables Society, launched in September. It’s an invite-only service that hosts dinner parties of four single women and four single men, with no browsing of members at all: the website’s only purpose is to enable you to invite new members and book dinners. The founder set up shop after years of cajoling friends to find love online – and hearing them moan about how time-consuming, inefficient and patchy it was. “I absolutely think internet dating is not working for some people,” the London Business School graduate says. “For a lot of people it does work, of course, if they’re prepared to go out there and say ‘what I really want to find is a soulmate’ and they answer those 180 questions or whatever is required. Personally, though, I find it all a bit too sticky; a person changes all the time.” Like The Picnic Project, Shared Tables challenges not just the process but the fundamental structure of internet dating. “I don’t think it provides a good representation of people,” the founder says. “People aren’t very good at knowing what they want and they may not describe themselves in the best way. For example, many people would say their partner is nothing like the person they’d have described before they met.”
The pressurised, potentially awkward meetings arranged through traditional sites are not everyone’s cup of tea. Below: the new breed of services are more hip.
BEYOND THE INTERNET | MATCHMAKING THROUGH PEOPLE, NOT ALGORITHMS l Shared Tables Society, sharedtables.com Arranges dinners where four single men and four single women meet. Members are invited by existing members: each time you sign up to a dinner or “table” you have to recommend four other singles. Attracts a high-calibre, international crowd of late-20s, early 30s professionals. Website is truly “cool”. Upsides: Almost always good fun, and takes all pressure off the one-to-one format. Chance to meet several people at once. Downsides: In the shared table format, it can be hard to form a connection with one person, and the night can end up feeling more friend-y than date-y.
l Picnic Project, thepicnicproject.com An interview process determines eligibility – that, and the ability to pay a sizeable fee for membership. Lots of time-poor, cash-rich highflyers apply: women tend to be aged 30-40, men go up to 48. People are matchmade and sent on dates according to the co-founder Suze Cook’s intuition. Bills itself as a members club. Upsides: You’ll meet people you might never have chosen online and they’ll all be successful. Cook’s strategy for matchmaking seems solid and fresh. Downsides: Very expensive and there are likely to be some tricky customers, particularly the men, who will be rich and therefore potentially impossible to please.
l Social Concierge, socialconcierge.co.uk A more party-focused matchmaking service for twenty-somethings who feel they’ve run out of dating options and don’t fancy going online. Would-be daters are “hand-picked” by the eccentric, larger than life founder, Nana Wereko Brobby and then hit the town together, probably in Shoreditch or Soho. Upsides: There is a selective element, and it’s all imbued with a sense of “fun” – nothing dowdy or stiff here. Downsides: The “hand-picked” aspect is a bit of an unknown quantity, and if you’re looking for a super hard-working professional to date, this may not be quite right.
And for the busy professional, internet dating can be a false friend. It’s a great way to access a large pool of single individuals but you may not like them and then you’ve wasted time. The solution? “You need to meet more people at once,” says the Shared Tables founder. Jon Harris, a technology consultant and dating entrepreneur, agrees. He is in the process of creating a service that combines a hand-picked, CV-based application process with an online browsing function and a real-life speed-dating element. It’s the most efficient format possible: if you don’t find a date, you’ll probably find a good person to network with. “My idea is that you get to meet six or eight great people in the amount of time you would normally take to meet one,” says Harris. “Either there's chemistry or a professional contact.” As for that sense of alienation that arises from endless dates with people who seem one way but turn out quite another, Harris says: “The matchmaking trend now is kinship – people are finally thinking about how they meet and form relationships with people in real life. I personally like to develop relationships through friends of friends. It’s far safer from a timesaving point of view.” Internet dating works for many people. But for the vast amount of busy, professional singletons whom it only confuses and tires, the dawn of a new matchmaking era has arrived not a moment too soon. Zoe Strimpel’s book, The Man Diet: One Woman’s Quest to End Bad Romance, is out as e-book on 30 Nov, paperback January 2012 (Avon).
BY ZOE STRIMPEL l Drawing Down the Moon, drawingdownthemoon.co.uk The name refers to a contemporary Wiccan practice, but the service is anything but witchy, charging a substantial fee for membership following interview. Billed as “the introduction agency for thinking people”, members are said to be “well-educated and successful”. Upsides: You probably won’t end up with a hippie and may well meet people who are both interesting and successful. Downsides: Founded in 1984, it lacks the contemporary image, and the founder and MD – pictured in a video still on the homepage – looks a bit eccentric.
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Lifestyle | Motoring
WORDS BY RYAN BORROFF
CITYA.M. 2 NOVEMBER 2011
The Q3: Audi’s likeable compact SUV The petrol model lacks verve, but the diesel edition is predictably impressive
I
NTERNALLY, Audi calls it “the product firework”. With 12 new models introduced in the last five years and seven more planned for introduction by 2015, it seems the Four Rings can do no wrong. The Ingolstadt manufacturer seems to have an almost alchemic ability to find success in whatever niche it enters. But it is a bit late to the party with its latest Q3 compact SUV. Premium rivals have beaten Audi to the segment including BMW with its X1 and Range Rover with its excellent Evoque. Good then that the Q3 is a very worthy rival. Prettier by a country mile than the Bimmer, if not as sassy as the Evoque, Audi’s take on compact soft roader posh may be predictable in terms of its styling but is genuinely surprising in terms of its character. Ingolstadt may not be known for creating the most emotionally engaging of cars but I find I warm to the Q3 quickly. Maybe that’s because it is aimed at people like me – it may be an SUV, but the primary audience for the Q3 is clearly City urbanites. At just over four metres long, the Q3 is essentially the same size as the Audi A3 Sportback. The most surprising thing is how spacious it feels inside when outside it neither looks nor seems that big. I found I could jump in the back – behind the driver’s seat when it was set up for me – and still had plenty of space between my knees and the seat in front. At 5’9” I may only be averagely tall, but the Q3 passed this quick, if crude, realworld measure of rear passenger legroom. I was driving Audi’s Q3 on roads of questionable quality. Avoiding potholes, pheasants and sheep was the order of the day, a not inconsequential task when you are lost in dense fog somewhere on top of the North Yorkshire Moors near Witby. But the crappy roads showed just how refined the Q3 is. I drove the 208bhp 2.0 TFSI Quattro S tronic petrol model and the 170bhp 2.0 TDI Quattro S tronic diesel. I found both cars to be quiet and refined at speed and the ride – despite such tricky tarmac – very comfortable, in all but the sportiest “dynamic” setting. Though quicker and more powerful, the petrol version wasn’t a patch on the diesel. Its 4-cylinder engine felt distant and detached to me. In the less powerful diesel car, I found I could carry more speed in and out of the corners thanks to better gearing. In the 2.0 TFSI the car felt
Audi Q3: not quite as exciting as it could be.
like it was constantly too high or too low revving, as if the engine was a little flustered. This resulted in too frequent gear changes and a driving experience that lacked the more satisfying fluidity of the torquier diesel model which was a lot more fun to drive. Inside, the car has the same premium quality that we have come to expect of Audi. The two models I drove certainly felt luxurious and were packed with the kind of in-car tech that the Audi brand has become synonymous with. One word of warning though, the options list was long on both cars with list prices inflated to a wallet-shrinking £40k for each. Despite this, the Q3 comes with some generous kit as standard including air conditioning, alloy wheels, an energy recuperation system and a start-stop system. Which means you might find you
need to spend little more than the basic price. Which makes the car a bit of a steal.
THE FACTS: AUDI Q3 2.0 TDI QUATTRO S TRONIC PRICE: 0-62MPH: TOP SPEED: CO2 G/KM: MPG COMBINED:
£27,650 8.2secs 132mph 156g/km 47.9mpg
THE VERDICT: DESIGN PERFORMANCE PRACTICALITY VALUE FOR MONEY
CAR TALK
hhhhi hhhhi hhhhi hhhhi
BY RYAN BORROFF
FORD’S YOUNG-DRIVER PROTECTION TECHNOLOGY
MAZDA’S VERY CLEVER CONCEPT
A SPOT OF VW EMOTION
Ford has introduced technology which helps parents to prevent young drivers from receiving calls while driving. The feature, which is part of Ford’s MyKey technology, is called “Do Not Disturb” and blocks incoming phone calls or text messages from a Bluetoothpaired mobile phone. Calls are diverted to voicemail and text messages saved for later viewing instead.
This is the Takeri concept car, a preview of Mazda’s new 6 which will be shown at the 42nd Tokyo Motor Show at the end of November. The new mid-sized saloon will feature a regenerative braking system which converts kinetic energy to electricity during deceleration, then uses it to power the car’s electrical equipment saving fuel. Clever stuff.
Volkswagen's prototype electric Golf blue-e-motion is competing in the second RAC Future Car Challenge on Saturday. The challenge measures the energy used by participant vehicles between Brighton and London’s Pall Mall. The 113bhp EV has a 0-62mph time of 11.8 seconds and looks like a regular Golf, minus exhaust pipes. Production models are planned for 2013.
Lifestyle | TV& Games
SATELLITE & CABLE
TERRESTRIAL
CITYA.M. 2 NOVEMBER 2011
BBC1
BBC2
ITV1
CHANNEL4
CHANNEL5
6pm BBC News 6.30pm BBC London News 7pm The One Show 7.30pm CHOICE Waterloo Road: BBC News: Regional News 8.30pm The Impressions Show with Culshaw and Stephenson 9pm Frozen Planet 10pm BBC News 10.25pm Regional News 10.35pm The National Lottery Wednesday Night Draws 10.45pm Ask Rhod Gilbert 11.20pm Film 2011 with Claudia Winkleman: National Lottery Update 12am FILM Dead Ringers. 1988. 1.50am Weatherview 1.55am Sign Zone: See Hear 2.25am Planet Dinosaur 2.55am Made In Britain 3.55am Sign Zone: Reel History of Britain 4.25am-6am BBC News
6pm Eggheads 6.30pm Strictly Come Dancing – It Takes Two 7pm Celebrity Antiques Road Trip: Phil Tufnell and Chris Hollins compete for the best deals. 8pm Great British Food Revival 9pm Secret Pakistan 10pm Rab C Nesbitt 10.30pm Newsnight: Weather 11.20pm James May’s Man Lab: James May tames his fears in a ghost hunt. 12.20am Damages
6pm London Tonight 6.30pm ITV News 7pm Emmerdale 7.30pm CHOICE Live UEFA Champions League 10pm ITV News at Ten 10.30pm London News 10.35pm UEFA Champions League: Extra Time 11.35pm Ladette to Lady: Australia 12.30am The Zone; ITV News Headlines
6pm The Simpsons 6.30pm Hollyoaks 7pm Channel 4 News 7.55pm 4thought.tv 8pm Kirstie’s Handmade Britain
6pm Home and Away 6.25pm OK! TV 7pm 5 News at 7 7.30pm Highland Emergency: 5 News Update 8pm Dangerous Drivers’ School: 5 News at 9 9pm Paul Merton’s Adventures 10pm Big Brother: Daily round-up of highlights. 11pm Banged Up Abroad 12am Poker: The Big Game 12.55am SuperCasino
9.30pm International Judo World Circuit 10pm Cage Fighter 10.30pm Trans World Sport 11.30pm Cage Fighter 12am Inside the PGA Tour 12.30am European Tour Weekly 1am Watersports World 2am-2.30am Total Rugby
1.45am ESPN Kicks: Extra 2am Live Major League Soccer 4.30am-6am Premiership Rugby Union
1am BBC News 4am-6am BBC Learning Zone
SKY SPORTS 1
7pm Sky Sports News at Seven 7.30pm Soccer Special 10.30pm You’re on Sky Sports! 11.30pm Football’s Greatest 12am FIFA Futbol Mundial 12.30am UEFA Champions League Goals 1.30am You’re on Sky Sports! 2.30am A League Football 3am-6am Live World Golf Championship
BRITISH EUROSPORT
6.45pm Equestrian 8.45pm Riders Club 8.50pm PGA Tour Golf 9.50pm European Tour Golf 10.20pm Golf Club 10.25pm Sailing 10.55pm Yacht Club 11.05pm Tennis: Mats Point 11.35pm-12.35am Ten Pin Bowling
SKY SPORTS 2
6pm UEFA Champions League Pre-Game Show 7.30pm Live UEFA Champions League 10pm UEFA Champions League Goals 11pm NFL: Total Access 12am International Judo World Circuit 1am F3 Euroseries 2am Trans World Sport 3am International Judo World Circuit 4am-5am UEFA Champions League Goals
ESPN
6.45pm NHRA Drag Racing 9.45pm ESPN Kicks: Extra 10pm Premier League World 10.30pm ESPN Press Pass 11pm World Series of Poker 12am ESPN Game of the Week 12.30am Goal Show 1am Premier League World 1.30am ESPN Kicks: Serie A
SKY SPORTS 3
7pm Inside the PGA Tour 7.30pm European Tour Weekly 8pm F3 Euroseries 9pm Angling
9pm Grand Designs 10pm Top Boy 11.05pm CHOICE Steve Jobs: iChanged the World 12.10am Random Acts 12.15am Music on 4: On Track 12.50am Music on 4: 4Play: Summer Camp 1.05am Music on 4: The Album Chart Show: Spotlight 1.15am FILM O’Horten: 2009. 2.45am Hallo Panda 3.20am FILM Animal Farm. 1955. 4.30am Willie’s Chocolate Revolution 5.25am-6.10am Countdown
2.35am FILM The Nun’s Story: Drama, starring Audrey Hepburn. 1959. 5.10am-5.30am ITV Nightscreen
E4
7pm Hollyoaks 7.30pm How I Met Your Mother 8pm FILM Fantastic Four 2005. 10pm Rude Tube 11pm Misfits 12.10am The Big Bang Theory 1.05am Scrubs 2am How I Met Your Mother 2.20am Rude Tube 3.15am Rules of Engagement 3.35am Desperate Housewives 4.20am-6am Switched
SKY LIVING
7pm Criminal Minds 8pm The Secret Circle 9pm Pushy & Proud: Junk Food Mums 10pm Supernatural 11pm Bones 12am Criminal Minds 1am CSI: Crime Scene Investigation 2.40am Maury 3.30am Bones 4.20am Nothing to Declare UK 5.10am-6am Jerry Springer
HISTORY
7pm Heir Hunters 8pm Ax Men 9pm Swamp People 10pm Mounted in Alaska 11pm Seven Deadly Sins 12am Swamp People 1am Ax Men 2am Seven Deadly Sins 3am Heir Hunters 4am Pawn Stars 5am-6am Ancient Discoveries
BBC THREE
7pm The World’s Strictest Parents 8pm World’s Strictest Parents Top 10 Tantrums 9pm Hot Like Us 10pm FILM Lesbian Vampire Killers 2009. 11.20pm Family Guy 12.05am American Dad! 12.50am Hot Like Us 1.50am The World’s Strictest Parents 2.50am Him & Her 3.20am Lee Nelson’s Well Good Show 4.20am-5.20am The Real Hustle: New Recruits
COFFEE BREAK
SUDOKU
KAKURO
Place the numbers from 1 to 9 in each empty cell so that each row, each column and each 3x3 block contains all the numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Fill the grid so that each block adds up to the total in the box above or to the left of it. You can only use the digits 1-9 and you must not use the same digit twice in a block. The same digit may occur more than once in a row or column, but it must be in a separate block.
DISCOVERY
7pm Mythbusters 8pm Factory Line 9pm Alone in the Wild 10pm End of the World Cult 11pm Wheeler Dealers 12am Bear Grylls: Born Survivor 1am Alone in the
QUICK CROSSWORD C H A M P A O A S C O T A R O T S C R I P N B E A D T S E F R I L L O A I T A N G Y
U M B R A R A G G O R S E S E R N D I E T T A S S T I T C H H I R E U C A R O M T U D E B T S
14
27
12 23 31
15 21 7 23
30 33
7
21 14
14 29
8 10
6
4
5
KAKURO 9 3 5 8 5 4 2 3 8 6 9 4 1 2 1 6 2 8 9 5 7 1 6 1 3 9 7
3 9 2 6 1 4 5 4 9 3 8 6 4 4 2 8 1
9 7
6 2 6 9 6 7 8 1 4 7 2 8 2 3 5 9 7 9 8 1 3 7 1 6
5 1
SUDOKU
9 2 1 6 5 9
WORDWHEEL The nine-letter word was SELECTION
8pm The Middle 8.30pm Modern Family 9pm Trollied 10pm Fringe 11pm Chris Ryan’s Strike Back 1am Brit Cops 1.50am UK Border Force 2.40am Mental 4.20am Paul McKenna: I Can Change Your Life 5.10am-6am Liza and Huey’s Pet Nation
STEVE JOBS: ICHANGED THE WORLD CHANNEL4, 11.05PM
The life story of the late co-founder of Apple, including a never-beforebroadcast interview where the entrepreneur explains his philosophy of life.
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23
18
19 13
10
7
16 13
17
35
20
A O K
B
R
W D
31
28
Using only the letters in the Wordwheel, you have ten minutes to find as many words as possible, none of which may be plurals, foreign words or proper nouns. Each word must be of three letters or more, all must contain the central letter and letters can only be used once in every word. There is at least one nine-letter word in the wheel.
7pm Birth Days 8pm Twins by Surprise 9pm Untold Stories of the ER 10pm A&E 11pm Hospital Sydney 12am Untold Stories of the ER 1am A&E 2am Hospital Sydney 3am Twins by Surprise 4am A Baby Story 5am-6am Bringing Home Baby
ITV1, 7.30PM Villarreal v Manchester City (Kick-off 7.45pm). Coverage of the matchday four Group A clash at the Estadio El Madrigal.
16 20
WORDWHEEL
LAST ISSUE’S SOLUTIONS
16
34
26
BBC1, 7.30PM Michael discovers his tormentor’s identity, and Emily’s rebellious streak threatens to land Scout back in foster care.
LIVE UEFA CHAMPIONS LEAGUE
DISCOVERY HOME & HEALTH
21
39
WATERLOO ROAD
QUICK CROSSWORD
17
Wild 2am End of the World Cult 3am Deadliest Catch 3.50am Clash of the Dinosaurs 4.40am Top 10 Mysteries and Conspiracies 5.30am-6am Destroyed in Seconds
TV PICK
SKY1
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
30
4am The Family Recipe 4.10am The Gadget Show 5am County Secrets 5.10am House Doctor 5.35am-6am House Doctor
37
N E
ACROSS
DOWN
1 Leapt (6) 6 Person who handles equipment for travelling entertainers (6) 7 Void (4) 8 Dash a liquid upon or against (7) 12 Elf or fairy (5) 13 (They) exist (3) 14 Manipulate in a fraudulent manner (3) 15 Hostel (3) 17 Mass of eggs deposited by frogs (5) 18 Drop a hint (7) 21 Presidential assistant (4) 22 Psychiatric hospital (6) 23 One who transmits a message (6)
1 Sketchy summary of the main points of a theory (8) 2 Taking it easy (8) 3 Wire hairpin (4) 4 Decoy, lure (4) 5 Large natural stream of water (5) 8 Twilled woollen fabric (5) 9 Acute but unspecific feeling of anxiety (5) 10 Tropical tree with yellow flowers and long brown seed pods (8) 11 Arctic ruminants (8) 16 Dentist’s assistant (5) 19 Fête (4) 20 Adds together (4)
38
Sport
CITYA.M. 2 NOVEMBER 2011
Guilty verdict must trigger change CRICKET COMMENT
ANDY LLOYD
I
T’S CERTAINLY no exaggeration to hail yesterday’s dramatic events at Southwark Crown Court as a watershed and landmark moment in cricket’s rich history.
The guilty verdicts handed down to Salman Butt and Mohammad Asif – allied to the news that Mohammad Amir had admitted wrongdoing back in September – must surely act as the ultimate deterrent to any cricketer tempted to indulge spot-fixing. It’s one thing losing your livelihood and being kicked ot of your profession, but another thing entirely to risk a custodial sentence for financial gain. Sadly, however, I suspect this is merely the tip of the iceberg and rather than celebrate justice being done, I sincerely hope it triggers a more decisive approach from the
BELGIAN STRUGGLE
International Cricket Council’s anticorruption unit to rooting out the cancer eating away at the game. I would suggest the ICC need to become more pro-active and innovative in their methods of catching the culprits, after all it’s worth remembering that the Pakistani trio have been brought to justice largely as a result of an undercover newspaper investigation. It would be wrong also to presume this is a problem that extends only to the subcontinent and I trust the authorities will not be so parochial in their ongoing attempts to make cricket a cleaner sport.
l Chelsea condone Ferdinand fan chants l Luiz misses penalty as Chelsea blow lead l Cech admits Blues must qualify hard way
▲
FOOTBALL
GENK CHELSEA
1 1
▲
FOOTBALL BY JAMES GOLDMAN
CHELSEA goalkeeper Petr Cech admitted his side will have to seal qualification for the knockout stages of the Champions League the hard way after they threw away a lead for the second time in three days. Ramires fired the visitors ahead in
the 26th minute and the Blues had the opportunity to kill off their opponents five minutes before the break, only for David Luiz to strike his penalty too close to Genk goalkeeper Laszlo Koteles. The Belgian champions, beaten 5-0 in the reverse fixture a fortnight ago, were far more competitive after the interval and equalised just past the hour mark through Jelle Vossen. Chelsea must now pick up four points from their remaining two fixtures, away at Bayer Leverkusen and at home against Valencia, to book their place in the next round, and Cech knows that will represent no
Ferguson: Rio’s lost his pace so he must find a new way ▲
FOOTBALL
MANCHESTER UNITED manager Sir Alex Ferguson has warned defender Rio Ferdinand that his days as an automatic first-choice starter are no more. United’s recent success has been built on the central defensive partnership between Ferdinand and Nemanja Vidic. But a series of injuries, coupled with the emergence of Johnny Evans, Chris Smalling and Phil Jones, has seen the former England skipper play a reduced role this season. Ferdinand was dropped to the bench on Saturday against Everton having struggled in the 6-1 defeat by Manchester City a fortnight ago, and
ahead of tonight’s Champions League clash against Otelul Galati, Ferguson suggested the 32-year-old may have to tailor his game in order to lengthen his career. He said: “I explained to Rio the other day is simply this: That we have two young centre-halves coming through and I’m have very happy to have four of them, and I hope to keep the four of them for a long time. “Rio is almost 33 now and he has lost a yard of pace he had five years ago. That doesn’t mean to say he can’t tailor his game in a different way. “Whereas he used to rely on his pace, he doesn’t now. We’ve all faced that moment in your career when you realise you have to change your game. Rio will do the same and he’ll be fine.”
Sport
CITYA.M. 2 NOVEMBER 2011
Chelsea have won just one of their last four games Picture: GETTY
SPORT | IN BRIEF French win in Melbourne HORSE RACING: A first ever British victory in the Emirates Melbourne Cup was prevented by the narrowest possible margin once again as Ed Dunlop’s Red Cadeaux succumbed to well-fancied French stayer Dunaden.”I thought he wouldn’t like the ground and with a little more juice he’d have beaten the other horse,” said Dunlop.
Rooney up for award FOOTBALL: Manchester United striker Wayne Rooney is the only Englishman shortlisted for the Ballon D’Or. Only five players on the shortlist
easy task. “We could have put the game beyond their reach but we didn’t do and that’s why they came back into the game,” he said. “For their comeback they deserved a point. For them it was a fantastic game and they had nothing to lose. “When you get the opponent into this sort of mood it’s difficult. “We could have done it the easiest way possible and play four games and be qualified so now we have to do it the hard way.” Chelsea, meanwhile, condemned chants by their own supporters about QPR defender Anton
Ferdinand during last night’s match. The travelling fans repeatedly sang about Ferdinand, who it is alleged was racially abused by Blues captain John Terry last month. A Chelsea spokesman said in a statement: “The chanting was wholly inappropriate and we don’t condone it.”
GROUP E TEAM PLD Chelsea 4 B Leverkusen 4 Valencia 4 Genk 4
W 2 2 1 0
D 2 0 2 2
L 0 2 1 2
F 9 5 5 1
A PTS 2 8 6 6 4 5 8 2
Mancini willing to offer Tevez a second chance ▲
FOOTBALL
MANCHESTER CITY manager Roberto Mancini has suggested Carlos Tevez could figure in his plans again if he apologises for his part in the ongoing controversy. Tevez has been frozen out of the first-team picture since Mancini claimed the Argentinian refused to play in the Champions League game at Bayern Munich back in September. Mancini has spoken little about the subject since the night in question, but in an interview yesterday ahead of tonight’s Champions League clash against Villarreal, he said: “Everything depends on Carlos. If he apologises to the squad and to me then everything will be as before. “If he doesn’t, then Tevez has a value that everyone knows and something will happen in January.
“He is totally unprepared and being badly advised. I don’t want it to be like this and I would be the first to forgive him.” Mancini also revealed that the club turned down the chance to sell controversial 21-year-old striker Mario Balotelli back to Italy this summer. The former Inter Milan star endured a turbulent debut campaign in England, but has thrived this time around and already has six goals to his name, rewarding Mancini for the faith he has shown in him. “Sooner or later Balotelli will go back to Italy,” said the City boss. “However, it won’t happen for a few more years and it will do him good to remain here. “We did receive offers for him from Italian clubs over the summer, but we don’t sell anybody here.”
have Premier League connections, two of which – Cesc Fabregas and Sergio Aguero spent only half of 2011 in England – compared to 15 in Spain. European champions Barcelona lead the way with eight nominees, including Lionel Messi, winner for the last two years.
Djokovic back on course TENNIS: Novak Djokovic struggled to a three-set victory over Xavier Malisse at the Swiss Indoors in Basel. Djokovic beat the Belgian 6-2, 4-6, 7-5 in his first match since winning the US Open in September.
39
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email [email protected]
40
Sport
CITYA.M. 2 NOVEMBER 2011
“FERDINAND MUST CHANGE HIS STYLE” FERGUSON HINTS AT REDUCED RIO ROLE: P38
PAKISTAN TRIO GUILTY
Police begin Terry race investigation ▲
FOOTBALL
THE METROPOLITAN Police have launched a formal investigation into allegations Chelsea skipper John Terry racially abused Anton Ferdinand after spending a week assessing a complaint from a member of the public. The move means the Football Association’s own investigation into the incident, which is alleged to have taken place during QPR’s win over Chelsea last month, cannot be completed until the outcome of the police probe. Terry has denied racially abusing Ferdinand, insisting his own response was actually a denial and not racist in any way.
Edwards puts RFU on red alert ▲
RUGBY UNION
Former captain Butt and bowlers Asif and Amir face prison after being found guilty of spot-fixing offences ▲
CRICKET BY JAMES GOLDMAN
DISGRACED Pakistan cricketers Salman Butt, Mohammad Asif and Mohammad Amir face the prospect of up to seven years behind bars after they were all found guilty yesterday of spot-fixing during last summer’s tour of England. Former Test captain Butt and fast bowlers Asif and Amir, who pleaded guilty on 16 September to charges of conspiracy to cheat at gambling and accepting corrupt payments, plotted to bowl deliberate no-balls in the
Lord’s Test against England as part of a betting scam. Amir (right) issued a heartfelt apology for his actions through his barrister, Ben Emmerson QC, who told the court at an earlier hearing: “Amir wants to make it clear he wants to take full responsibility for what he did. “This vulnerable 18year-old boy, as he was then, was subjected to extreme pressure from those upon whom he
should have been able to rely. He recognises the damage he has caused Pakistan cricket. and he wishes to do his best to put that right.” By stark contrast, the more experienced pair of Butt and Asif, who will be sentenced today along with Amir, both strenuously denied any involvement in matchf i x i n g throughout
the four-week trial. International Crick Council chief executive Haroon Lorgat believes yesterday’s verdict will send a clear message to anyone involved in attempting to con cricket fans across the world. He said: “I would reiterate, as I have on every occasion that I have spoken on this matter, that the ICC has a zero-tolerance attitude towards corruption. We will use everything within our power to ensure that any suggestion of corrupt activity within our game is investigated and, where appropriate, robustly prosecuted.”
WASPS head coach Shaun Edwards is set to leave the Premiership club before the end of the week, putting England and his other suitors on red alert. Edwards’ future at the club had been in doubt after he recently revealed that he expected to return from the World Cup, where he helped Wales to a fourth-place finish, as a “free agent”. WRU chief executive Roger Lewis is known to be keen to ensure that Edwards and the remainder of Gatland’s coaching set-up remain with the national side. The RFU, meanwhile, are to discuss England’s poor World Cup performance at a Twickenham board meeting today.
Van Persie gamble backfires as Gunners fire blanks ARSENAL MARSEILLE
0 0
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FOOTBALL
ARSENAL manager Arsene Wenger admitted the emotional effects of Saturday’s win over Chelsea played a part in his side’s failure to secure qualification to the knockout stages of the Champions League following
last night’s stalemate against Marseille. Wenger opted to rest captain and top scorer Robin van Persie and the move backfired as Arsenal struggled, particularly in the second-half, to carve out clear goalscoring opportunities. The Dutchman was introduced from the bench with half-an-hour remaining, but even he couldn’t find a way past visiting goalkeeper Steve Mandanda. On his decision to rest a man who
had scored 28 goals in his previous 27 games, Wenger said: “He was tired, this was fatigue, that’s why I did that. You know we are playing 50 games in a year, he cannot play 50. “Emotionally more than physically maybe [Saturday had an impact]. It is difficult to be on a high three days later again but we still had opportunities. “Aaron Ramsey in the first half, he had two great chances. Gervinho had a chance, and in a game like that you still expect to be able to
take one of these chances. I felt it was a game where we were not physically at our sharpest. Marseille started stronger than us and after that we got back in the game.” Despite a failure to win at home in Europe for the first time since Barcelona visited Emirates Stadium back in Mach 2010, Arsenal remain top of their section with Borussia Dortmund up next at home. Wenger added: “We wanted to achieve qualification after this game
but you have to say as well to be fair that we have taken four points against Marseille in our two games. If we win our next home game we have a good chance.”
GROUP F
TEAM PLD W Arsenal 4 2 Marseille 4 2 Dortmund 4 1 Olympiacos 4 1
D 2 1 1 0
L 0 1 2 3
F 4 4 3 4
A PTS 2 8 1 7 7 4 5 3
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Issue 1,502 Wednesday 2 November 2011
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EUROZONE BY TIM WALLACE
THE GREEK government was on the verge of collapse last night as Prime Minister George Papandreou rejected calls for him to cancel the proposed referendum on the Eurozone rescue package. Early this morning, the cabinet agreed to back the referendum. In another shock announcement, the top brass in Greek’s armed forces were sacked en masse last night. The CIA warned in May that austerity measures risked provoking a military coup. A military junta ruled Greece between 1967 and 1974. Two socialist MPs defected, cutting the government’s majority to one. A further six leading socialists called for Papandreou’s replacement. Finance minister Evangelos Venizelos was hospitalised after stomach pains, missing crisis talks. “No one will be able to doubt Greece’s course within the euro” after the referendum, Papandreou insisted last night. A confidence vote is set for Friday, and the opposition from within Papandreou’s own party may cause the government to fall, prompting an election. Analysts believe the government’s fall would result in the IMF negotiating the ongoing bailout with governing PASOK and the opposition New Democracy party. The same process was undertaken in Portugal, allowing the state to avoid bankruptcy, whoever won the following election. French President Nicolas Sarkozy summed up the mood on the referendum: “This announcement surprised all of Europe,” he said. European Council leader Herman Van Rompuy and Commission boss Jose Manuel Barroso said: “We are convinced that this [rescue] agreement is the best for Greece. We fully trust that Greece will honour the
FTSE 100 ▼5,421.57 -122.65
ANALYSIS l Greek 10-year spreads over bunds are shooting up
30
5,834.51 Greece
6,200
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6,000
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5,800
Germany 2009
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2010
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28 Oct
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3,068.33
3,400
Italy
5
3,300
4
3,200
3
3,100
1 Nov
Germany
2 2009
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2010
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2011
commitments undertaken in relation to the euro area and the international community.” An emergency meeting was called in Cannes today ahead of tomorrow’s G20 conference. Papandreou will meet EU leaders and the IMF. Markets had risen on the EU’s package last week, but crashed on news of the referendum. The DAX tumbled five per cent to 5834.51. And early this morning Japan’s Nikkei share average took a bath, falling two per cent on opening. The yield on 10-year German
DOW ▼11,657.96 -297.05
26 Oct
Apr Jul Oct
27 Oct
28 Oct
31 Oct
bunds dropped 26 basis points (bps) to 1.77 per cent, as investors sought safe havens, while UK gilt yields fell 23bps to 2.21 per cent. Meanwhile the yield on ten-year Italian government debt rose 10bps to 6.19 per cent and Greek yields soared to 24.647 per cent. “By threatening a referendum, which could result in a disorderly default and exit from the euro, Papandreou is trying to extract better terms from Germany,” Schneider FX’s Stephen Gallo told City A.M. ALLISTER HEATH: P4
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CHANCELLOR George Osborne has serious doubts about whether a Tobin tax is viable even if it were applied globally, City A.M. can reveal. In a private letter sent to bank chiefs on Monday and seen by City A.M., the chancellor appears to contradict his public stance that he is firmly in favour of a Tobin or financial transaction tax (FTT) if only there were support to impose it globally. Responding to an industry-wide letter opposing the EU’s plans for a Tobin tax, Osborne assures them that “the necessary international consensus does not exist” to impose it. But he then goes further than his public stance: “Beyond this,” he writes, “I agree there would need to be further discussions about whether any FTT model offers an efficient mechanism to raise revenue.” The private reassurance to bankers that he remains unconvinced about even a global Tobin tax using “any FTT model”, despite his public support for one, will relieve many in the City but could leave him vulnerable to charges of hypocrisy. The City has mobilised to oppose an EU Tobin tax, which is supported by the European Commission and the French. Last night, the Archbishop of Canterbury backed such a levy. MORE: P6
Prime Minister Papandreou faces a rebellion within his socialist party. Picture: GETTY
Chancellor Osborne
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ANALYSIS l Italian 10-year spreads over bunds hit record high
7
1 Nov
6,400
20
5
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25
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CITYA.M. 2 NOVEMBER 2011
Why the Archbishop has got it wrong EDITOR’S LETTER
ALLISTER HEATH I must confess that I’m glad not to be a member of the Church of England, an institution that has been hemorrhaging members ever since anybody can remember. While I have the deepest respect for the remaining band of Anglican churchgoers (though not for the CoE’s leadership), I can’t say I’m surprised by the Church’s latest woes. It has long since turned its back on its core competence of bread and butter theology and helping its members navigate life, preferring instead to turn itself into a politicised advocacy group. It is more interested in fighting
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means to achieve this. So it is sad that Williams, who clearly has never bothered to engage with the arguments, books or research of his intellectual opponents, still speaks as if he had a monopoly on morality and wisdom. It pains me to say this – but he and the protesters deserve each other.
GREEK TRAGEDY THERE are three lessons from yesterday’s nonsense. Greece will probably default and quit the euro; sacking military chiefs and calling a high-risk referendum smacks of desperation. Second, watch Italian government bond yields: if they rocket above 7 per cent, we will be in real trouble. Third, the current bailout plans are useless. Expect another summit – and eventually, when all else fails, the European Central Bank to start printing money and political tensions to keep on rising and rising. If this sounds bad, that’s because it really is. [email protected] Follow me on Twitter: @allisterheath
M&A BY HARRY BANKS PRIVATE equity company KKR & Co is in exclusive talks to buy most of Samson Investment Co, a privately held US oil and gas company, in what could be the biggest buyout of the year. The private equity firm is not likely to want Samson’s Gulf of Mexico assets, one source said. While the whole company could be worth $8bn to $10bn, KKR’s bid without the Gulf Of Mexico assets is likely to be in the range of $7bn, that source said. KKR is still doing due diligence and the deal could fall apart, sources said. But if it succeeds, the takeover could be the biggest-ever leveraged buyout of an oil and gas company. Family-owned Samson, based in
Tulsa, Oklahoma, operates more than 4,000 wells and has interests in more than 11,000 wells, according to the company’s website. It has access to potentially lucrative shale gas assets that may have tempted KKR to enter the oil and gas sector, which has been generally avoided by private equity until recently due to its links to volatile commodity prices. The sale process of Samson has been underway for months. Sources said last month that the company hired investment bank Jefferies Group to advise on the process.
António Horta-Osório, the chief executive of Lloyds Banking Group who joined the lender at the beginning of the year, is poised to step back from his role as chief executive due to health reasons, the Financial Times reported this morning. The paper claims it will be revealed at a board meeting today that HortaOsório, who joined the bank from Santander, has been told by his doctors to step down from the role on grounds of stress.
Madoff trustee loses JPM case A US judge last night threw out most of a $19.9bn (£12.46bn) lawsuit against JP Morgan Chase and a $2bn case against UBS by the trustee seeking money for victims of epic swindler Bernard Madoff's fraud. The decision is one of the largest setbacks for the trustee, Irving Picard, who has spent nearly three years liquidating Bernard L Madoff Investment Securities LLC. JPMorgan had been Madoff’s main bank for two decades. The decision wipes out about $19bn of Picard’s case against the largest US bank, a person familiar with the matter said.
Rupert Murdoch’s News Corporation came under pressure after new evidence yesterday
News Corp papers emerge NEWS CORPORATION agreed to pay hundreds of thousands of pounds to an early phone-hacking victim because it recognised that evidence from the case was “fatal” to its claims of innocence, new evidence released yesterday claimed. Briefing notes and emails between News Corp lawyers and handed over to the parliamentary committee investigating the scandal make it clear that
several senior executives were aware of the problem in 2008. News Corp’s senior counsel Michael Silverleaf QC told his clients that there was “a culture of illegal information access” at the media group involving “at least three” of its reporters. The evidence suggested that lawyers for News Corp agreed to a huge pay-off to the victim, soccer players’ union boss Gordon Taylor, who had got hold of a evidence that implicated that other News of the World journalists were involved as well as Glen Mulcaire.
FOSTER REVEALS PLAN FOR THAMES AIRPORT TO RIVAL BORIS ISLAND
CAMERON FACES REBELLION OVER PETROL PRICES
ZIMBABWE FIELD CLEARED TO EXPORT DIAMONDS
Britain must capitalise on its Victorian heritage and the experience of booming Asian economies to overhaul its transport system, the architect Lord Foster of Thames Bank will argue today as he unveils plans for a new hub airport in the Thames Estuary. The four-runway airport, built partly on reclaimed land, will be served by the country’s busiest railway station with high-speed connections to London, the North and mainland Europe.
David Cameron is facing the prospect of a backbench rebellion over petrol prices, after more than 80 MPs supported calls for the Government to tackle rising fuel tax. The issue will be debated in parliament within two weeks, following a campaign against next year’s 3p increase in duty led by Robert Halfon, a Conservative MP.
Diamond regulator Kimberley Process has given the green light for exports of stones mined in Zimbabwe’s Marange fields, ending a standoff between supporters of the deal and critics who warned the sales could fuel human-rights abuses.
QATAR TO HOLD NATIONAL DEMOCRATIC ELECTIONS FOR THE FIRST TIME
Hakan Ates, chief executive of DenizBank AS, is proud to say he is the cost-cutting “peasant” of Turkey's banking industry; it has made his bank a winner from two economic crises. Half a dozen buyers are interested in acquiring DenizBank, one of Turkey’s fastest-growing banks, from Dexia SA, the troubled BelgianFrench lender that is being broken up and nationalized, according to a person familiar with the matter.
Henry Kravis, co-chief of KKR, is in line to make the biggest buyout of the year if talks with Samson succeed
MEDIA BY KASMIRA JEFFORD
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Distribution helpline
word of God. There is no longer room in his church for conservatives, free marketeers or capitalists – or even for mainstream folk who work hard and honestly to better the living standards of their families and don’t want to feel bad about it. This is not a dispute about ethics – it is about a weirdly ignorant rejection of the foundations of our modern, prosperous societies. Everybody knows that the peculiar economic system that we had during the noughties – its strange combination of big government, free markets, rigged markets and ultra-low interest rates – failed and needs reform. My view is that we need to embrace the discipline of real capitalism – and banish the moral hazard and risk-taking that corporatism and bailouts guarantee – and return to sound money with properly priced credit. Others prefer different solutions. But everybody with a heart wants to fight unemployment, improve the prospects of the poor, and make the world a better place. It is just that we disagree on the
Horta-Osorio to quit Lloyds job
KKR nears a Samson deal ▲
Editor Deputy Editor News Editor Acting Night Editor Business Features Editor Lifestyle Editor Sports Editor Art Director Pictures
capitalism, calling for ever more government spending and higher taxes and jumping onto every fashionable left-wing bandwagon (the most recent being banker-bashing and Tobin taxes), rather than talking about God (whom its clerics presumably still believe in), the difference between right and wrong in personal decisions, and how responsible individuals can do good themselves through their behaviour, choices and private charity. Poverty is idolised, material gain demonised and envy rationalised. The collapse of the Berlin wall and the astonishing wealth-creation (for which capitalism and globalisation are entirely responsible) that has enabled scores of people in emerging nations to climb out of abject poverty has completely passed by the CoE’s establishment. Rowan Williams, the Archbishop of Canterbury, sounds more like an anti-growth environmental radical or a traditional, pre-Blair socialist Labour politician, rather than a man interested in spreading the
NEWS | IN BRIEF
WHAT THE OTHER PAPERS SAY THIS MORNING SNP REVIVES PLAN FOR A MINIMUM ALCOHOL PRICE BIG AREAS STILL LACK 3G, SAYS OFCOM Nearly 90 per cent of the UK’s land mass and a quarter of buildings are unable to receive all five 3G phone networks a decade after the introduction of the mobile licences, according to the telecoms regulator. In its first report on the UK’s communications infrastructure, Ofcom said that almost 7.7m homes and workplaces did not have a choice of all five 3G networks, which allow fast internet access.
QUESTION MARK OVER SECURITY COSTS OF THE OLYMPICS The full cost of Olympic security will not be known until after the games, a senior official has said, raising uncertainty over a key element of the London 2012 budget. Chris Allison, the national Olympic security co-ordinator, told the London Assembly: “I can’t tell you what the final costs are going to be. . . I just don’t know.”
A bill to set a minimum price for alcohol has been reintroduced by the Scottish government, despite warnings that the measure might breach European law. An earlier attempt by the Scottish National party government was blocked by opposition parties. Since then , in May elections, the nationalists have won an outright majority at Holyrood . The plan is likely to be passed by next summer.
JAPAN RESTARTS NUCLEAR REACTOR Japan was due to restart its first nuclear reactor on Tuesday after the Fukushima disaster in March, a symbolically important first step before dozens of idled reactors can be brought back online. However, hopes for confidence in the sector were hit early this morning when Tokyo Electric Power warned that it had detected a possible nuclear fission at its No 2 reactor at the Fukushima plant.
HIGH STREET COMPLAINS OF TESCO HAIRCUT Long the scourge of corner shops, Tesco is now facing the wrath of hairdressers, who say that its move to offer £12.50 haircuts in stores could threaten their livelihoods, the Forum of Private Business warned yesterday.
The Emir of Qatar, one of the world’s few remaining absolute monarchs, announced he would allow the holding of national democratic elections for the first time. Sheikh Hamad bin Khalifa al-Thani said there would be a vote for an advisory council in 2013, in line with a constitution introduced eight years ago. The decision is another victory for the Arab Spring.
TURKISH PEASANT BANKER FACES SALE
News
CITYA.M. 2 NOVEMBER 2011
Client money not separated at MF Global BANKRUPT US broker MF Global flouted rules on keeping client and company funds in separate accounts, the head of the Chicago Mercantile Exchange claimed yesterday. Under rules set by the CME and the Commodities and Futures Trading Commission (CFTC), companies must hold client assets separately from those belonging to the company, but the exchange said preliminary investigations had revealed shortfalls in some of MF’s customer accounts. “CME has determined MF Global is not in compliance with CFTC and CME customer segregation requirements,” said the exchange’s chief executive Craig Donohue. It is not yet clear whether any client money is missing or the apparent shortage is the result of bookkeeping errors. MF Global’s lead attorney, Ken Ziman, said all of the funds in the company’s broker dealer are account-
ed for. To management’s best knowledge, “there are no shortfalls” in brokerage accounts, he said in court. The firm, led by ex-Goldman Sachs boss Jon Corzine, filed for bankruptcy protection in the US on Monday. The previous week its stock and rating had been hit by huge losses on bets made on Eurozone sovereign debt, and it was forced to turn to Chapter 11 proceedings when attempts over the weekend to find a buyer failed. Work has already begun in the UK to close out creditor positions related to MF Global’s British arm, the first to be processed through the new Special Administration Regime. Sources close to the administrators told City A.M. they had been fielding calls all yesterday from worried clients.
FAST FACTS | MF GLOBAL ● MF Global, a US futures broker, held $7.3bn
(£4.5bn) in customer assets as of 31 August ● Its bankruptcy is the eighth-largest in the US in
the past 30 years. Lehman Brothers is the largest.
Jefferies said it walked away from MF offer ▲
▲
FINANCIAL SERVICES BY ELIZABETH FOURNIER
5
FINANCIAL SERVICES BY ALISON LOCK
Ex-Goldman Sachs boss Jon Corzine has led MF Global into bankruptcy
Picture: GETTY
MEET THE LAWYERS ADAM PLAINER WEIL GOTSHAL & MANGES
LAW firm Weil Gotshal & Manges has been appointed as legal adviser to the administrators to MF Global in relation to its UK operations, having applied late on Monday for the appointment of KPMG partners Michael Pink, Richard Fleming and Richard Heis to the role. The Weil Gotshal team will be led by restructuring head Adam Plainer, who has been advising creditors on the unwinding of several of the structured investment vehicles (Sivs) that went into receivership.
Plainer was locked in board meetings yesterday afternoon, but via email called the case “truly groundbreaking”. He will be supported on the case by 12 Weil lawyers, as well as by Martin Pascoe QC and Daniel Bayfield, both members of 3-4 South Square chambers. Much of Bayfield’s recent work has been advising the administrators to Lehman Brothers’ European operations – the bankruptcy that led UK regulators to introduce the Special Administration Regime that the MF Global case will test. The FSA is being advised by a multi-disciplinary team from Ashurst, including litigation partner Edward Sparrow, restructuring partner Giles Boothman and regulatory partner Rob Moulton. Elizabeth Fournier
JEFFERIES decided not to buy MF Global Holdings because the company’s high leverage and its bets on European debt made it a risky gamble, Jefferies chief financial officer Peregrine Broadbent said yesterday. Shares in the US bank tumbled as much as 14 per cent as investors feared that the investment bank, another relatively small Wall Street player, could get burned by bad bets on Europe the same way MF Global did, analysts said. Broadbent said he spent the weekend at MF Global offices examining its financial statements to see whether any of its businesses were worth purchasing. Meanwhile, trading companies that provided services to MF Global rushed to reassure investors that the demise would not badly affect them. Fidessa, which sold its trading platform technology to MF Global, played down the loss, saying it would not be materially affected by its closure, though analysts said it could lose up to £2m from its annual revenues. Software maker Patsystems, which said MF Global was an “important customer”, also admitted it would lose £3m of revenue and £300,000 in unpaid invoices from its collapse.
6
News
CITYA.M. 2 NOVEMBER 2011
St Paul’s protesters win pause in expulsion plans ▲
POLITICS BY TIM WALLACE
LEGAL action to remove anti-capitalist protesters from the area surrounding St Paul’s Cathedral was put on hold yesterday after discussions led to renewed cooperation between the church, the City and protesters. St Paul’s announced it wanted to “engage directly with both the protesters and the moral and social issues they wish to address, without the
threat of forcible eviction hanging over both the camp and the church.” Archbishop Rowan Williams (pictured right) warned that the row over the location of the protests means “we are at risk of forgetting the substantive questions that prompted the protest.” Writing in the Financial Times, he said “many people are frustrated at what they see as the disastrous effects of global capitalism” and it is time “we tried to be more specific” about the protest’s “vague” aims.
The City of London Corporation followed the cathedral and suspended its legal action affecting the highways until around lunchtime today. “We want to leave more space for a resolution of this difficult issue, while not backing away from our responsibilities as a highway authority,” said policy chairman Stuart Fraser. Protesters welcomed the move, adding they were looking forward to discussing “political, ecumenical and logistical issues”. THE FORUM: P31
The Archbishop of Canterbury has joined the debate, calling for a new focus on the aims the protesters and church can both work towards Picture: Rex
8
News
CITYA.M. 2 NOVEMBER 2011
G4S investors vent ire after ISS deal scrapped
Terra Firm set to leave RBS aviation sale ▲
▲
M&A BY PETER EDWARDS AND ALISON LOCK
CEO Nick Buckles
Picture: VISMEDIA
INVESTORS in security firm G4S started to call for the chairman’s scalp yesterday after the company abandoned its takeover of Danish cleaning group ISS at the eleventh hour. Shareholders welcomed the decision to abort the unpopular £5.2bn merger, but called for chairman Alf Duch-Pedersen to resign over his handling of the deal.
G4S pulled the deal just 48 hours before facing shareholders at a crunch vote. It would have received all proxy votes, and it is believed the result was so grim it decided to abandon the effort. G4S has not released any vote results. City A.M. understands that Schroders and Artemis were among those that voted against the deal, while Co-op Asset Management and hedge fund Parvus publicly opposed it. Parvus’ founder and portfolio manager Edoardo Mercadante, who spear-
headed opposition, said DuchPedersen’s position was “untenable”. “I didn’t speak to a single shareholder who didn't share our views,” he said. “I am very surprised that the chairman has not stepped down yet.” Others said G4S would need to reassure investors on strategy. “Shareholders will need to regain confidence that [chief executive Nick] Buckles himself doesn’t think the existing strategy has run its course. Our engagement will focus on the acquisition sign-off process on the board,” one investor told City A.M. G4S shares closed 0.4 per cent up. ANALYSIS l G4S PLC
245.20
1 Nov
p 250 245 240 235
26 Oct 27 Oct
28 Oct
@
31 Oct
1 Nov
M&A
TERRA Firma, the private equity firm run by Guy Hands, looks set to lose its place in the next stage of RBS’s £4bn auction of its aircraft leasing arm. The firm is not expected to improve its current bid in order to make it to the next round of the auction, Sky News reported last night. Hands’ non-binding offer was said to be “significantly lower” than other bids made. RBS is selling off its Aviation Capital arm, which owns and manages a total of 335 commercial jets and employs 69 sales executives, as part of a huge asset sale to help repay its debts to the UK government. Other firms linked with the sale during the first round of bids in September included Macquarie Bank and several other Asia-based players. Terra Firma and RBS did not respond to calls for comment last night.
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Spreads may widen dependent on liquidity and market volatility Apple, the Apple logo, and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.
10
News
Legal & General’s chief executive Tim Breedon said cash generation was high
L&G sales flat but cash rises ▲
INSURANCE BY ALISON LOCK
RETIREMENT and insurance group Legal & General yesterday reassured investors with a bigger than expected figure for its cash generation so far this year, despite sales of products such as annuities staying flat. L&G said it added £25bn of new funds to its asset management arm in the first nine months of the year, while cash generation jumped 17 per cent to £736m compared to a year earlier. The solid figures were welcomed by analysts but L&G’s shares fell seven per cent, in line with the insurance sector across Europe, as investors sold out of financial stocks on fears over Greece. The strong cash generation raised L&G’s net cash by 15 per cent year-onyear to £631m, putting it on track to beat its full-year target. “We are significantly ahead of our plans and expect comfortably to beat the £700m net cash target for 2011 set in March this year,” L&G said. Sales of L&G’s savings products such as annuities fell one per cent to £1.3bn
compared to 2010, but the result was better than the two per cent drop analysts expected. Performance was helped by a deal to manage £1.1bn of assets from the closed Turner & Newall pension scheme and provide bulk annuities to its 30,000 members last month. But annuity sales remain generally weak as retirees put off buying them while both interest rates and stock market performance are low. Chief executive Tim Breedon was upbeat, saying he was “confident we can continue to grow from a position of strength”. ANALYSIS l Legal and General Group PLC p
114
102.60 1 Nov
112 110 108 106 104 102 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
News
CITYA.M. 2 NOVEMBER 2011
Nomura cuts to hurt London ▲
BANKING BY ALISON LOCK
A.M. understands staff will be told today how they will be affected. Nomura has come under pressure to cut down its lossmaking wholesale business, which made a pre-tax loss of 73bn yen, to focus on growing its Asian and US divisions. Jesse Bhattal, head of its wholesale division, likened conditions to the last financial crisis. “I’ve been in the business a long time, many decades, and I certainly can’t remember a time when there was a single quarter that we saw such adverse market conditions,” he said.
Danske Bank to reduce its headcount by 2,000 ▲
NOMURA, Japan’s biggest brokerage, outlined plans to dramatically scale back its European wholesale banking operations yesterday after a slump in its trading income in the past quarter. The broker said it would triple its cost cuts to $1.2bn (£747m) per year after it plunged to a worse-thanexpected net 46.1bn yen (£370m) quarterly loss, its first since 2009. “These cuts are aimed at establishing a structure that can still respond
even if the bad business environment remains intact for 18 months,” said its chief finance officer Junko Nakagawa. About 60 per cent of the savings will come from its European operations where its wholesale bank is based and is home to 4,500 staff, or 13 per cent of its global workforce. More than 1,000 jobs are expected to go in total. The move will raise fears for Nomura’s employees at its high-profile new headquarters at One Angel Lane, opened by chancellor George Osborne only in April this year. City
11
BANKING
DANSKE Bank is to cut costs by 10 per cent, axing 2,000 jobs in the process, after quarterly profit was wiped out by a drop in trading income, becoming the latest Nordic lender to combat slowing revenue growth and higher funding costs. The Danish bank, which wants to cut expenses by about 2bn Danish crowns (£231m) from 2012-14, also said
yesterday it had started looking for a replacement for chief executive Peter Straarup ahead of his retirement. July-September pre-tax profit fell to 10m crowns from 1.87bn a year ago, missing forecasts for 1.28bn. Net trading income collapsed to 267m crowns from 1.93bn, against a forecast for 1.4bn, while loan impairments fell to 2.80bn from 3.08bn. “This is not a result we will gladly remember,” Straarup said.
Credit Suisse slashes jobs in UK and US ▲
BANKING BY JULIET SAMUEL
Credit Suisse boss Brady Dougan said the bank would shift towards emerging economies
Picture: REUTERS
Swiss capital rules will prove final straw FOR all the furore over the rogue trading scandal at UBS, it is Switzerland’s notoriously strict capital requirements – not allegedly unauthorised trades – that is most hurting the country’s banks. That’s why the strategy unveiled by Credit Suisse boss Brady Dougan yesterday differs little from the one being pursued by UBS. The case of Kweku Adoboli is really just a sideshow. Of course, all banks are suffering from low levels of activity, but Swiss capital rules are proving to be the straw that breaks the camel’s back for UBS and Credit Suisse. While others must adhere to Basel III, which is also stricter than anything before it, these rules leave just enough room
for institutions to make a return on investment banking. Not so for Switzerland’s Credit Suisse, which yesterday effectively announced its exit from the ranks of bulge bracket investment banks. Instead, it will focus on niche investment banking that predominantly supports its private banking arm. UBS is expected to announce a similarly radical withdrawal at its investor day later this month. Anyone who doubts the scale of Credit Suisse’s move should look at just how drastically it is scaling back activity in fixed income, which historically accounts for roughly two thirds of global investment banking revenues.
Yesterday, Dougan said the bank would reduce by half the risk weighted assets (RWAs) in its fixed income division, as measured under Basel III, by 2014. In notional terms, that will see the firm cut approximately SwFr99bn (£85bn) from FICC, accounting for the lion’s share of 1,500 job losses. So as bankers worldwide rue the fact that regulators seem to know nothing of unintended consequences, they should consider this. It could be much, much worse. [email protected]
BOTTOMLINE
Analysis by David Crow
CREDIT Suisse has announced it will slash 1,500 jobs as part of an overhaul that will see it refocus away from its traditional European bond trading business and towards high-growth markets in Asia and South America. The losses will fall most heavily on its fixed income and credit business, following deep job cuts already in its equities division. And City A.M. understands that the job cuts in its London and New York offices are likely to run into the hundreds – one source familiar with the situation estimated cuts of 750 between the two cities. In all, the move will shave three per cent off its headcount globally and is meant to boost annual cost savings from SFr1bn (£704m) to SFr1.2bn. The decision came as the bank announced that nine-month pre-tax profits at its investment bank more than halved to SFr1.28bn. Chief executive Brady Dougan said: “I am convinced that being a first
mover in adapting to a new regulatory and market environment is a distinct advantage... We will allocate resources to faster-growing and large markets, especially Brazil, south east Asia, Greater China and Russia.” The bank now has a new target to draw a quarter of revenues from those markets by 2014, versus 15 per cent now. Credit Suisse’s private banking business also saw nine-month pre-tax profits drop by 28 per cent to SFr1.88bn. But earnings rose 44 per cent at its smaller asset management division, reaching SFr466m. ANALYSIS l Credit Suisse Group AG CHF
23.50
27
1 Nov
26 25 24
26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
12
News
CITYA.M. 2 NOVEMBER 2011
Growth bounce for GDP but UK set to slow again
53.7 Canada
50.8 ▲
UK ECONOMY BY TIM WALLACE
ECONOMIC growth rebounded slightly in the third quarter, the Office for National Statistics’ (ONS) preliminary estimates revealed yesterday. Growth came in at 0.5 per cent, up from 0.1 per cent in the second quarter. Year on year, the ONS figures put growth at 0.5 per cent. However, October’s manufacturing
figures from Markit show the sector contracting into the fourth quarter. Services grew by 0.7 per cent in the third quarter, according to the ONS. Transport, storage and communications expanded by 0.9 per cent, led by telecoms and computing, and business services and finance followed, with 0.8 per cent growth. Manufacturing output grew by an estimated 0.5 per cent. Chancellor George Osborne
described the GDP expansion as “a positive step forward for the economy”. However, analysts from Deutsche Bank described the recovery as “worse than the Great Depression” as output remains almost four per cent below its pre-recession peak. Meanwhile, October’s manufacturing purchasing managers’ index (PMI) from Markit fell to 47.4 from 50.8 in September. Any figure below 50 indicates a contraction.
USA
46.5 Brazil
47.4 United Kingdom
News
CITYA.M. 2 NOVEMBER 2011
47.3 Eurozone
50.4 Russia
48.0 South Korea
53.3 Turkey
50.6 Japan
52.0 India
51.0 China
Double dip in industry may be avoidable
13
NEWS | IN BRIEF Australian interest rates cut Fears over the global economic slowdown yesterday pushed the Reserve Bank of Australia to cut interest rates for the first time since April 2009. The benchmark interest rate was cut from 4.75 per cent to 4.5 per cent. Governor Glenn Stevens pointed to “subdued demand conditions” and also explained that the Australian dollar’s strength helped contain inflation. The Bank expects inflation to fall back to its two to three per cent target in 2012 and 2013, allowing it some room to loosen monetary policy now.
Women losing out in pensions
Taiwan
▲
43.7
WORLD ECONOMY BY TIM WALLACE
47.4 Australia
OVER 50 = EXPANSION THE LARGER THE BUBBLE, THE LARGER THE EXPANSION OR CONTRACTION (RED)
MANUFACTURING output has continued to expand in the US, China and India, purchasing managers’ indices out yesterday revealed, though the UK, Brazil, Taiwan and South Korea all registered declines in October. Analysts believe a global manufacturing recession may be avoided. International data from Markit, and US data from the Institute for Supply Management (ISM) is an early gauge of economic activity, based on survey responses. Any result above 50 indicates output expansion. China moved from slight contraction into growth, rising from 49.9 to 51, whilst India’s growth accelerated from 50.4 to 52. US manufacturing expanded, but at a slowing rate than in September, falling from 51.6 to 50.8. Even this growth was described as
“lacklustre” by analysts at Capital Economics. “The fall in the index was disappointing,” said economist Paul Dales. “For the past four months the index has been at almost exactly the same level, which is consistent with annual GDP growth of around two per cent.” On the downside, UK manufacturing went into reverse, falling from 50.8 to 47.4. Brazil continued its decline, but at a slower rate, up to 46.5 from 45.5. Former Asian tigers South Korea and Taiwan also kept falling, at 48 and 43.7 respectively. “At an aggregate global level, so far industrial confidence appears to be stabilising at a weak point consistent with industrial stagnation rather than recession,” said Julian Callow from Barclays Capital. “This could be an early sign that a double dip recession in the manufacturing sector has been averted.”
Almost half of women over 40 who live with a partner have no independent pension, research out today by Prudential reveals. Fifty-six per cent of couples of the same age have not worked out how much money they will need to live once they have retired, the study found. Prudential warns they “could be sleepwalking into poverty” just because “British couples seem reluctant to discuss with each other the finances that will support them in later life.”
Drop tax relief for rich says paper Tax relief on pension lump sums disproportionately benefits the wealthy at taxpayers’ expense, claims a report out today from liberal think-tank CentreForum. From 2012/13, wealthy retirees will still be able to take £375,000 from a £1.5m pension pot, taxfree. The think-tank argues instead that individuals taking lump sums above the higher rate income tax threshold (£42,475) should have to pay higher tax, as they would on any other form of income.
14
News
CITYA.M. 2 NOVEMBER 2011
Russian IPOs in spotlight as FTSE probes free float ▲
CAPITAL MARKETS BY ALISON LOCK AND DAVID HELLIER
COMPANIES that float only a small proportion of their shares in London could be barred from FTSE stock indices in future under new proposals from the index group yesterday. FTSE is to consult on whether to make UK-based firms list at least 25 per cent of shares, rather than the current 15 per cent, to join its indices. Its move follows growing unease
among fund managers about the number of companies that want to benefit from being included in indices such as the FTSE 100 but keep most of their shares in private hands. Managers voiced alarm last week after Russian miner Polyus Gold said it would list just 13 per cent of shares – now raised to 20 per cent – as they fear low free floats can leave them with little control over decision-making that can run counter to good governance. Similar firms include Kazakh miner
ENRC, which listed just 18 per cent of its shares in 2007; Fresnillo and Essar Energy with 23 per cent; and Glencore, which listed 20 per cent in May. George Dallas, director of corporate governance at F&C Asset Management, welcomed the probe. “It’s positive news that this has been opened up for discussion and debate. We’ve seen a lot of commentary and the issues of corporate governance seem to concern a lot of market participants,” he told City A.M.
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From top left (clockwise): Ivan Glasenburg of Glencore, Felix Vulis of ENRC, Prashant Ruia of Essar and Jaime Lomelin of Fresnillo
© Rob Verrill Abstracted Landscape I
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Win £1,000 of art with ING To celebrate ING’s continuing association with arts charity The Discerning Eye, ING Commercial Banking has teamed up with CityAM to offer you the chance to win up to £1,000 of art. The ING Discerning Eye, with its slogan “new artists, new audiences”, showcases the work of unknown artists alongside their more established contemporaries. This year a total of 611 pieces of art, representing the work of 300 artists, has CFFOTFMFDUFECZQSPNJOFOUʔHVSFTGSPNUIFBSUXPSMEUPHPPOTIPX&BDI selector will use their own dedicated gallery space to display their choices, providing a unique range of themes which has earned the exhibition an enviable reputation among art lovers and collectors alike. All the art on show is for sale. REGISTER FREE NOW AT SGMARKETMASTER.CO.UK
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Covered Warrants, Super10s and Turbos are leveraged products and suitable for sophisticated retail investors. The underlying assets may be volatile and both gains and losses could be greater than those incurred by the underlying asset itself. As the issuer, any failure by Societe Generale Acceptance N.V. to make payments due may result in the loss of all or part of your investment. This is a marketing document issued in the UK by the London Branch of Societe Generale. Societe Generale is a French credit institution (bank) authorized by the Autorité de Contrôle Prudentiel (the French Prudential Control Authority). Societe Generale is subject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request. Any reproduction, disclosure or dissemination of these materials is prohibited.
ING Discerning Eye, Mall Galleries, London SW1Y 5BD – 10-20 November, 10am to 5pm, entrance free. Follow us on Twitter : INGDiscEye and join our Facebook group : ING Discerning Eye Terms and conditions The winner will be entitled to choose a painting from the ING Discerning Eye exhibition up to the value of £1,000. The prize is non transferable, non negotiable and no cash alternative is offered. Entry to the prize draw is free and is open to anyone aged 18 years and over and resident in the UK, except employees of ING Bank N.V. (“ING”), their families, agents or anyone else professionally associated with the draw. Only one entry per person is permitted. The closing date is midnight on Sunday 6 November 2011. The winning answer will be drawn at random from all eligible entries received and the winner will CF OPUJʔFE PO .POEBZ /PWFNCFS5IF XJOOFS NVTU CF BWBJMBCMF PO UIF FWFOJOH PG5VFTEBZ /PWFNCFS BU UIF .BMM (BM leries in London to choose their painting. ING assumes no responsibility and is not liable for any costs, charges or expenses which the winner may be required to pay at any time in connection with the prize. By entering the competition you agree to receive further information and similar promotions from CityAM and Discerning Eye. The winner, by accepting the prize, agrees to participate in non paid publicity accompanying or resulting from this draw if required. The Editor’s EFDJTJPO JT ʔOBM */( SFTFSWFT UIF SJHIU UP TVTQFOE DBODFM PS BNFOE UIJT QSPNPUJPO BOEPS SFWJFX BOE SFWJTF UIFTF UFSNT and conditions at any time without giving prior notice and by continuing to take part in the promotion subsequent to any revision of these terms and conditions, entrants shall be deemed to have agreed to any such new or amended terms.
CITYA.M. 2 NOVEMBER 2011
News
15
Serious Fraud Office boss Richard Alderman in our mock up of a poster for its new tip-off service
SFO: help us to unmask fraud THE SERIOUS Fraud Office (SFO) yesterday unveiled a new service it hopes will “unmask fraud and bribery” in the City. SFO Confidential is an online whistle-blowing tool that allows City workers to anonymously tip off the watchdog to any activity they think may be suspect. The service, which also includes a telephone hotline, promises to keep the identity of anyone offering information secure. SFO boss Richard Alderman said: “I want people to come forward and tell us if they think there is
fraud or corruption going on in their workplace. Executives, staff, professional advisors, business associates or trade competitors can talk to us in confidence. I have set up a special team to make the SFO readily accessible to whistleblowers. I want SFO Confidential to help flush out fraud.” The watchdog has come under fire in recent weeks after sensationally dropping a two-and-a-half-year probe into collapsed hedge fund Weavering Capital. It is also facing questions from property tycoon Vincent Tchenguiz, who was arrested in a dawn raid earlier this year but later released without charge.
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AC23264
▲
ENFORCEMENT BY STEVE DINNEEN
16
News
CITYA.M. 2 NOVEMBER 2011
Supermarkets vie to promote value for money BRANDINDEX
STEPHAN SHAKESPEARE
W
ITH the economic outlook still looking bleak and consumers (as shown by YouGov’s Household Economic Activity Tracker) increasingly price conscious it is not surprising
that a number of big supermarkets are keen to emphasise their value. Sainsbury’s launched its “live well for less” advertisements on 15 September and Tesco’s “Big Price Drop” campaign came out a week later. With two of the big companies going with similar messages in such a short space of time it is interesting to look at BrandIndex and compare their success. Both saw immediate rises in buzz after the launch but Sainsbury’s has been successful in building on this, whereas Tesco dropped back almost immediately. Sainsbury’s was at +17 on 15 September and has steadily climbed to +28 this week. Tesco went from +5 to +10 in the first fortnight
but fell just as quickly and are now again at +5. And what of the message that they were trying to convey? The value scores show that neither brand has had much success in shifting its value perceptions; indeed if anything the movement has been downwards, with Sainsbury’s going from +26 to as low as +17 and Tesco from +28 to +22, although both have recovered to some extent over the last week. A month later Morrisons launched its “Morrisons Millions” campaign – not as distinctly linked to value as the other two but along the same lines. Like Sainsbury’s it has seen a rise in buzz over the two weeks of the cam-
biggest winner) but all will need to work harder at conveying a message of value to todays hard-pressed consumers. Stephan Shakespeare is the chief executive of YouGov
paign (from +16 to +23) but value has dropped slightly from +34 to +30. So all three supermarkets have achieved some success in creating positive buzz (with Sainsbury’s the ANALYSIS l Buzz chart 35.0
ANALYSIS l Index chart 40.0
Sainsbury’s
30.0
30.0
25.0
25.0
20.0
Morrisons
10.0
15.0
Sainsbury’s
10.0
5.0
5.0
Tesco 1 Jul
Tesco
20.0
15.0
0
Morrisons
35.0
5 Aug
9 Sep
0
7 Oct 28 Oct
1 Jul
5 Aug
9 Sep
7 Oct 28 Oct
NEWS | IN BRIEF Lamprell wins North Sea work
Soco slows ramp up in production
Lamprell, an engineering firm serving the oil and gas industry, has been awarded two new construction contracts by Nexen Petroleum UK worth in excess of $200m. The first of the contracts relates to the Golden Eagle Development in the North Sea and will involve the construction of a two level Wellhead deck. The second contract is for a production, utilities and quarters deck, weighing about 10,000 tonnes.
British oil firm Soco International has delayed a ramp up in production at its oil field off the Vietnam coast but said it was confident of achieving target output during 2012. Soco, which in August said it could reach its target of producing 55,000 barrels of oil per day (bopd) from its Te Giac Te oil field by the end of 2011, said it wanted to understand the field better before upping output to that level.
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For full product information & sources to these claims, visit http://www.ibm.com/systems/uk/x/hardware/tower/x3200m3/index.html 2TBR 4Q10 x86-Based Servers: Corporate IT Buying Behavior & Customer Satisfaction Study, February 2011. 3All prices stated include VAT at a rate of 20% and are the IBM estimated retail selling prices that were correct at the time of going to print. 4Quarterly price quoted is based on IBM’s 0% System x Solution Finance offering (FMV lease). Terms & Conditions Apply: Offering availability subject to credit approval; Available to offering specific credit qualified commercial clients financing; £5,000 to £200,000 in the United Kingdom; IBM eligible hardware must comprise a minimum 70% of total financed amount; IBM eligible hardware financed on 36 month fair market value lease*; all other items financed on 36 month loan, or full pay out lease if available; Charges for software, services must be a one-time cost not recurring i.e. quarterly; Sold direct through IBM or through an authorised IBM reseller. For more details and full Terms and Conditions please visit: http://www.ibm.com/financing/uk/lifecycle/acquire/xsolutionfinancing.html Global Financing offerings are provided through IBM Credit LLC in the United States and other countries. IBM Global Financing terms and conditions and other restrictions may apply. Monthly payment provided is for planning purposes only and may vary based on customer credit and other factors. Payment is quarterly. Rates and offerings are subject to changes, extension or withdrawal without notice. 5Standard warranty is 3-year on-site limited warranty. The ServicePac upgrades this to 3-year 7x24x4hr. IBM hardware products are manufactured from new parts or new and serviceable used parts. Regardless, our warranty terms apply. For a copy of applicable product warranties, visit http://www.ibm.com/servers/support/machine_warranties. 6Service will only be provided in the country where the service has been purchased, unless stated otherwise. For more information on ServicePac warranty enhancements visit: www.ibm.com/services/europe/maintenance IBM makes no representation or warranty regarding third-party products or services. IBM, the IBM logo, System Storage and System x are registered trademarks of International Business Machines Corporation registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. For a current list of IBM trademarks, see www.ibm.com/legal/copytrade.shtml. Intel, the Intel logo, Xeon and Xeon Inside are trademarks of Intel Corporation in the U.S. and other countries. All other products may be trademarks or registered trademarks of their respective companies. All prices and savings estimates are subject to change without notice, may vary according to configuration, are based upon IBM’s estimated retail selling prices as of 30/08/2011 and may not include storage, hard drive, operating system or other features. Reseller prices and savings to end users may vary. Products are subject to availability. Contact your IBM representative or IBM Business Partner for the most current pricing in your geographic area. ©2011 IBM Corporation. All rights reserved.
News
18
BHP and Mitsubishi to put $4.2bn into Australian coal mining sector ▲
MINING
BHP Billiton and Mitsubishi Corp will invest a total of $4.2bn (£2.6bn) to expand coal mining in Australia and are looking at further investments, BHP said yesterday. The project initially will add 8m tonnes per year capacity in exports of metallurgical coal used in making steel, with an expectation of a rapid, low-cost expansion to 10m tonnes per year, BHP said. BHP and Mitsubishi operate a 50-50 joint venture covering seven mines in Australia’s Bowen Basin region and will each contribute $2.1bn to the work. The work will require development of a new mine, Caval Ridge, and
expansion of the alliance’s Peak Downs colliery. Production will start in 2014 and run for more than 60 years, BHP said. “This is a continuation of BHP Billiton’s strategy of investing in large, low cost, expandable mines with long lives,” BHP’s metallurgical coal division president, Hubie van Dalsen, said in a statement. “Additional expansion projects are being advanced to follow this investment in due course,” he said. Mines owned under the BHPMitsubishi alliance have a combined output capacity of more than 58m tonnes per year of mostly metallurgical coal, representing about a fifth of annual global trade.
Bakrie in $1bn Bumi sell-off ▲
MINING BY JOHN DUNNE
INDONESIA’S Bakrie group has announced a $1bn (£626.5m) deal to sell half its stake in London-listed coal miner Bumi – its venture with Nat Rothschild (pictured) – to help tackle its debts. The stake is being bought by Indonesian rival Borneo Lumbung Energi and will allow Bakrie to avoid a default on $1.35bn of loans after talks with commodities giant Glencore over a sale stalled. Under the deal, which insiders said Rothschild welcomed, Bakrie Group will transfer its 47.6 per cent stake in Bumi to a 50-50 joint venture with Borneo. The process is expected to be completed by the end of next month. Bakrie will use the cash to pay off loans arranged by Credit Suisse. Borneo Lumbung Energi is backed by Indonesian investor Samin Tan, a powerful fig-
“
” |
|
ure in the country. Talks between the Bakrie Group and Glencore fell through because lenders were not comfortable with the structure of the proposal, while the price was also seen to be an issue. Bakrie group chairman Nirwan D Bakrie said: “In forming this partnership, Bakrie Group has strengthened its balance sheet and returned stability to its shareholding in its Indonesian listed flagship PT Bakrie & Brothers Tbk and in Bumi, also highlighting the intrinsic investment value in the LSE listed company.” Tan, a former partner at accountant Deloitte, had failed in an attempt to buy a stake in 2006. Meanwhile Bumi is to double its coal production over the next two years. It was listed on the LSE in January this year.
CITYA.M. 2 NOVEMBER 2011
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The Capitalist
19
THE SHOW MUST GO ON SAYS FOREX FINANCIER DIGITAL downloads decimating album sales, Russian oligarch Len Blavatnik poised to swoop on the UK’s last major domestic music label – it’s fair to say the music industry has seen better days. Here to help the sector’s financially challenged artistes make the most of their remaining revenue sources – touring, merchandise and ticket sales – is currency millionaire Peter Ellis, who is helping bands such as Thin Lizzy beat the banks on their forex transactions. Ellis, who made his £50m fortune by founding Foreign Currencies Direct, credits Planet Rock investor Malcolm Bluemel with alerting him to the “large volumes of forex traded in the music business”. “It is about getting the most out of the markets,” Ellis told The Capitalist on his “competitive exchange rates” that save rock bands up to 20 per cent on each transaction. Ellis also has Bluemel to thank for asking The Doors’ bassist Phil Chen to authenticate the handwritten lyrics to Break On Through that he bought for £600 without knowing if they were genuine. Turns out they were – a £15,000 bonus for the City’s biggest music fan.
Left: Thin Lizzy are among the bands taking financial advice from Peter Ellis Picture: REX Above: Gibson Custom Guitars and Aston Martin are backing the first Gibson City Blues Jam at Boisdale
I’M WITH THE BAND OR SHOULD that be the City’s second biggest music fan? Jeremy Pacifico, who left Investec to focus on his session musician firm Specific Music and his band Pacifico Blues, must come a close second. Pacifico last night gave the City the chance to be in his band “without the commitment” at the sold-out Gibson City Blues Jam at Boisdale of Canary Wharf, where bankers from BGC Partners, Bank of America Merrill Lynch and Barclays Capital played alongside Pacifico Blues in the first of what promises to become a monthly event. One for the A&R men to keep an eye on is Urban Society, the band formed by
UBS Investment Bank’s capital markets head Cesar Gueikian with his colleagues Anton Alvarez and Nat Zilkha, who rattled out their greatest hits as Pacifico played blues harmonica.
MONEY TALKS CANTEEN food prices have been curbed and a McDonald’s-style Employee of the Month scheme has been introduced at the Bank of England in an attempt to distract staff from the fact their salaries have been frozen until 2013. But no amount of morale-boosting incentives can stop the exodus of economics talent at the Bank, which has just been notified that Simon Wells, a star
operator in Spencer Dale’s monetary analysis division, is off to join the research team at HSBC Holdings. It’s not the first time HSBC has poached from the Bank, having attracted officials John Butler and Karen Ward in previous years, while Goldman Sachs lured Andrew Benito to the more generously remunerated private sector only this June. Money, as they say, talks.
LESS IS MORE SIZE ISN’T everything, says the Tory MPturned Telegraph Media Group executive chairman Lord Black of Brentwood. He means marketing budgets, of course, speaking as lead judge of the advertising industry’s annual IPA Effectiveness Awards, which this year scaled back the budget of the campaigns entered to £2.5m to reflect the mayhem in capital markets. “The industry continues to deliver fantastic results in spite of continuing pressure on budgets,” said Black as he awarded the evening’s star prize to an ad that showed “profound insight” by encouraging Colombian terrorists to lay down their arms.
20
News
CITYA.M. 2 NOVEMBER 2011
New watchdog: we don’t care if London is competitive or not ▲
REGULATION BY JULIET SAMUEL
THE NEW regulator charged with protecting consumers should not have to take into account the competitiveness of the City when making decisions, its incoming chief Martin Wheatley said yesterday. Appearing before the influential Treasury Select Committee, Wheatley, who will run the Financial Conduct Authority (FCA)
when it is created next year, said that the body should be able to ban financial products pre-emptively without regard for the City’s attractiveness as a financial centre. “People are attracted to a well regulated structure – safe secure transparent markets that they can have confidence in,” he argued. “All of that enhances competitiveness. But that’s quite different to having a specific objective that would be used to argue against
things that would otherwise be sensible measures.” He added that if the FCA were to not take action due to fears about harming the business environment of London, “it would be a very strange outcome”. The FCA will have sweeping new powers to intervene to protect consumers before firms’ actions have yet been proven to be problematic, on the basis that they could be likely to become so.
Clockwise from top left: committee chair Peter Lilley MP, RBS chief Stephen Hester, Barclays chief Bob Diamond and HSBC chief Stuart Gulliver Pictures: REUTERS/PA
Bank CEOs hit back at ethics accusations ▲
BANKING BY JULIET SAMUEL
BANK chiefs clashed with a committee of MPs and peers yesterday to defend the industry from what they called unfounded “generalisations”. Responding to an accusation from the Conservative peer Lord Maples that the crisis had involved “a failure of ethics… particularly within investment banking”, Barclays chief Bob Diamond said that the query was rife with “many generalisations”. “I certainly bristle when I hear people refer to what we do for our customers as casino banking without the courtesy to come in and watch our operations and show me where the casino is,” he said. “I think there’s a lot of generalisa-
tions picked out of specific firms and applied to the industry and I don’t think that’s necessarily helpful.” He was joined in his defence by rival bank chiefs, HSBC’s Stuart Gulliver and RBS’s Stephen Hester. “What you’re talking about doesn’t apply to the banks we’re running,” said Gulliver. “We’re not condoning it in any way, shape or form. We’re just saying it doesn’t happen in our banks.” The committee, examining the government’s draft financial services bill, also asked what banks make of new capital rules. In a veiled swipe at the UK’s attempt to gold-plate the regulations, Diamond emphasised the need to achieve “a balance so that no country is super-equivalent...If [our rivals are] on a different measure of capital than us, it will create inefficiencies.” In association with PoliticsHome.com
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News
CITYA.M. 2 NOVEMBER 2011
BofA in U-turn over debit fees
Pfizer beats forecast with $3.4bn profit
19.45 1 Nov
$ 19.8 19.5 19.4 19.2 19.0 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Picture: REUTERS
US auto sales growth is at its best rate for year TRANSPORT BY HARRY BANKS US CAR sales rose to near their highest level of 2011 in October, early sales results showed, although shares in General Motors and other automakers tumbled yesterday on concern that the industry’s slow recovery could falter. Chrysler posted a 27 per cent gain in October US sales – its best result in four years – as major carmakers reported results pointing to the strongest showing for industry-wide vehicle sales since the start of the calendar year.
General Motors posted a sales gain of two per cent in October, a weaker gain than some analysts had expected for the top US carmaker. GM said that it expected industrywide sales of light vehicles would top the 13.3m sales rate the industry saw in February of this year. US auto sales, which are tracked as one of the earliest snapshots of consumer demand, slipped in the spring and early summer amid concerns about the prospect of a renewed downturn in the US economy and supply disruptions triggered by the March earthquake in Japan.
BANK of America has scrapped plans to charge a $5 per month debit fee, handing a victory to consumers and protesters angry with big banks. The second-biggest US bank said yesterday that the move was in response to customer feedback and competition. BofA was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards. Last week JP Morgan Chase and Wells Fargo cancelled test schemes.
Revenues lifted at Dollar Thrifty TRANSPORT
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ANALYSIS l Pfizer Inc
US car companies have reported encouraging car sales
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PFIZER reported better-than-expected quarterly results yesterday, helped by the weaker dollar and strong performance of the nutritionals and animal health businesses it plans to sell or spin off. The world’s biggest drugmaker, whose top-selling Lipitor cholesterol fighter will face generic competition in the US from 30 November, boosted its full-year 2011 profit forecast and predicted 2012 earnings will be little changed from this year. The company said yesterday profits were $3.74bn (£2.35bn) in the third quarter, including a $1.3bn after-tax gain on the recent sale of its Capsugel business. That compared with a profit of $866m in the year-earlier period, when the company took a big charge for asbestos litigation. Global revenue rose seven per cent to $17.1bn, well above Wall Street expectations of $16.4bn. But revenue
would have risen only one per cent if not for the weak dollar, which increases the value of sales in overseas markets. Pfizer’s earnings and share price have been in the dumps for most of the past five years due to worry over Lipitor’s impending collapse and the company’s inability to create big-selling drugs. But a handful of promising new drugs now working their way through late-stage trials have restored some faith in the company’s laboratories.
BANKING
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PHARMA BY HARRY BANKS
21
DOLLAR Thrifty Automotive Group posted strong third-quarter results that beat estimates on higher car rental revenue yesterday, and the company forecast fourth-quarter rental revenue growth of about one to two per cent. The company posted a third-quarter net income of $66.6m (£41.8m), compared with $49.2m a year ago. Revenue rose to $451.7m from $443.5m. Vehicle rental revenue for the quarter was up 2.4 per cent.
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News
CITYA.M. 2 NOVEMBER 2011
WERE IMPERIAL’S FIGURES IN LINE WITH EXPECTATIONS? TINA COOK | CHARLES STANLEY
“
Imperial Tobacco continues to demonstrate resilience with strength in emerging markets helping to offset headwinds in Spain and the UK. The main positive surprise is a continuation of shareholder friendly actions with a 13 per cent increase in the dividend on a slightly larger than expected hike in the payout ratio to 50.6 per cent.
”
JONATHAN JACKSON | KILLIK & CO
“
By Kasmira Jefford
MARTIN DEBOO | INVESTEC
“
With the numbers well-guided, Imperial's full year has come in very close to our and consensus expectations.... At the divisional level, it's hard to put a cigarette paper between the out-turn numbers and our forecasts, if one will excuse the phrase. Spain was weaker than we thought on the top line...UK was almost entirely in line with our forecasts.
” ”
Imperial Tobacco released its results for the year ending 30 September 2011, which were in line with market expectations. The numbers support our positive view on the shares, which are proving to be very resilient at a time of economic uncertainty and market volatility...The business remains highly cash generative.
Imperial Tobacco, led by Alison Cooper, raised its dividend by 13 per cent
Imperial ups dividend as profits rise ▲
CONSUMER BY KASMIRA JEFFORD
IMPERIAL Tobacco group, the cigarette-maker behind JPS, Davidoff and Gauloises, was upbeat about the ending of a price war in Spain yesterday, as it reported annual profits in line with expectations. The world’s fourth largest maker of cigarettes saw profits rise 1.2 per cent to £3.1bn in the year to 30 September as increasing demand in emerging markets helped offset a slump in the company’s Spanish business. Chief executive Alison Cooper said the tough economic environment, combined with excise duty increases and Spain’s extended smoking ban, imposed in January, had created “the perfect storm” in Spain. “I would argue that it was quite unique in terms of its extremeness because of the relative brand positions compared with other parts of the world,” she said. Imperial, which has a 30 per cent share of the market in Spain with brands like Fortuna, said annual revenues fell by 16 per cent to £497m, after cutting prices to compete with other market players.
“We are seeing a more stable position in Spain with prices back or above those seen at the start of this year, so we see a better year in Spain in 2012,” Cooper told a conference call. In the UK, Imperial saw profits fall from £614m to £577m due to the impact of tax and VAT increasess. A strong performance in the emerging markets of eastern Europe, north Africa and Russia, helped lift overall sales by 3.7 per cent to £29.2bn for the year. The group increased its annual dividend by 13 per cent to 95.1p a share and raised its payout ratio from earnings to 50.6 per cent. Shares closed unchanged at 2,275p. ANALYSIS l Imperial Tobacco Group PLC 2,320
2,275.00
p
1 Nov
2,300 2,280 2,260 2,240 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Rathbones adds Reuters beats £307m in funds results forecast WEALTH manager Rathbone Brothers showed it had continued to pull in clients over the summer, as it said yesterday that net new funds going into the firm hit £307m in the three months to September. However, falling markets meant funds under management were £15.1bn, a 3.2 per cent drop over the period. “We expect markets to remain nervous for the remainder of 2011 as inflation expectations and European sovereign debt uncertainties continue to dominate the headlines,” said chief executive Andy Pomfret.
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FUND MANAGEMENT
FUND MANAGEMENT
MEDIA group Thomson Reuters yesterday posted results ahead of forecast as its professional information business offset sluggish growth in its markets division. Sales to legal, tax and accounting professionals jumped 10 per cent, buoyed by strong sales of its WestlawNext software. But growth was subdued in the unit that caters to banks and other financial institutions, with sales rising one per cent. Overall third quarter revenues rose five per cent to $3.26bn (£2.04bn), while operating profit jumped 12 per cent to $717m.
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24
News
CITYA.M. 2 NOVEMBER 2011
Kuwaitis to buy up Hammerson asset ▲
PROPERTY
KUWAITI property firm St Martins Corporation is close to buying 60 Threadneedle Street at the heart of the City from Hammerson in a deal said to be worth more than £175m. The offices, which were completed in 2009, are 99 per cent let, producing £8.8m of rent a year from tenants including Talbot Underwriting and the Toronto Dominion Bank.
Year-on-year house price growth has hit positive territory for the first time in six months Picture: REUTERS
The deal will see St Martins, the property investment arm of Kuwait’s sovereign wealth fund, begin to deploy some of the more than £750m it raised from the sale of non-core assets over the last year into prime assets, according to reports yesterday. The group this year sold more than £750m of secondary retail, office space in UK and Europe, in a process nicknamed “Project Blue”. St Martins declined to comment.
House prices edge up in a soft market ▲
ECONOMICS BY HARRY BANKS
HOUSE prices nudged up last month, beating expectations for no change, driven by sales in more affluent areas, data from mortgage lender Nationwide showed yesterday. House prices rose 0.4 per cent in October having risen 0.1 per cent in September, pushing them 0.8 per cent higher than a year ago, the first time annual house price growth has been in positive territory for six months, Nationwide said. “Given the challenging economic backdrop, October’s data is encouraging, but it doesn’t fundamentally change the picture of a housing market that is treading water,” said Robert Gardner, chief economist at Nationwide. Data released on Monday showed a slowdown in mortgage lending with approvals of home loans -- a gauge of house prices six months down the line -- and net mortgage lending weakening in September, pointing to a further softening in the housing market. Howard Archer, an economist at IHS Global Insight said the underly-
ing trend “remains soft”. He added: “We maintain the view that house prices are likely to fall by around five per cent from current levels by mid-2012 in the face of low consumer confidence, persistently weak economic activity, rising unemployment and muted earnings growth.” He said these factors would likely outweigh the boost to the housing market coming from the extension of very low interest rates. Meanwhile, the average price of a London home slipped by 1.9 per cent in the three months to the end of September to £295,024, according to Nationwide. although prices are still up 0.5 per cent compared to this time last year. Although the capital is still the most expensive region in the country to buy a house, there are large differences between boroughs, Nationwide said. In Hammersmith and Fulham, one of the most expensive areas in London, prices have gone up by 12 per cent compared to last year, while Ealing homes are five per cent cheaper on average. The average UK price is £165,650, Nationwide said.
DTZ says City H&M swoops offices resilient on Carnaby St OFFICES in London’s Square Mile offer one of the best defensive plays for property investors seeking to safeguard total returns if the panEuropean sector is dragged into a second recession by the Eurozone debt crisis, research by DTZ claims. The property consultancy carried out research based on a worst-case scenario, with the 20 per cent possibility of a Eurozone debt crisis unfolding. Total returns for City offices from 2011-16 would be 6.6 per cent, against 7.7 per cent if the economy continued its current muted rebound.
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PROPERTY
RETAIL
SWEDISH Fashion retailer H&M yesterday signed for the first UK standalone stores for its Monki and Cheap brands on London’s Carnaby Street. West End property company Shaftesbury has let its two newlybuilt stores for a ten year term, which will produce a total rental income of £965,000 per year. Last month H&M took full control of FaBric Scandinavien, the owner of the girlswear brand Monki and Cheap Monday, a jeanswear brand which is sold in almost 40 countries and 1,800 stores, including Selfridges.
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26
News
CITYA.M. 2 NOVEMBER 2011
Wolfson swings to $10m loss ▲
TECHNOLOGY BY STEVE DINNEEN
agement chips as customers scrapped products due to lack of demand. It also faced a separate $3.5m restructuring charge. ANALYSIS l Wolfson Microelectronics PLC 117.50
113.25
p
1 Nov
115.00 112.50 110.00 107.50 105.00 26 Oct
27 Oct
28 Oct
31 Oct
1 Nov
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WOLFSON yesterday swung to a $10m (£6.3m) third-quarter loss and said weak demand meant it would not return to profitability until well into next year. The firm, whose audio chips are in Samsung handsets, also slashed its revenue forecast for the final quarter to $35-$40m, down from $46.1m. Chief executive Mike Hickey said order intake has stabilised after a sharp slowdown in the summer but at lower levels than expected, reflecting muted consumer demand for
electronic products apart from smartphones. He added that the group’s standalone audio chips, which deliver better quality sound than that provided by a central processor, should help drive a recovery in 2012. Investors, however, are losing patience, with the Edinburgh-based company’s shares, which have lost 60 per cent of their value since the start of the year, falling 3.75 per cent. A host of chipmakers, including Texas Instruments and STMicroelectronics , have said the key Christmas period will disappoint this year. Wolfson took a $3.5m hit on some of its discrete and power man-
Olympus lays out plans it hopes will quell scandal TECHNOLOGY
OLYMPUS yesterday announced a plan it hopes will help put an end to the scandal that threatens to drag the business to its knees. The endoscope and camera maker named six men, including a former Japanese supreme court justice, to investigate past M&A deals, which have been under intense scrutiny after record-breaking advisory fees were brought to light. None of the six, including lawyers
ARM snaps up American design firm
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ADVERTISING giant Aegis yesterday outperformed the industry, smashing analyst growth forecasts. The UK firm was buoyed by a strong performance in the US, where rivals including WPP have struggled in the last three months. It posted organic revenue growth of 11.2 per cent, compared with analyst forecasts of 7.5 per cent. Aegis said it expects organic revenue growth to slow in the fourth quarter and noted that, as is historically the case, revenue will be weighted towards that period. It also said some staff costs had risen, which would keep underlying operating profit in line with forecasts. The firm, which this month closed the sale of its Synovate market research unit for £529m, now expects to fend off any potential suitors after proving itself as a smaller outfit. Havas has long been seen as a potential bidder for Aegis, a position that was strengthened by the sale of Synovate. Havas chairman Vincent Bolloré, who is also the biggest shareholder in Aegis, is a long-term admirer of the company.
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A strong US performance boosts Aegis ADVERTISING BY STEVE DINNEEN
TECHNOLOGY BY STEVE DINNEEN
Chief executive Jerry Buhlmann said: “We’re making good progress on all fronts at Aegis and the business has considerable momentum.” He said the group was benefiting from new systems and management put in place, which had energised the firm. He said he also expected its ability to take work off rivals and its presence in faster-growing regions to help it through 2012. It also has a lengthy list of acquisitions that it is working on after completing 15 deals this year. WPP last week cut its 2011 outlook after slowing growth in the US. Omnicom posted third quarter organic growth of 7.2 per cent, Publicis 6.4 per cent, Havas 7.3 per cent, WPP 4.7 per cent and IPG 8.7 per cent. ANALYSIS l Aegis Group PLC p
135.40 1 Nov
142.5 140.0 137.5 135.0 132.5 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
and an accountant with experience investigating governance at a bank, have had any previous association with the company. The all-Japanese committee will look into $687m (£430m) in fees paid to a financial adviser over the $2bn purchase of British medical equipment maker Gyrus in 2008 – the biggest such payment ever – and the acquisition of three companies that Olympus, under chairman Tsuyoshi Kikukawa’s decade-long reign at the company, later largely wrote off.
Warren East says ARM is stronger as an independent company Picture: Laura Lean / CITY A.M.
ARM Holdings yesterday snapped up US design software firm Prolific, as chief executive Warren East reiterated his belief that the firm would suffer if it was subject to a US takeover. And East’s bullish attitude appeared justified later in the day, as HewlettPackard unveiled plans to develop extremely low-energy servers, utilising ARM technology. The Silicon Valley giant is working with Austin-based start-up chipmaker Calxeda -- which uses the ARM technology in its microprocessors -- to create servers aimed at companies running large-scale remote computing operations such as Twitter and Facebook. Meanwhile, it was confirmed yesterday that ARM has bought privatelyheld Prolific for an undisclosed – understood to be relatively low – sum. It hopes the company will enable it to design chips that are easier for its semiconductor manufacturer customers to produce. Ease of manufacture is an increasing concern as ARM designs ever smaller and more energy efficient chips to power the world’s smartphones. Yesterday morning East said ARM’s status as a British company is beneficial to the business and a takeover by a larger US rival would “hamper” it. He told the Today programme: “ARM’s business model works on us being independent.”
Online gaming firm 888 cashes in as Perform Group reassures customers stay at home and gamble investors with solid results ONLINE gaming firm 888 expects 2011 earnings to be significantly ahead of estimates as squeezed consumers opted to stay home and gamble instead of venturing outside. Third-quarter sales grew 42 per cent to $86m (£54m), the highest quarterly revenue ever achieved in its history. It said it has more than 10m registered casino, poker and sport customer accounts, up 24 per cent from last year.
Deputy chairman Brian Mattingley said: “Trading has continued to be strong into the fourth quarter, and we expect that clean Ebitda for the financial year will be significantly ahead of current market expectations.” In August, 888 had said trading across all its business lines for the traditionally weaker third quarter was likely to remain robust. Rival Bwin.party, meanwhile, saw its shares rocket 12.4 per cent yesterday after it announced a partnership with casino operators MGM Resorts
International and Boyd Gaming. ANALYSIS l 888 Holdings 35.50
35.25 1 Nov
p
35.00 34.50 34.00 33.50 33.00 32.50 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
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GAMING BY STEVE DINNEEN
MEDIA BY STEVE DINNEEN
PERFORM yesterday continued its long journey to restore investor confidence after its disastrous IPO this year with a solid set of results. The media rights company posted year-on-year revenue growth of 55 per cent to £27.4m and said it is on track to hit full-year forecasts. Joint chief executive Oliver Slipper said: “We are very pleased to report that our strong performance has con-
tinued through the third quarter, with further growth across all our businesses and geographies. The funds raised on listing give us a substantial platform to growth through acquisition and this pipeline remains promising... We are on track to deliver strong growth in 2012.” Perform listed in April for 260p a share, giving it a market cap of more that £500m. However, it plunged as low as 150p a share over the summer before recovering to yesterday’s price of 200p.
News
CITYA.M. 2 NOVEMBER 2011
27
CITY VIEWS: HAS YOUR TRAIN CARRIAGE BEEN GETTING BUSIER?Interviews by Phoebe Torrance RON BARNES | MILES SMITH
CLIVE GILBERT | INCEPTA
“Yes, they have become so busy that it is unbearable. The new fast trains on my route have been allowed to increase fares more than others. There also seem to be more houses being built along the line, presumably because of such expensive housing closer to the City.”
“Yes, they have become noticeably busier. I've taken to travelling first class because it is getting harder to get a seat. I know they have cut back on the number of carriages, and also the fact that fuel is still so expensive means people prefer to commute by train.”
RISHI CHOUDHURY | TINDALL RILEY MARINE “Not particularly. Personally I think they have always been a busy, slow and inefficient service and I haven’t seen any obvious changes. I have noticed an increase in prices, but it is understandable why.” * These views are those of the individuals above and not necessarily those of their company.
Stagecoach, led by Sir Brian Souter, said it trains were doing well Pic: GETTY, Inset: Micha Theiner / CITY A.M.
Rail and bus firms deliver revenue gains ▲
TRANSPORT BY MARION DAKERS
TRANSPORT firms Stagecoach and National Express reported rising ticket sales yesterday as commuters looking to avoid the high cost of cars turn to buses and trains. Underlying revenue at Stagecoach’s domestic rail business, which includes South West Trains, grew 8.7 per cent in the 24 weeks to 16 October, while Virgin Rail Group, a joint venture in which Stagecoach owns 49 per cent, saw a 9.7 per cent sales jump. National Express, which operates the c2c and East Anglia routes, said third-quarter revenue at its UK rail division grew six per cent. The firm said a jump in passengers using Oyster cards on its routes more than offset the lower yields from Oyster-discounted journeys. Sales at the UK bus businesses of
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MULTINATIONAL car dealer Inchcape yesterday posted a rise in third-quarter revenue with an uneven global recovery in the car industry showing strong growth in Asia Pacific and the emerging markets, and a further weakening of consumer confidence across the UK and Europe. The British-based firm, which
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National Express and Stagecoach grew around two per cent. But both firms performed better overseas, with Stagecoach’s US coach operations posted a 12 per cent leap in like-for-like revenue while revenue at National Express’s America school bus business rose 10 per cent. Shares in National Express closed down 1.9 per cent to 225.8p yesterday, faring slightly better than the rest of the FTSE 250, while Stagecoach dropped four per cent to 238.3p. ANALYSIS l Stagecoach Group PLC 248
238.30
p
1 Nov
246 244 242 240 26 Oct 27 Oct
28 Oct
31 Oct
1 Nov
Inchcape turnover gets lift from Asia Pacific as Europe weakens TRANSPORT
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sells and distributes cars for manufacturers such as Toyota, MercedesBenz and BMW in 26 countries, said yesterday it was maintaining its guidance for the full-year. Inchcape’s revenue increased by 2.2 per cent to £1.46bn in the three months to 30 September, with likefor-like revenue up 4.1 per cent. That took revenue to £4.39bn in the nine months to 30 September, down three per cent on last year.
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News
28
CITYA.M. 2 NOVEMBER 2011
CITY MOVES | WHO’S SWITCHING JOBS
Edited by Harriet Dennys
Marsh The insurance broker and risk adviser has appointed David Batchelor as head of its international division, comprising all operations outside North America. Batchelor, who will relocate to New York from London early next year, will remain chief executive of Marsh’s EMEA region throughout 2011. Batchelor began his career in 1976 at Bowring, which was acquired by Marsh & McLennan Companies in 1980. He took up his most recent role as chief executive of Marsh’s EMEA region in April 2008.
Xchanging The technology services provider has appointed Geoff Unwin, the former chairman of United Business Media and
executive chairman of Hoskyns, as chairman. He will join the board on 1 December, initially as a non-executive director, before replacing Nigel Rich as
To appear in CITYMOVES please email your career updates and pictures to [email protected]
chairman on 1 January 2012 after Rich stands down on 31 December. Unwin is currently chairman of Taptu, RD Card Holdings, OpenCloud and Halma.
Intertain The parent company of the Walkabout bar chain has appointed David Myers as its new chairman, succeeding Stephen Lambert. Myers, the former chief executive of Avebury Taverns, will retain his current positions as nonexecutive chairman of Premium Bars & Restaurants and La Tasca.
Carmignac Gestion The fund manager has hired Mark Dunn, previously head of strategic business
The European-focused private equity investor has appointed Andrew Land as a senior member of its services sector team and a director of the firm. Land was formerly a managing director with Och-Ziff Capital Management.
Sun European Partners Sun Capital Partners has made three senior hires to its European arm: Jerome Nomme joins from Ernst & Young as a principal on the transaction team, Tim Stubbs joins from the Sapa Group as a managing director
ANALYSIS l Dixons Retail
p
68.00
01 Nov
90 85 80 75 70 Sep
HgCapital
on the operations team, and David Finnigan relocates from the Florida office to become a managing director on the operations team.
Eversheds The law firm has appointed senior Hogan Lovells M&A partner Richard Lewis as a partner in its London M&A practice. Lewis, who has been a partner since 2001, specialises in M&A and corporate finance deals.
Saffron Building Society Jon Hall has been confirmed as Saffron’s chief executive. Hall, who was previously finance director, replaces Andy Golding, who resigned earlier this month.
+44 (0)20 7092 0053 morganmckinley.com
To appear in Best of the Brokers email your research to [email protected]
ANALYSIS l Xchanging
Aug
development at LV Asset Management, as sales director.
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BEST OF THE BROKERS 95
in association with
Oct
14
ANALYSIS l Wm Morrison Supermarkets
p
10.73
01 Nov
300
13
290
12
280
11
270
Aug
Sep
Oct
p
Aug
Sep
301.1 01 Nov
Oct
XCHANGING
DIXONS RETAIL
WM MORRISON
Panmure Gordon has upgraded the outsourcing company from “sell” to “hold” with a target price of 70p, seeing long-term value in the business, whose shares have lost more than 30 per cent in the last three months. The broker says good progress has been made this year since the appointment of Ken Lever as chief executive, which should result in cleaner, more visible cash generative earnings.
Nomura rates the electronics retailer as “neutral” with a target price of 16p, and says the challenging first quarter, when it saw UK like-for-like (LFL) sales fall 10 per cent, has been followed by an uncertain trading environment due to squeezed consumer spending. Despite a forecast for a 7.3 per cent drop in first half LFL sales, the broker expects stable losses before interest and tax of £12.2m.
JP Morgan rates the supermarket group as “underweight” with a target price of 302p ahead of its third quarter trading update on 10 November. The broker says WM Morrison should maintain its position at the top of the leader board among food retailers on like-for-like sales, but says the gap is flattered by its limited non-food exposure. JP Morgan sees like-for-like sales growth of 2.3 per cent excluding food and VAT, and expects space growth of 2.4 per cent.
Shock of Greek referendum Torrent of EU news sends financial stocks down batters Wall Street THELONDON REPORT
F
INANCIAL stocks led Britain’s FTSE 100 sharply lower yesterday, after the Greek Prime Minister’s call for a referendum on the bailout package agreed last week sent shockwaves through markets and heightened tensions over debt contagion. London’s blue chips fell 122.65 points or 2.2 per cent to 5,421.57, echoing similar falls across the globe as investors deserted riskier assets on concerns a Greek ‘no’ vote could be catastrophic for the euro and the banking system. “By calling a referendum, Papandreou has given 12m Greeks a decision that has massive and potentially devastating ramifications for the 500m inhabitants of the European Union,” Louise Cooper, markets analyst at BGC Partners, said. The Greek government faced possible collapse after Prime Minister George Papandreou shocked investors and angered fellow EU leaders by letting Greeks vote on the €130bn ($178bn) bailout package, with many voters already deeply disenchanted with austerity measures. Expressing concern at Papandreou’s snap decision to call a
referendum, Jean-Claude Juncker, the chairman of the Eurogroup countries said Greece could face bankruptcy if the population ends up voting against the bailout. German and French leaders are due to meet their Greek counterparts ahead of the G20 summit tomorrow. Having gained just over eight per cent in October, the UK’s benchmark has fallen 5.1 per cent in three trading days and back into the range -5,000 to 5,450 -- that it had previously struggled to breakout of between August and October, when investors were baying for politicians to bring an end to the Eurozone debt crisis. With gains having been capped at the 200-day moving average of around 5,710 on Thursday, the FTSE is now attacking the 50-day moving average support level of around 5,310. Investors responded to the uncertainty brought on by Greece by ditching risky equities and piling their cash into safer assets such as German and UK government bonds. Yields, however, in 10-year Greek and deeply indebted Italy and Spain government bonds rose as the risk that the countries would be unable to repay their debts grew. The FTSE volatility index, a gauge of investor fear, which had stabilised after the announcement of the EU rescue plan last week, shot up 25 per cent. Those with the most to lose should
EU countries begin defaulting fell furthest. Banks fell 3.5 per cent and insurers shed 7.2 per cent. Hedge fund firm Man Group, which has been struggling to retain client money amid relentless volatility, fell 9.3 per cent. Sentiment among financials was further dented as investors fretted over potential exposure to MF Global, which filed for bankruptcy protection on Monday. And the mood further darkened as Credit Suisse said it was cutting a further 1,500 jobs and scaling back its capital-guzzling investment banking business, as it dealt with tougher banking regulations and the impact from the Eurozone’s problems. Europes debt woes weighed too on global factory activity, which slowed down in October on weak demand for exports, raising the risk that the debt crisis could drag the global economy into recession.
ANALYSIS l FTSE
5,421.57
5,800
01 Nov
5,600 5,400 5,200 5,000 4,800 1 Aug
31 Aug
29 Sep
28 Oct
THENEW YORK REPORT
U
S stocks tumbled yesterday after investors were blindsided by a surprise call for a Greek referendum on an EU bailout plan, casting doubt on the sustainability of the recent market rally. The S&P 500 has slid more than five per cent so far this week in moves reminiscent of the stomachchurning market swings seen over the past two months and after investors thought the worst of the Eurozone debt crisis was over. The speedy pullback comes after stocks rebounded to post their best month in 20 years in October. The gains were fueled by hope for an eventual deal to rescue Greece, finally agreed upon at last week’s European Union summit. “The fact that we gave it back as quick as we did in two days is very concerning,” said Ari Wald, an analyst at Brown Brothers Harriman. “It looks very much as though it was a lot of short-covering, a lot of bears found themselves on the wrong side of the trade,” he said of the October rally. Analysts said if Greek voters reject the unpopular bailout in a vote pro-
posed by Greek Premier George Papandreou, it would likely result in a “hard default” by Greece, causing bigger losses for banks and raising the threat of systemic risk. The news slammed European stocks, particularly the region's banks, which slumped six per cent. US banks were also hit hard. Morgan Stanley, which investors worry has heavy exposure to Europe, fell eight per cent. The Dow Jones industrial average fell 297.05 points, or 2.48 per cent, at 11,657.96. The Standard & Poor’s 500 Index lost 35.02 points, or 2.79 per cent, at 1,218.28. The Nasdaq Composite Index dropped 77.45 points, or 2.89 per cent, at 2,606.96. The selloff came on sharp spike in volume with 10.3bn shares traded on the NYSE, the Amex, and the Nasdaq, 22 per cent above its 20-day moving average, while the CBOE volatility index jumped 16 per cent to 34.77, its highest since around mid-October. Nearly six stocks fell on the NYSE for every one that rose. Adding to the gloom, factory activity in Asia’s big export economies slowed to the weakest rate in nearly three years in October, while UK manufacturing suffered a sharp decline, reigniting fears of a global slowdown. The S&P 500 traded below its 14day moving average for the first time since 7 October, pointing to a possible shift in short-term momentum.
London 2012 OLYMPIC REPORT
29
The Olympic Park uncovered: The secrets that lie hidden beneath its green surface Atkins has used engineering expertise to transform a wasteland into a destination, says Marc Sidwell project Atkins brought people from many disciplines together, helping to create new ways of working for the next generation of construction professionals, integrating landscape design with infrastructure planning and environmental concerns.
COUNTDOWN TO THE LONDON OLYMPIC GAMES 2012
HEROIC SCALE
V
ISITORS to Stratford’s Olympic Park next year will be too busy attending magnificent sporting spectacles to give much thought to the work that was required to turn an East London industrial wasteland into a venue fit to receive the whole world’s attention. But Atkins, the engineering partner for the London 2012 Olympic and Paralympic Games, has been working on the project almost since the deal was signed in 2005. Mike McNicholas, Atkins 2012 Project Director, says that the immense effort to reclaim a contaminated site in Stratford stretching over 2 and half square kilometres is “the biggest show in my career” and is understandably proud of the results. The work Atkins has completed has been responsible for “creating the largest park since Victorian times”. It wasn’t always that way. Atkins has overseen the demolition of over 200 buildings and undertaken over 1.3m square metres of site clearance to make the park. What once
was an area of breaking yards, rundown industrial sheds and highly contaminated ground is now unrecognisable.
GREEN PLAYGROUND Old photographs are the only sign now of the decaying cars and towers of old tyres, the buildings with every window smashed, the forlorn railway car streaked with graffiti left in a jumble of weeds. Now the site has been returned to Londoners as a new green playground, and one not just for the spectacle of next year but for the long-term future. Organisers boast that 75 pence in every pound is being spent on lega-
1. THE SITE 102ha brownfield site criss-crossed with neglected waterways and bound by railway lines. Occupied by industrial activity prior to aquisition
2. CONTAMINATION LEYTON
A12
3. ANALYSIS Onsite borehole investigation
0.5miles
LIFTING LIZARDS While attention naturally focuses on the area around the Olympic stadiums, part of the project has been to develop the northern end of the park as an eco-realm with wildflower meadows and woodland. As well as all the heavy lifting, ecologists and archaeologists have been going over the ground by hand, the ecologists literally lifting lizards into their new territory. As well as lizards, some 4,000 newts and 100 toads call this biodiverse habitat home. Subtle details of the new ecosystem such as creating a living river edge not reinforced with concrete and metal are evidence that on this
4. REMEDIATION
5. ECOLOGY
Insitu remediation
6. COIR MATTING Mesh
7. PLANT TYPES
Preplanted grasses
Yellow iris
River Lea
N
A12
Contaminated Brownfield site Planned green areas
102ha
Coir mat
The Archeae bug, used for bio remediation
Contamination from over 200 years of
Teams were sent in as each of the
factory, landfill site and bus depot. All giving rise to an accumulation of diverse contaminants which had penetrated both soil and groundwater
adding to historic information already known about the site. Eventually 3000 borehole based investigations had been conducted
neglect. Previous business uses businesses left. They carried out full STRATFORD industrial including; waste tip, chemical works, glue investigation of the ground below
Position of stadium
extent of site
cy, and in Atkins’s work on the foundations of the Olympic Park that is especially true. It is visible in even the smallest details, such as helping to create footbridges that can be temporary “people motorways” during the bustle of next summer but then revert to thinner footways for the future so that people can meander over at their leisure – and stop to enjoy the view. It’s true too in many important engineering works that lie out of sight. Atkins has designed and overseen the installation of a new culvert that intercepts the overland flood route, putting almost 4,000 fewer houses at risk of flooding.
River Lea
200yrs 3000 industrial neglect
bore-hole based investigations
Soil hospital for worst contamination
The remediation strategy was to keep as much material onsite as possible. With both soil washing and bio remediation techniques used. 95% of demolition materials were reclaimed and reused with an overall cut and fill balance achieved across the site
80%
of soil retained and reused
Earth
Purple losestrife
Emergent grasses
Despite having more than 200 buildings this brownfield site also contained many wildlife havens. There were many interesting habitat sites for flora and fauna containing many invertebrates. Where ever possible these species were collected and relocated
After exhaustive testing coir pallet planting was found to be the most successful way of delivering native wetland plants back to this challenging River Lea and Thames estuary area. Seedlings are delivered to site ready planted in coir mats
45ha
380,000 15,000m2
of created habitat
Individual plants
graphic: www.paulweston.info
267 DAYS TO GO
But above all it is the scale that astonishes. Working within a living corner of the city and to very tight deadlines, Atkins had to construct temporary roads and utilities just to support the more than 11,000 construction workers involved at the peak of construction. Yet it also managed to hold itself to strict standards on reuse of the material on the site. Of the 500,000 tons of demolition material, 97 per cent has been reused. And thanks to an elaborate system of soil washing and decontamination, 80 per cent of the soil in the area has been replaced – now fresh and ready for the next thirty years. To those who do notice the Olympic Park’s skilfully-constructed foundations, perhaps it will help spark new interest in the industry – which is, after all, one of the UK’s historic exports. It’s certainly a wonderful showcase for the global audience that the 2012 Games is bringing to London. Mike McNicholas says: “I’m immensely proud of the work that Atkins has done and the role that thoughtful engineering has played in delivering on the ambition of London 2012, and everyone who has worked on the project will also be able to take the lessons they’ve learned and apply them elsewhere, creating an even greater legacy.”
Trails identified which species coped best with the sites tough conditions. These consisted mainly of emergent grasses, yellow irises and purple loosestrife. These should flower during the games
of planting
Source: Atkins, first appeared in NCE. Paul Weston
30
The Forum
CITYA.M. 2 NOVEMBER 2011
cityam.com/forum
It’s not just the Eurozone: A trade crisis is growing. The G20 must show leadership T
HE crisis spawned in 2007 has in many ways come to resemble Hydra – the mythical many-headed serpent of Ancient Greece, which grew two new heads every time one was cut off – already last Wednesday’s Brussels Summit shows no sign of marking a true turning point for the Eurozone. And while the euro-crisis commands attention, lurking just behind it is a growing – and almost unseen – trade crisis. Protectionism – the murky art of closing markets to foreign goods or services – is raising its head in some familiar places. In France, the surprise result in the Socialist primaries was that a candidate who advocates protectionism knocked former presidential candidate Segolene Royal into fourth place. In Washington, a bill currently sits before Congress which proposes to introduce punitive charges on Chinese imports unless Beijing re-values the renminbi. In Brazil, after months of complaining that currency movements were working to Brazil’s disadvantage, the new Brazilian government flexed its muscles by introducing preferential terms for local manufacturers competing for government contracts. Business is already feeling the very real effects of these shenanigans. Those trying to get into foreign markets are facing new obstacles to trade – not just higher tariffs, but opaque regulations, discriminatory procurement practices, hidden export subsidies, and the biased tax treatment of foreign investments. The reasons for this creeping protectionism are understandable: we have been passing through a time of almost unprecedented economic uncertainty, coupled with closelyfought electoral cycles in some key countries. For international business, it’s a dangerous concoction. Its all-too-tempting for a politician on the campaign trail to add another glug of protectionism, maybe with a dash of nationalist rhetoric. The problem is that what works on the campaign trail has disastrous effects
STEPHEN PATTISON
in practice. And if anyone needs reminding of the risks: it was precisely the rise of protectionism which tipped the financial crisis of the 1930s into a global depression. What’s particularly worrying here is that key global institutions are not gripping this risk. The World Trade Organisation (WTO) languishes, picking over the entrails of the nearly dead Doha round, and wondering what on earth governments will do when they turn up in Geneva for the WTO’s big jamboree in December. The G20 meeting in Cannes later this week risks being stuck with last year’s agenda when real life has moved a long way on. Add some buck-passing between the two and you have a good recipe for further global paralysis on trade. So of course, it is tempting, as Anthony Browne did in last week’s City A.M., to give up on
If anyone needs reminding, in the 1930s protectionism turned crisis into depression. the multilateral approach to trade liberalisation and join the chorus of voices arguing for more bilateral free trade negotiations. But bilaterals are easier to talk about than to deliver. They turn out quite often to be no easier to negotiate than multilateral agreements. It is not unusual for a bilateral deal to take close to ten years to complete – and these are mostly the easy ones. Worse, looking ahead, if you give up on the goal of a truly global trade deal there is the fundamental risk that the world will break down into regional trading blocs which have no real success talking to each other. Fine, if all your business is with the EU. But if you really want to go global you need something more powerful to open the doors. Doha may be dead – or at best comatose for the foreseeable future. But that doesn’t mean we
should give up. We need fresh thinking about how to use the multilateral machinery to counter immediate protectionist threats and to maximise future global growth. The answer should start at this week’s G20 Summit, with three simple steps. One, policy makers need to grasp that the dynamics of international trade have undergone a significant transformation over the past decade. The focus on collecting import-export statistics doesn’t really do justice to the complexities. For all the political huffing and puffing, the US and China might be in a symbiotic relationship which quite suits them. Two, the World Trade Organisation urgently needs to be given a new role to monitor countries’ trade policies to keep protectionist excesses in check. Three, the major global powers should recommit to new trade talks – starting with coalitions of the willing – on issues of fundamental importance to business. Prime candidates could include agreements on investment protection, e-commerce and services. The process of global trade liberalisation is impossible without clear leadership. This role has usually fallen to America, but nothing is likely to come out of Washington until after the presidential elections next year. But someone needs to step up to the plate right now. Maybe the G20 this week and the WTO Ministerial later in the year will show us just who. Stephen Pattison is the director of the International Chamber of Commerce UK.
Agree? Disagree? Got a sharp comment? The Forum wants you to join the debate. COMMENT NOW ON Twitter: @cityamforum; on the web: cityam.com/forum; or by email: [email protected]. Top responses will be reprinted in The Forum.
CITYA.M. 2 NOVEMBER 2011
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RAPID RESPONSES Simply complex In response to Gemma Godfrey [The EU’s decision process: It’s not rocket science, on Monday], I think we’ve outlived a time where the world economy worked mostly in a linear fashion that’s easy to grasp and extrapolate (e.g. if exports grow by X per cent, and unemployment falls by Y per cent, GDP will rise by Z percent). Instead, thanks to globalisation and an ever faster pace, the world economy has grown into an incredibly complex and complicat-
ed system where non-linear effects dominate. We could spend years building complex and expensive models for the world economy, mimicking weather forecasting and always lagging the fast pace of the economy itself. Or we could use physicists, economists and psychologists to scrutinise regulation and make sure that it addresses root causes, rather than symptoms, thus reducing the complexity of the entire
system. Gemma’s quote of Einstein saying “we can't solve problems by using the same kind of thinking we used to create them” is a very valuable reminder. All politicians (and other decision-makers) should have to recite this quote every morning before being allowed into their office. In that spirit, physicists, meteorologists, economists and psychologists unite and educate decision-makers. Tony Scott
Forcing others to obey is the issue, not greed BY JAMIE WHYTE
M
ANY of those occupying Wall Street and the City of London object to corporate greed. Yet greed is usually harmless. For example, I may well be greedy. I would like to earn more despite already earning what many of the protesters would consider more than enough. But my greed is harmless because I cannot force people to give me their money; I must persuade them to part with it. And I can do that only by offering them something they want in return. Given my impotence, my greed is beneficial to others. It inspires me to come up with valuable things to offer them. The anti-capitalists must really be worried about corporate power. And their language suggests they are. They claim that large multi-national companies “exploit” workers and “force” other firms out of business. They speak as if corporates use coercion to satisfy their greedy desires. Sometimes companies do wield coercive power but, ironically, never in the free markets that anti-capitalists despise. Imagine a subsistence farmer in a third world country working 70 hours a week to provide himself with about $5 worth of food and shelter a day. A clothesmaking factory opens nearby offering jobs that pay $1 per hour and a 70 hour week. He will probably take the job, since it doubles his income. If the factory had been opened by a local man using a subsidised micro-loan, those occupying the City would celebrate. If started by an American firm, however, they will claim the worker is being exploited. But where is the exploitation? If working for $1 an hour benefits the man when he is paid by a poor local, it
benefits him when he is paid by a rich American. And, in both cases, the job is taken voluntarily. Or take the greatest crime in the imagination of British anti-capitalists: a supermarket chain such as Tesco “forcing” a high-street butcher out of business. Where is the force? The supermarket’s scale allows it to offer shoppers lower prices than the butcher. They voluntarily switch suppliers and the butcher goes out of business. No one has been coerced. Sex may make the matter clearer. Tim is a local boy who all the local girls think is gorgeous and who enjoys the attendant benefits. One day a handsome American named Brad moves into town. Brad uses his superior “pulling power” to seduce the women Tim used to get. This is disappointing for Tim. But Brad has wielded no power from which people must be protected. Coercion is involved only when someone acts involuntarily. Deny this and you cannot distinguish seduction from rape, employment from slavery, or buying something from stealing it. It is, in fact, those who wish to protect the “victims” of free markets who would employ force. Tim and the local butcher can be protected from their disappointments only by preventing consumers from acting on their preference for Brad and Tesco. Anti-capitalists complain about cronyism but they do not object to it in principle. They merely dislike the most successful cronies of recent times: namely, those bankers that received bailouts. Propose that the government use its coercive powers to bestow gifts on school teachers, nurses or local shopkeepers and few occupying the City will complain. Like any greedy banker or corrupt politician, they are keen to replace voluntary exchange with state-compelled transfers when doing so benefits people they like. Jamie Whyte is a senior fellow of the Cobden Centre and author of Crimes Against Logic (McGraw Hill 2004).
31
We need to teach financial literacy in all UK schools I
T IS significant the e-petition calling for compulsory financial education in schools has this week become one of the first petitions to reach the threshold of 100,000 signatures and that the All Party Parliamentary Group (APPG) on Financial Education for Young People is the largest in parliament, with 224 cross-party MPs. We are a financially illiterate nation. The UK has the highest levels of personal debt per capita of any country in the G20 and the UK’s personal debt crisis has deepened by over 350 per cent in the last 10 years. We need to make fundamental changes to the way individuals manage their money, and we now have the popular support of both the public and parliamentarians to take this forward. Financial education is a long-term solution to the national problem of irresponsible borrowing and personal insolvency. It is time to teach people about budgeting, good and bad debt, and personal finance so that they are able to manage their money more effectively in an increasingly complex financial world. Ensuring that every child in the country gets a basic understanding of personal finance and consumer rights before leaving school would enable the next generation of consumers to make informed decisions. It will equip the workforce with skills to succeed in business and drive forward economic growth. Some schools already provide personal finance education, but provision is at best ad hoc. Schools face significant barriers to teaching personal finance education, including pressures on curriculum time, no statutory mandate, lack of teacher training, lack of teacher subject knowledge and confidence, and lack of awareness of suitable resources. It needs to be given curriculum time by government to guarantee that every child leaves school with at least a basic understanding of the financial decisions they will need to make
JUSTIN TOMLINSON as they embark on independent living, and the impact that these decisions will have on their wellbeing and future. The APPG on Financial Education for Young People has undertaken a nine-month inquiry into how financial education can be provided in the national curriculum. We have conducted an online survey of over 850 teachers, received 41 written submissions from the education sector, financial services industry, student representation bodies, and individuals, and examined 38 witnesses from the education sector across the UK, the financial services industry, and independent commentators. The inquiry’s report, to be launched on 12 December, will provide conclusions and recommendations intended to help the government and schools build a sustainable model of personal finance education that equips young people with the skills and knowledge they need to become intelligent and responsible managers of their money. We have the support for financial education, we have a framework of how it can be delivered, now is the time to debate this issue on the floor of the House and for the government to take this forward. Justin Tomlinson MP is the chair of the Financial Education for Young People APPG.
Wealth Management
32
DON’T TOE THE LINE OF CABLE COMPLACENCY
| Foreign Exchange
Japan can’t scare off
Interventions won’t BORIS SCHLOSSBERG stop the yen rising DIRECTOR OF CURRENCY RESEARCH, GFT against the dollar, OOKING at the carnage that is the Eurozone writes Philip Salter today from the comfort of a Canary Wharf office,
L
it is easy to feel superior. After all, the UK appears to be relatively immune to the chaos that’s currently occurring in European capital markets. With Greece “circling the drain” as some of my fellow analysts have so indelicately put it, and with shorts primed to skewer Italy next, euro-dollar is facing an all out assault from every angle. Meanwhile cable has remained above the fray, trading within the $1.5500$1.6000 range for the past two months. The pound has been the beneficiary of two critical trends. First, economic data over the past few months has been relatively stable, with business activity in the third quarter enjoying a rebound. In fact, the latest GDP reading released yesterday showed that the UK economy grew at 0.5 per cent, versus a 0.3 per cent forecast. Secondly, UK debt has been afforded a remarkable measure of respect in the credit market. The standard five year CDS contract costs only 91 basis points for UK – less than the much larger and arguably much more stable German economy, which was trading at 97 basis points. Contrast that with the 513 basis points that the market now charges for Italian debt and the question that you must ask is – is UK credit really five times as safe as Italian credit? I believe the answer is no. The UK economy remains laden with debt and is still very heavily reliant on the finance sector for growth. Furthermore, the latest economic data is signalling another stall in activity. Yesterday’s massive miss in the PMI Manufacturing report, which printed at 47.7 versus 50 eyed, caused a sell-off in cable, as traders were more concerned about decline in forward demand than the backward leaning GDP surprise. Therefore, this Thursday’s PMI Services report could be the tipping point for the pound. If the data prints below 50, signalling contraction in the critically important services sector, investor attitudes towards sterling could change in a heartbeat, as the rosy credit assumptions and growth prospects are challenged – threatening to send the pair to $1.50 by year end.
T
HE yen will continue to strengthen against major currencies. No matter the actions of Japan’s authorities, attempts to bring it down are destined to fail. It is not as though Japan’s leaders haven’t been trying – the economy has been mismanaged for decades. But interventions and gargantuan government debt have done nothing to dissuade the forex market from its instinct that in adversity, the yen is the place to be.
THE COST OF INTERVENTION On Monday, the Bank of Japan (BoJ) managed to dig the yen out of its record ¥75.35 against the dollar, but at an estimated cost in the region of $100bn (£64bn). This was a short-term fix and has since been trading in a tight channel just above ¥78. It won’t stay there for long. Chris Towner of HiFX thinks “the timing of the intervention was intentional.” He says “they patiently waited for the Europeans to come up with their plan and as risk-on returned to the market on the last day of October, they intervened.” Interventions have failed on its two previous attempts this year and the latest move will follow suit. “Back in August,” says FairFX’s Rishi Patel, “the ¥77 handle in dollar-yen was simply ineffectual.” The markets returned back to that level within a few days. He thinks although Monday’s “intervention was significantly
A stimulus to nowhere
more than the August intervention, so far the impact has been limited and there has been no follow through.”
A HARD RAIN The Eurozone’s leaders are forever claiming that its economies are better than the markets give them credit for. In contrast, Japan is in the rather peculiar position of trying to convince investors that they
79
125 ¥ 120 115 110 105 100 95
¥
78.50 78 77.50 77
90 85 80
76.50 76 75.50 26 Oct
have too much faith in them. In reality, both are in a significantly worse state than most are willing to admit – but for now, the Eurozone’s liquefaction takes centre stage. As Markos Solomou, risk manager at Easy-Forex explains, the seemingly never-ending Eurozone crisis and all of the ongoing uncertainty leads investors to seek safe havens. Towner thinks the Eurozone has caught Japan
ANALYSIS l A blip against a long-term trend (dollar-yen)
ANALYSIS l Monday’s dramatic intervention (dollar-yen) 79.50
Picture: GETTY
27 Oct
28 Oct
31 Oct
01 Nov
2007
2008
2009
2010
2011
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33
safe haven status between a rock and a hard place: “We have seen the Japanese yen strengthen due to risk aversion and then when risk aggression returns to the market, the US dollar weakens and by default the yen strengthens.” Deflationary Japan holds some security for forex traders. Yannick Naud of Glendevon King notes that as long as the inflation gap between Japan (year-on-year expected 2011 CPI of -0.2 per cent) and the US (3.2 per cent) remains wide, we should expect the yen to appreciate further in the medium term. Kathleen Brooks thinks the authorities will fail not only because the dollar-yen is a highly liquid trade in a $4 trillion market, but also due to the size of its economy, currency manipulation of the sort required would become a serious diplomatic matter. As Michael Derks, chief strategist at FxPro surmises: “In a world where many of the major currencies have serious doubts attached to them as a
reliable store of value and with question-marks over the safety and security of their banking systems, it is hardly surprising that the yen has so many friends.”
ON A DIME Traders had been speculating and guessing an intervention was coming says Spreadco’s Ian O’Sullivan. BoJ mutterings tipped off traders, however, he says “when it did happen, it caught most traders completely off guard.” For some this was no bad thing: “Anyone who had been buying dollar-yen in the last week of October just below ¥76, with a stop loss below ¥75.50, found themselves in a lovely position, as the stop escaped, just, before it launched over 300 pips skywards.” O’Sullivan says traders are willing now to close out and take the opposite trade – expecting the BoJ to eventually succumb to the pressure. Even though it is destined to fail in the long-term, traders need to
beware, as the BoJ is serious about interventions, which could upset trading conditions. Towner warns that Japan, in protecting its currency from strengthening, has unlimited reserves. It can print its own money to buy the dollars for the intervention. Derks advises that although “intervention always complicates trading, it is never a reason to avoid trading a particular currency. The answer”, he says, “lies in attempting to determine at what level the central bank will intervene, and neutralise positions beforehand.” Derks thinks Australian dollar-yen is also an interesting pair to keep an eye on: “If we now revert to risk aversion like we did through August and September, it is hard to see how this pair would not fall further.” Japan’s fiscal and monetary authorities are in a game of snakes and ladders, in which the snakes are out to get them and the ladders lead to nowhere.
THE TIPSTER EURO FALL LOOKING FOR TENDER LANDING
A
FTER a month long rally against the dollar, the euro wiped out almost half the gains falling 440 pips in one day, with the news of a Greek referendum and the European Central Bank’s consideration in cutting rates looming large. The euro-dollar pair is in freefall and will take a strong bit of positive news for the pair to bounce back any time soon. Capital Spreads quotes $1.3685-$1.3586. The risk aversion so far this week has seen a mass sell off in the riskier currencies. The Aussie dollar has retraced from almost touching $1.0800 back to $1.0300. Since breaching the 23.6 per cent Fibonacci retracement level, the pair could go lower to the 38.2 per cent level, which is at $1.0235. Capital Spreads quotes a price of $1.0300$1.0301 for Australian dollar-dollar. The market has been testing the Bank of Japan’s resolve since their dramatic intervention in the small hours of Monday morning. $78 is the battle ground for now, but there seems to be strong resistance once it heads towards $79. Look to sell on approaches to $79
and look to buy back again around $78, or below, should the market pressure buckle the Bank of Japan. Spread Co offers a spread on dollar-yen of ¥78.179-¥78.199. The euro plummeted yesterday on news that Greece was to hold a referendum on the latest euro debt bailout proposal. Euro-dollar dropped by around 500 points. Euro-sterling wasn’t quite as dramatic, falling around 200 points, before recovering to rise back above £0.8600. Spread betters were buying with limit orders set at £0.8700 and stops at £0.8550. Spreadex quotes £0.8606-£0.8609. It was a ghoulish Halloween for cable as it whipsawed between $1.6130 to $1.5965, back to $1.6160 and back down to $1.6065, all in the space of 24 hours. Despite stronger than expected UK GDP figures on Tuesday, cable plunged to test the $1.590 support area, a break which opens a run at $1.570. Spread Co offer a spread on sterling-dollar of $1.5908$1.5910. Philip Salter
FOREX ANALYST PICKS FOREX STRATEGIST
FOREX STRATEGIST
FOREX STRATEGIST
JOHN KICKLIGHTER
JOEL KRUGER
ILYA SPIVAK
My pick: Long dollar-Canadian dollar, short sterling-dollar Expertise: Fundamental analysis with risk management Average time frame of trades: 1 day to 1 week
My pick: Sell Australian dollar-dollar at $1.0310 Expertise: Technical analysis Average time frame of trades: 1 day to 1 week
My pick: Stay short euro-dollar Expertise: Global macro Average time frame of trades: 1 week to 6 months
We witnessed an incredible swing in risk trends preventing both my sterling-yen and Aussie-dollar setups from triggering. The dollar-Canadian dollar managed to hit the Ca$0.9970 short, but it was best to bail with a small take. Volatility and event risk is a big threat this week. I’m looking for a short-term long dollar-Canadian dollar above Ca$1.0025 if risk aversion sets in. There are a lot of options for that scenario, including sterling-dollar reversing trend below $1.5950. It’s high risk though.
We continue to classify the latest market rally as corrective, with the move putting in a lower top below the September high. The market is now rolling back over to keep the downtrend intact and open a bearish resumption. While selling rallies is probably too aggressive, we recommend being slightly more cautious and looking for confirmation on a break back below $1.0315. Look for the break below $1.0315 to then expose a fresh drop back towards $0.9385. Only a sustained break back above $1.0750 would negate.
I sold euro-dollar at $1.4328 on 29 July. Prices soared last week in the wake of the EU debt crisis summit, taking out my revised stop-loss at $1.3975 for a small profit. With the euphoria fading and the many gaps in the now third “comprehensive” crisis containment plan emerging, euro is on the defensive once again. I will look for a compelling new entry point to re-establish the position in the days ahead. Ideally on a bounce from support at $1.3707 back toward the $1.39 figure.
34
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Lifestyle
35
THE CLOUD EXPLAINED IN GADGETS TOMORROW
Life beyond the web for a new age of daters A fresh wave of matchmakers is reinventing the way we search for love, says Zoe Strimpel
I
T’s been a long day and you’re tired. But when you get home you have another job to do: search through thousands of faces for your potential life partner and reply to a half-dozen or so relevant messages from fellow cyber loveseekers. Internet dating is no longer considered weird or sad – roughly 5.2m Brits set up dates this way – but it has lost some of its sheen. Despite the success stories (everyone has a friend that found The One online), there is a growing sense of exhaustion among digital daters. The term “online dating fatigue” has become de rigueur and an increasing number of relationship experts are discussing the “exhaustion” that is leading people to bin their profiles. A recent Wall Street Journal article was headlined: “Scary New Dating Site: The Real World”. Chicago-based psychologist and author of Relationships for Dummies Kate Wachs noted therein that people were finding internet dating “exhausting” and that they “burn out really fast”. Certainly, people have been at it for a while now. It’s 15 years since online dating hit the mainstream – Match.com, the first of the biggies, launched in 1994 in the US. The market has matured, allowing time for its exciting novelty, as well as its stigma, to fade. We all have friends who we encourage to go online without a single twinge – heck, many of us have given it a whirl ourselves. But – as well as concerns over how tiring it is – there is a growing cynicism about just how effective internet matchmaking is. In the last year, there has been a surge in criticism of the figures pumped out by websites, which are thought to be hugely inflated. Web dating services claiming so-and-so numbers of marriages per day do not invite peer review of their data, unlike in the scientific community. Nor are the figures balanced against the far greater numbers of internet daters who quit before finding anyone. And, as people are beginning to admit, despite sleek and cheerful TV ads and posters full of images of happy domestic endings, successful outcomes are the exception, not the rule.
Internet dating is far from over, of course – it is still one of the most lucrative businesses online. But a new wave of entrepreneurs is stepping into the disillusioned abyss enveloping web daters, offering something better and, quite frankly, nicer. Whereas traditional internet dating is all about choice, algorithms, photo perusal and messaging, the new format is far more personal and sells selectivity, exclusivity and less time behind a screen. Suze Cook, founder of The Picnic Project, a new “luxury matchmaking service”, got the idea for her company from her own experience of internet dating while working and travelling a lot as a high-flyer at Microsoft. “I did a bit of online dating and had a lot of fun, but there was a real disconnect between day life and evening life – I’d be busy all day and then going home and sitting in my bedroom chatting to randoms online. Also, it was very hit and miss – there were some really bad dates. The fun began to really wear off. Then I just thought Christ, if there’s a way of paying someone to help make the process more selective, it would be great.” Cook tried a range of upmarket matchmaking agencies but felt they were sorely out of date: “The emphasis on you as a woman was all about the biological clock, things you should be doing to snare a husband and so on. Plus, the people I was meeting were quoting 80s books and had poodle hairstyles.” So Cook struck out on her own, following the application-based, personal matchmaker model used by agencies such as the high-end Berkley International and Drawing Down the Moon. “We have to consider you interesting and presentable,” she says. “You could be stunning but have no personality – we wouldn’t select you. If you weren’t well groomed or had no interests, you wouldn’t make it. All our clients are attractive.” Fundamentally, Cook’s service challenges box-ticking. “We try to take people away from their lists – the starting point for any internet profile. You can’t do wildcards online, but sometimes those are the
best. In essence, we’re acting like friends of friends. Personal recommendation is the way things are going if you can afford it and you’re busy. After all, people have personal yoga teachers, nutritionists and now dating managers.” A consultant who prefers to go unnamed is yet another dating entrepreneur trading on exclusivity, whose business, the Shared Tables Society, launched in September. It’s an invite-only service that hosts dinner parties of four single women and four single men, with no browsing of members at all: the website’s only purpose is to enable you to invite new members and book dinners. The founder set up shop after years of cajoling friends to find love online – and hearing them moan about how time-consuming, inefficient and patchy it was. “I absolutely think internet dating is not working for some people,” the London Business School graduate says. “For a lot of people it does work, of course, if they’re prepared to go out there and say ‘what I really want to find is a soulmate’ and they answer those 180 questions or whatever is required. Personally, though, I find it all a bit too sticky; a person changes all the time.” Like The Picnic Project, Shared Tables challenges not just the process but the fundamental structure of internet dating. “I don’t think it provides a good representation of people,” the founder says. “People aren’t very good at knowing what they want and they may not describe themselves in the best way. For example, many people would say their partner is nothing like the person they’d have described before they met.”
The pressurised, potentially awkward meetings arranged through traditional sites are not everyone’s cup of tea. Below: the new breed of services are more hip.
BEYOND THE INTERNET | MATCHMAKING THROUGH PEOPLE, NOT ALGORITHMS l Shared Tables Society, sharedtables.com Arranges dinners where four single men and four single women meet. Members are invited by existing members: each time you sign up to a dinner or “table” you have to recommend four other singles. Attracts a high-calibre, international crowd of late-20s, early 30s professionals. Website is truly “cool”. Upsides: Almost always good fun, and takes all pressure off the one-to-one format. Chance to meet several people at once. Downsides: In the shared table format, it can be hard to form a connection with one person, and the night can end up feeling more friend-y than date-y.
l Picnic Project, thepicnicproject.com An interview process determines eligibility – that, and the ability to pay a sizeable fee for membership. Lots of time-poor, cash-rich highflyers apply: women tend to be aged 30-40, men go up to 48. People are matchmade and sent on dates according to the co-founder Suze Cook’s intuition. Bills itself as a members club. Upsides: You’ll meet people you might never have chosen online and they’ll all be successful. Cook’s strategy for matchmaking seems solid and fresh. Downsides: Very expensive and there are likely to be some tricky customers, particularly the men, who will be rich and therefore potentially impossible to please.
l Social Concierge, socialconcierge.co.uk A more party-focused matchmaking service for twenty-somethings who feel they’ve run out of dating options and don’t fancy going online. Would-be daters are “hand-picked” by the eccentric, larger than life founder, Nana Wereko Brobby and then hit the town together, probably in Shoreditch or Soho. Upsides: There is a selective element, and it’s all imbued with a sense of “fun” – nothing dowdy or stiff here. Downsides: The “hand-picked” aspect is a bit of an unknown quantity, and if you’re looking for a super hard-working professional to date, this may not be quite right.
And for the busy professional, internet dating can be a false friend. It’s a great way to access a large pool of single individuals but you may not like them and then you’ve wasted time. The solution? “You need to meet more people at once,” says the Shared Tables founder. Jon Harris, a technology consultant and dating entrepreneur, agrees. He is in the process of creating a service that combines a hand-picked, CV-based application process with an online browsing function and a real-life speed-dating element. It’s the most efficient format possible: if you don’t find a date, you’ll probably find a good person to network with. “My idea is that you get to meet six or eight great people in the amount of time you would normally take to meet one,” says Harris. “Either there's chemistry or a professional contact.” As for that sense of alienation that arises from endless dates with people who seem one way but turn out quite another, Harris says: “The matchmaking trend now is kinship – people are finally thinking about how they meet and form relationships with people in real life. I personally like to develop relationships through friends of friends. It’s far safer from a timesaving point of view.” Internet dating works for many people. But for the vast amount of busy, professional singletons whom it only confuses and tires, the dawn of a new matchmaking era has arrived not a moment too soon. Zoe Strimpel’s book, The Man Diet: One Woman’s Quest to End Bad Romance, is out as e-book on 30 Nov, paperback January 2012 (Avon).
BY ZOE STRIMPEL l Drawing Down the Moon, drawingdownthemoon.co.uk The name refers to a contemporary Wiccan practice, but the service is anything but witchy, charging a substantial fee for membership following interview. Billed as “the introduction agency for thinking people”, members are said to be “well-educated and successful”. Upsides: You probably won’t end up with a hippie and may well meet people who are both interesting and successful. Downsides: Founded in 1984, it lacks the contemporary image, and the founder and MD – pictured in a video still on the homepage – looks a bit eccentric.
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Lifestyle | Motoring
WORDS BY RYAN BORROFF
CITYA.M. 2 NOVEMBER 2011
The Q3: Audi’s likeable compact SUV The petrol model lacks verve, but the diesel edition is predictably impressive
I
NTERNALLY, Audi calls it “the product firework”. With 12 new models introduced in the last five years and seven more planned for introduction by 2015, it seems the Four Rings can do no wrong. The Ingolstadt manufacturer seems to have an almost alchemic ability to find success in whatever niche it enters. But it is a bit late to the party with its latest Q3 compact SUV. Premium rivals have beaten Audi to the segment including BMW with its X1 and Range Rover with its excellent Evoque. Good then that the Q3 is a very worthy rival. Prettier by a country mile than the Bimmer, if not as sassy as the Evoque, Audi’s take on compact soft roader posh may be predictable in terms of its styling but is genuinely surprising in terms of its character. Ingolstadt may not be known for creating the most emotionally engaging of cars but I find I warm to the Q3 quickly. Maybe that’s because it is aimed at people like me – it may be an SUV, but the primary audience for the Q3 is clearly City urbanites. At just over four metres long, the Q3 is essentially the same size as the Audi A3 Sportback. The most surprising thing is how spacious it feels inside when outside it neither looks nor seems that big. I found I could jump in the back – behind the driver’s seat when it was set up for me – and still had plenty of space between my knees and the seat in front. At 5’9” I may only be averagely tall, but the Q3 passed this quick, if crude, realworld measure of rear passenger legroom. I was driving Audi’s Q3 on roads of questionable quality. Avoiding potholes, pheasants and sheep was the order of the day, a not inconsequential task when you are lost in dense fog somewhere on top of the North Yorkshire Moors near Witby. But the crappy roads showed just how refined the Q3 is. I drove the 208bhp 2.0 TFSI Quattro S tronic petrol model and the 170bhp 2.0 TDI Quattro S tronic diesel. I found both cars to be quiet and refined at speed and the ride – despite such tricky tarmac – very comfortable, in all but the sportiest “dynamic” setting. Though quicker and more powerful, the petrol version wasn’t a patch on the diesel. Its 4-cylinder engine felt distant and detached to me. In the less powerful diesel car, I found I could carry more speed in and out of the corners thanks to better gearing. In the 2.0 TFSI the car felt
Audi Q3: not quite as exciting as it could be.
like it was constantly too high or too low revving, as if the engine was a little flustered. This resulted in too frequent gear changes and a driving experience that lacked the more satisfying fluidity of the torquier diesel model which was a lot more fun to drive. Inside, the car has the same premium quality that we have come to expect of Audi. The two models I drove certainly felt luxurious and were packed with the kind of in-car tech that the Audi brand has become synonymous with. One word of warning though, the options list was long on both cars with list prices inflated to a wallet-shrinking £40k for each. Despite this, the Q3 comes with some generous kit as standard including air conditioning, alloy wheels, an energy recuperation system and a start-stop system. Which means you might find you
need to spend little more than the basic price. Which makes the car a bit of a steal.
THE FACTS: AUDI Q3 2.0 TDI QUATTRO S TRONIC PRICE: 0-62MPH: TOP SPEED: CO2 G/KM: MPG COMBINED:
£27,650 8.2secs 132mph 156g/km 47.9mpg
THE VERDICT: DESIGN PERFORMANCE PRACTICALITY VALUE FOR MONEY
CAR TALK
hhhhi hhhhi hhhhi hhhhi
BY RYAN BORROFF
FORD’S YOUNG-DRIVER PROTECTION TECHNOLOGY
MAZDA’S VERY CLEVER CONCEPT
A SPOT OF VW EMOTION
Ford has introduced technology which helps parents to prevent young drivers from receiving calls while driving. The feature, which is part of Ford’s MyKey technology, is called “Do Not Disturb” and blocks incoming phone calls or text messages from a Bluetoothpaired mobile phone. Calls are diverted to voicemail and text messages saved for later viewing instead.
This is the Takeri concept car, a preview of Mazda’s new 6 which will be shown at the 42nd Tokyo Motor Show at the end of November. The new mid-sized saloon will feature a regenerative braking system which converts kinetic energy to electricity during deceleration, then uses it to power the car’s electrical equipment saving fuel. Clever stuff.
Volkswagen's prototype electric Golf blue-e-motion is competing in the second RAC Future Car Challenge on Saturday. The challenge measures the energy used by participant vehicles between Brighton and London’s Pall Mall. The 113bhp EV has a 0-62mph time of 11.8 seconds and looks like a regular Golf, minus exhaust pipes. Production models are planned for 2013.
Lifestyle | TV& Games
SATELLITE & CABLE
TERRESTRIAL
CITYA.M. 2 NOVEMBER 2011
BBC1
BBC2
ITV1
CHANNEL4
CHANNEL5
6pm BBC News 6.30pm BBC London News 7pm The One Show 7.30pm CHOICE Waterloo Road: BBC News: Regional News 8.30pm The Impressions Show with Culshaw and Stephenson 9pm Frozen Planet 10pm BBC News 10.25pm Regional News 10.35pm The National Lottery Wednesday Night Draws 10.45pm Ask Rhod Gilbert 11.20pm Film 2011 with Claudia Winkleman: National Lottery Update 12am FILM Dead Ringers. 1988. 1.50am Weatherview 1.55am Sign Zone: See Hear 2.25am Planet Dinosaur 2.55am Made In Britain 3.55am Sign Zone: Reel History of Britain 4.25am-6am BBC News
6pm Eggheads 6.30pm Strictly Come Dancing – It Takes Two 7pm Celebrity Antiques Road Trip: Phil Tufnell and Chris Hollins compete for the best deals. 8pm Great British Food Revival 9pm Secret Pakistan 10pm Rab C Nesbitt 10.30pm Newsnight: Weather 11.20pm James May’s Man Lab: James May tames his fears in a ghost hunt. 12.20am Damages
6pm London Tonight 6.30pm ITV News 7pm Emmerdale 7.30pm CHOICE Live UEFA Champions League 10pm ITV News at Ten 10.30pm London News 10.35pm UEFA Champions League: Extra Time 11.35pm Ladette to Lady: Australia 12.30am The Zone; ITV News Headlines
6pm The Simpsons 6.30pm Hollyoaks 7pm Channel 4 News 7.55pm 4thought.tv 8pm Kirstie’s Handmade Britain
6pm Home and Away 6.25pm OK! TV 7pm 5 News at 7 7.30pm Highland Emergency: 5 News Update 8pm Dangerous Drivers’ School: 5 News at 9 9pm Paul Merton’s Adventures 10pm Big Brother: Daily round-up of highlights. 11pm Banged Up Abroad 12am Poker: The Big Game 12.55am SuperCasino
9.30pm International Judo World Circuit 10pm Cage Fighter 10.30pm Trans World Sport 11.30pm Cage Fighter 12am Inside the PGA Tour 12.30am European Tour Weekly 1am Watersports World 2am-2.30am Total Rugby
1.45am ESPN Kicks: Extra 2am Live Major League Soccer 4.30am-6am Premiership Rugby Union
1am BBC News 4am-6am BBC Learning Zone
SKY SPORTS 1
7pm Sky Sports News at Seven 7.30pm Soccer Special 10.30pm You’re on Sky Sports! 11.30pm Football’s Greatest 12am FIFA Futbol Mundial 12.30am UEFA Champions League Goals 1.30am You’re on Sky Sports! 2.30am A League Football 3am-6am Live World Golf Championship
BRITISH EUROSPORT
6.45pm Equestrian 8.45pm Riders Club 8.50pm PGA Tour Golf 9.50pm European Tour Golf 10.20pm Golf Club 10.25pm Sailing 10.55pm Yacht Club 11.05pm Tennis: Mats Point 11.35pm-12.35am Ten Pin Bowling
SKY SPORTS 2
6pm UEFA Champions League Pre-Game Show 7.30pm Live UEFA Champions League 10pm UEFA Champions League Goals 11pm NFL: Total Access 12am International Judo World Circuit 1am F3 Euroseries 2am Trans World Sport 3am International Judo World Circuit 4am-5am UEFA Champions League Goals
ESPN
6.45pm NHRA Drag Racing 9.45pm ESPN Kicks: Extra 10pm Premier League World 10.30pm ESPN Press Pass 11pm World Series of Poker 12am ESPN Game of the Week 12.30am Goal Show 1am Premier League World 1.30am ESPN Kicks: Serie A
SKY SPORTS 3
7pm Inside the PGA Tour 7.30pm European Tour Weekly 8pm F3 Euroseries 9pm Angling
9pm Grand Designs 10pm Top Boy 11.05pm CHOICE Steve Jobs: iChanged the World 12.10am Random Acts 12.15am Music on 4: On Track 12.50am Music on 4: 4Play: Summer Camp 1.05am Music on 4: The Album Chart Show: Spotlight 1.15am FILM O’Horten: 2009. 2.45am Hallo Panda 3.20am FILM Animal Farm. 1955. 4.30am Willie’s Chocolate Revolution 5.25am-6.10am Countdown
2.35am FILM The Nun’s Story: Drama, starring Audrey Hepburn. 1959. 5.10am-5.30am ITV Nightscreen
E4
7pm Hollyoaks 7.30pm How I Met Your Mother 8pm FILM Fantastic Four 2005. 10pm Rude Tube 11pm Misfits 12.10am The Big Bang Theory 1.05am Scrubs 2am How I Met Your Mother 2.20am Rude Tube 3.15am Rules of Engagement 3.35am Desperate Housewives 4.20am-6am Switched
SKY LIVING
7pm Criminal Minds 8pm The Secret Circle 9pm Pushy & Proud: Junk Food Mums 10pm Supernatural 11pm Bones 12am Criminal Minds 1am CSI: Crime Scene Investigation 2.40am Maury 3.30am Bones 4.20am Nothing to Declare UK 5.10am-6am Jerry Springer
HISTORY
7pm Heir Hunters 8pm Ax Men 9pm Swamp People 10pm Mounted in Alaska 11pm Seven Deadly Sins 12am Swamp People 1am Ax Men 2am Seven Deadly Sins 3am Heir Hunters 4am Pawn Stars 5am-6am Ancient Discoveries
BBC THREE
7pm The World’s Strictest Parents 8pm World’s Strictest Parents Top 10 Tantrums 9pm Hot Like Us 10pm FILM Lesbian Vampire Killers 2009. 11.20pm Family Guy 12.05am American Dad! 12.50am Hot Like Us 1.50am The World’s Strictest Parents 2.50am Him & Her 3.20am Lee Nelson’s Well Good Show 4.20am-5.20am The Real Hustle: New Recruits
COFFEE BREAK
SUDOKU
KAKURO
Place the numbers from 1 to 9 in each empty cell so that each row, each column and each 3x3 block contains all the numbers from 1 to 9 to solve this tricky Sudoku puzzle.
Fill the grid so that each block adds up to the total in the box above or to the left of it. You can only use the digits 1-9 and you must not use the same digit twice in a block. The same digit may occur more than once in a row or column, but it must be in a separate block.
DISCOVERY
7pm Mythbusters 8pm Factory Line 9pm Alone in the Wild 10pm End of the World Cult 11pm Wheeler Dealers 12am Bear Grylls: Born Survivor 1am Alone in the
QUICK CROSSWORD C H A M P A O A S C O T A R O T S C R I P N B E A D T S E F R I L L O A I T A N G Y
U M B R A R A G G O R S E S E R N D I E T T A S S T I T C H H I R E U C A R O M T U D E B T S
14
27
12 23 31
15 21 7 23
30 33
7
21 14
14 29
8 10
6
4
5
KAKURO 9 3 5 8 5 4 2 3 8 6 9 4 1 2 1 6 2 8 9 5 7 1 6 1 3 9 7
3 9 2 6 1 4 5 4 9 3 8 6 4 4 2 8 1
9 7
6 2 6 9 6 7 8 1 4 7 2 8 2 3 5 9 7 9 8 1 3 7 1 6
5 1
SUDOKU
9 2 1 6 5 9
WORDWHEEL The nine-letter word was SELECTION
8pm The Middle 8.30pm Modern Family 9pm Trollied 10pm Fringe 11pm Chris Ryan’s Strike Back 1am Brit Cops 1.50am UK Border Force 2.40am Mental 4.20am Paul McKenna: I Can Change Your Life 5.10am-6am Liza and Huey’s Pet Nation
STEVE JOBS: ICHANGED THE WORLD CHANNEL4, 11.05PM
The life story of the late co-founder of Apple, including a never-beforebroadcast interview where the entrepreneur explains his philosophy of life.
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23
18
19 13
10
7
16 13
17
35
20
A O K
B
R
W D
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Using only the letters in the Wordwheel, you have ten minutes to find as many words as possible, none of which may be plurals, foreign words or proper nouns. Each word must be of three letters or more, all must contain the central letter and letters can only be used once in every word. There is at least one nine-letter word in the wheel.
7pm Birth Days 8pm Twins by Surprise 9pm Untold Stories of the ER 10pm A&E 11pm Hospital Sydney 12am Untold Stories of the ER 1am A&E 2am Hospital Sydney 3am Twins by Surprise 4am A Baby Story 5am-6am Bringing Home Baby
ITV1, 7.30PM Villarreal v Manchester City (Kick-off 7.45pm). Coverage of the matchday four Group A clash at the Estadio El Madrigal.
16 20
WORDWHEEL
LAST ISSUE’S SOLUTIONS
16
34
26
BBC1, 7.30PM Michael discovers his tormentor’s identity, and Emily’s rebellious streak threatens to land Scout back in foster care.
LIVE UEFA CHAMPIONS LEAGUE
DISCOVERY HOME & HEALTH
21
39
WATERLOO ROAD
QUICK CROSSWORD
17
Wild 2am End of the World Cult 3am Deadliest Catch 3.50am Clash of the Dinosaurs 4.40am Top 10 Mysteries and Conspiracies 5.30am-6am Destroyed in Seconds
TV PICK
SKY1
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk
30
4am The Family Recipe 4.10am The Gadget Show 5am County Secrets 5.10am House Doctor 5.35am-6am House Doctor
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N E
ACROSS
DOWN
1 Leapt (6) 6 Person who handles equipment for travelling entertainers (6) 7 Void (4) 8 Dash a liquid upon or against (7) 12 Elf or fairy (5) 13 (They) exist (3) 14 Manipulate in a fraudulent manner (3) 15 Hostel (3) 17 Mass of eggs deposited by frogs (5) 18 Drop a hint (7) 21 Presidential assistant (4) 22 Psychiatric hospital (6) 23 One who transmits a message (6)
1 Sketchy summary of the main points of a theory (8) 2 Taking it easy (8) 3 Wire hairpin (4) 4 Decoy, lure (4) 5 Large natural stream of water (5) 8 Twilled woollen fabric (5) 9 Acute but unspecific feeling of anxiety (5) 10 Tropical tree with yellow flowers and long brown seed pods (8) 11 Arctic ruminants (8) 16 Dentist’s assistant (5) 19 Fête (4) 20 Adds together (4)
38
Sport
CITYA.M. 2 NOVEMBER 2011
Guilty verdict must trigger change CRICKET COMMENT
ANDY LLOYD
I
T’S CERTAINLY no exaggeration to hail yesterday’s dramatic events at Southwark Crown Court as a watershed and landmark moment in cricket’s rich history.
The guilty verdicts handed down to Salman Butt and Mohammad Asif – allied to the news that Mohammad Amir had admitted wrongdoing back in September – must surely act as the ultimate deterrent to any cricketer tempted to indulge spot-fixing. It’s one thing losing your livelihood and being kicked ot of your profession, but another thing entirely to risk a custodial sentence for financial gain. Sadly, however, I suspect this is merely the tip of the iceberg and rather than celebrate justice being done, I sincerely hope it triggers a more decisive approach from the
BELGIAN STRUGGLE
International Cricket Council’s anticorruption unit to rooting out the cancer eating away at the game. I would suggest the ICC need to become more pro-active and innovative in their methods of catching the culprits, after all it’s worth remembering that the Pakistani trio have been brought to justice largely as a result of an undercover newspaper investigation. It would be wrong also to presume this is a problem that extends only to the subcontinent and I trust the authorities will not be so parochial in their ongoing attempts to make cricket a cleaner sport.
l Chelsea condone Ferdinand fan chants l Luiz misses penalty as Chelsea blow lead l Cech admits Blues must qualify hard way
▲
FOOTBALL
GENK CHELSEA
1 1
▲
FOOTBALL BY JAMES GOLDMAN
CHELSEA goalkeeper Petr Cech admitted his side will have to seal qualification for the knockout stages of the Champions League the hard way after they threw away a lead for the second time in three days. Ramires fired the visitors ahead in
the 26th minute and the Blues had the opportunity to kill off their opponents five minutes before the break, only for David Luiz to strike his penalty too close to Genk goalkeeper Laszlo Koteles. The Belgian champions, beaten 5-0 in the reverse fixture a fortnight ago, were far more competitive after the interval and equalised just past the hour mark through Jelle Vossen. Chelsea must now pick up four points from their remaining two fixtures, away at Bayer Leverkusen and at home against Valencia, to book their place in the next round, and Cech knows that will represent no
Ferguson: Rio’s lost his pace so he must find a new way ▲
FOOTBALL
MANCHESTER UNITED manager Sir Alex Ferguson has warned defender Rio Ferdinand that his days as an automatic first-choice starter are no more. United’s recent success has been built on the central defensive partnership between Ferdinand and Nemanja Vidic. But a series of injuries, coupled with the emergence of Johnny Evans, Chris Smalling and Phil Jones, has seen the former England skipper play a reduced role this season. Ferdinand was dropped to the bench on Saturday against Everton having struggled in the 6-1 defeat by Manchester City a fortnight ago, and
ahead of tonight’s Champions League clash against Otelul Galati, Ferguson suggested the 32-year-old may have to tailor his game in order to lengthen his career. He said: “I explained to Rio the other day is simply this: That we have two young centre-halves coming through and I’m have very happy to have four of them, and I hope to keep the four of them for a long time. “Rio is almost 33 now and he has lost a yard of pace he had five years ago. That doesn’t mean to say he can’t tailor his game in a different way. “Whereas he used to rely on his pace, he doesn’t now. We’ve all faced that moment in your career when you realise you have to change your game. Rio will do the same and he’ll be fine.”
Sport
CITYA.M. 2 NOVEMBER 2011
Chelsea have won just one of their last four games Picture: GETTY
SPORT | IN BRIEF French win in Melbourne HORSE RACING: A first ever British victory in the Emirates Melbourne Cup was prevented by the narrowest possible margin once again as Ed Dunlop’s Red Cadeaux succumbed to well-fancied French stayer Dunaden.”I thought he wouldn’t like the ground and with a little more juice he’d have beaten the other horse,” said Dunlop.
Rooney up for award FOOTBALL: Manchester United striker Wayne Rooney is the only Englishman shortlisted for the Ballon D’Or. Only five players on the shortlist
easy task. “We could have put the game beyond their reach but we didn’t do and that’s why they came back into the game,” he said. “For their comeback they deserved a point. For them it was a fantastic game and they had nothing to lose. “When you get the opponent into this sort of mood it’s difficult. “We could have done it the easiest way possible and play four games and be qualified so now we have to do it the hard way.” Chelsea, meanwhile, condemned chants by their own supporters about QPR defender Anton
Ferdinand during last night’s match. The travelling fans repeatedly sang about Ferdinand, who it is alleged was racially abused by Blues captain John Terry last month. A Chelsea spokesman said in a statement: “The chanting was wholly inappropriate and we don’t condone it.”
GROUP E TEAM PLD Chelsea 4 B Leverkusen 4 Valencia 4 Genk 4
W 2 2 1 0
D 2 0 2 2
L 0 2 1 2
F 9 5 5 1
A PTS 2 8 6 6 4 5 8 2
Mancini willing to offer Tevez a second chance ▲
FOOTBALL
MANCHESTER CITY manager Roberto Mancini has suggested Carlos Tevez could figure in his plans again if he apologises for his part in the ongoing controversy. Tevez has been frozen out of the first-team picture since Mancini claimed the Argentinian refused to play in the Champions League game at Bayern Munich back in September. Mancini has spoken little about the subject since the night in question, but in an interview yesterday ahead of tonight’s Champions League clash against Villarreal, he said: “Everything depends on Carlos. If he apologises to the squad and to me then everything will be as before. “If he doesn’t, then Tevez has a value that everyone knows and something will happen in January.
“He is totally unprepared and being badly advised. I don’t want it to be like this and I would be the first to forgive him.” Mancini also revealed that the club turned down the chance to sell controversial 21-year-old striker Mario Balotelli back to Italy this summer. The former Inter Milan star endured a turbulent debut campaign in England, but has thrived this time around and already has six goals to his name, rewarding Mancini for the faith he has shown in him. “Sooner or later Balotelli will go back to Italy,” said the City boss. “However, it won’t happen for a few more years and it will do him good to remain here. “We did receive offers for him from Italian clubs over the summer, but we don’t sell anybody here.”
have Premier League connections, two of which – Cesc Fabregas and Sergio Aguero spent only half of 2011 in England – compared to 15 in Spain. European champions Barcelona lead the way with eight nominees, including Lionel Messi, winner for the last two years.
Djokovic back on course TENNIS: Novak Djokovic struggled to a three-set victory over Xavier Malisse at the Swiss Indoors in Basel. Djokovic beat the Belgian 6-2, 4-6, 7-5 in his first match since winning the US Open in September.
39
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40
Sport
CITYA.M. 2 NOVEMBER 2011
“FERDINAND MUST CHANGE HIS STYLE” FERGUSON HINTS AT REDUCED RIO ROLE: P38
PAKISTAN TRIO GUILTY
Police begin Terry race investigation ▲
FOOTBALL
THE METROPOLITAN Police have launched a formal investigation into allegations Chelsea skipper John Terry racially abused Anton Ferdinand after spending a week assessing a complaint from a member of the public. The move means the Football Association’s own investigation into the incident, which is alleged to have taken place during QPR’s win over Chelsea last month, cannot be completed until the outcome of the police probe. Terry has denied racially abusing Ferdinand, insisting his own response was actually a denial and not racist in any way.
Edwards puts RFU on red alert ▲
RUGBY UNION
Former captain Butt and bowlers Asif and Amir face prison after being found guilty of spot-fixing offences ▲
CRICKET BY JAMES GOLDMAN
DISGRACED Pakistan cricketers Salman Butt, Mohammad Asif and Mohammad Amir face the prospect of up to seven years behind bars after they were all found guilty yesterday of spot-fixing during last summer’s tour of England. Former Test captain Butt and fast bowlers Asif and Amir, who pleaded guilty on 16 September to charges of conspiracy to cheat at gambling and accepting corrupt payments, plotted to bowl deliberate no-balls in the
Lord’s Test against England as part of a betting scam. Amir (right) issued a heartfelt apology for his actions through his barrister, Ben Emmerson QC, who told the court at an earlier hearing: “Amir wants to make it clear he wants to take full responsibility for what he did. “This vulnerable 18year-old boy, as he was then, was subjected to extreme pressure from those upon whom he
should have been able to rely. He recognises the damage he has caused Pakistan cricket. and he wishes to do his best to put that right.” By stark contrast, the more experienced pair of Butt and Asif, who will be sentenced today along with Amir, both strenuously denied any involvement in matchf i x i n g throughout
the four-week trial. International Crick Council chief executive Haroon Lorgat believes yesterday’s verdict will send a clear message to anyone involved in attempting to con cricket fans across the world. He said: “I would reiterate, as I have on every occasion that I have spoken on this matter, that the ICC has a zero-tolerance attitude towards corruption. We will use everything within our power to ensure that any suggestion of corrupt activity within our game is investigated and, where appropriate, robustly prosecuted.”
WASPS head coach Shaun Edwards is set to leave the Premiership club before the end of the week, putting England and his other suitors on red alert. Edwards’ future at the club had been in doubt after he recently revealed that he expected to return from the World Cup, where he helped Wales to a fourth-place finish, as a “free agent”. WRU chief executive Roger Lewis is known to be keen to ensure that Edwards and the remainder of Gatland’s coaching set-up remain with the national side. The RFU, meanwhile, are to discuss England’s poor World Cup performance at a Twickenham board meeting today.
Van Persie gamble backfires as Gunners fire blanks ARSENAL MARSEILLE
0 0
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FOOTBALL
ARSENAL manager Arsene Wenger admitted the emotional effects of Saturday’s win over Chelsea played a part in his side’s failure to secure qualification to the knockout stages of the Champions League following
last night’s stalemate against Marseille. Wenger opted to rest captain and top scorer Robin van Persie and the move backfired as Arsenal struggled, particularly in the second-half, to carve out clear goalscoring opportunities. The Dutchman was introduced from the bench with half-an-hour remaining, but even he couldn’t find a way past visiting goalkeeper Steve Mandanda. On his decision to rest a man who
had scored 28 goals in his previous 27 games, Wenger said: “He was tired, this was fatigue, that’s why I did that. You know we are playing 50 games in a year, he cannot play 50. “Emotionally more than physically maybe [Saturday had an impact]. It is difficult to be on a high three days later again but we still had opportunities. “Aaron Ramsey in the first half, he had two great chances. Gervinho had a chance, and in a game like that you still expect to be able to
take one of these chances. I felt it was a game where we were not physically at our sharpest. Marseille started stronger than us and after that we got back in the game.” Despite a failure to win at home in Europe for the first time since Barcelona visited Emirates Stadium back in Mach 2010, Arsenal remain top of their section with Borussia Dortmund up next at home. Wenger added: “We wanted to achieve qualification after this game
but you have to say as well to be fair that we have taken four points against Marseille in our two games. If we win our next home game we have a good chance.”
GROUP F
TEAM PLD W Arsenal 4 2 Marseille 4 2 Dortmund 4 1 Olympiacos 4 1
D 2 1 1 0
L 0 1 2 3
F 4 4 3 4
A PTS 2 8 1 7 7 4 5 3
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