UK stocks rose amid financial worries

U.K. stocks rose for the first time in three days as investors bought shares of companies whose earnings are less dependent on growth amid signs the economy is deteriorating.
The U.K.’s FTSE 100 rose 1.1 percent as Imperial Tobacco Group Plc rallied. Imperial Tobacco Group Plc, Europe’s second-largest cigarette maker, added 2.6 percent, while Diageo Plc, the world’s biggest liquor company, gained 2.5 percent.

I’m favoring “companies that aren’t completely economically insensitive but are a lot less sensitive,” Jane Coffey, head of equities at Royal London Asset Management Ltd., which manages about $10.5 billion, said in a Bloomberg television interview.

BAE Systems Plc, Europe’s biggest defense company, climbed 5 percent to 359.5 pence as the brokerage said “defense stocks offer good visibility for the next two years,” predicting “strong” earnings-per-share growth in 2009 and further growth in 2010. Goldman has a “buy” recommendation on BAE shares.

The U.K. economy shrank more than expected in the third quarter as service industries including financial companies, hotels and restaurants declined the most since 1990.

Gross domestic product dropped 0.6 percent from the second quarter, the biggest decline in almost 18 years, the Office for National Statistics said today in London. The result was lower than the previous estimate for a drop of 0.5 percent, which economists had expected would be confirmed.

Toyota feels the pinch of the world economic turmoil

TOYOTA, the world's biggest car company, yesterday laid bare the extent of the global financial crisis when it warned that it was expecting to make its first full-year loss since the Second World War- the evidence that the global economic meltdown, not strategic mistakes, is the primary reason behind turmoil in the U.S. automotive industry.

"This is not an issue where the Japanese are doing fine and the domestic automakers are struggling," said Aaron Bragman, automotive analyst for HIS Global Insight in Troy. "This is an issue where everyone is struggling."
In last financial year, Toyota had an operating profit of ¥2.27 trillion (£17 billion) but now is projecting an operating loss of $1.7 billion, 150 billion yen, for its fiscal year ending March 31, and it slashed its global vehicle sales forecast by 700,000 cars, 8.5 percent fewer than the previous year. The UK has seen even more severe falls of Toyota vehicles, down 11 per cent in a year.

According to the Times, Toyota could cut up to 800 jobs in the UK, or 15% of its workforce, adding to the 40,000 positions expected to be shed from the UK car industry's 200,000 total over the next three years.

The Times said declining demand was "likely" to trigger redundancies across Toyota's business.

The car maker has not made any of its permanent staff redundant, but it is understood to have already cut an unspecified number of temporary workers.

Toyota promised to do all it could to retain permanent British workers, but has reportedly not ruled out the possibility of redundancies.

HSBC unveiled largest losses due Ponzi scheme

One of the largest and almost invincible UK financial institution during the pre financial meltdown this year, HSBC has revealed its losses due to exposure to New York conman Bernard Madoff. The UK giant unveiled that its losses is estimately around $US1 billion, making it the largest exposure unveiled by UK firm so far.

This is based from the statement made ealier by the firm yesterday regarding its exposure to the alleged fraud.
"It confirms that it has provided financing to a small number of institutional clients who invested in funds with Madoff. Also, in the context of its normal global custody business, HSBC has custody clients who have invested with Madoff. HSBC does not believe that these custodial arrangements should be a source of exposure to the Group. "

Shares in Santander, the biggest bank in Spain and the second-largest in Europe after HSBC, plunged after the lender said it had an exposure of more than three billion dollars to Madoff Investment Securities in New York. British, French, Japanese and Spanish banks and funds said investments totalling billions of dollars (euros) could be wiped off their balance sheets by a scandal that is set to affect some of the richest people in the world.

Biggest Ponzi scheme fraud exposed

The recent exposure to $50 billion Ponzi scheme fraud by the former NASDAQ chairman, Bernard Madoff caused a stir in financial and investment world. Most of the Spanish and Swiss banks lost over a billion US dollars each.
The UK asset manager, Bramdean Alternatives Ltd headed by well-known fund manager Nicola Horlick, said almost 10 percent of its holdings were exposed to Madoff. Bramdean said it had two holdings that maintain trading accounts with Bernard L. Madoff Investment Securities that represented 9.5 percent of its net asset value at the end of October. A UK real estate investor, Vincent Tchenguiz is also reported to have his asset invested in Madoff scheme.

Some people familiar with the case said that Bernard L. Madoff Investment Securities, which he founded in 1960 was never inspected by U.S. regulators after he subjected it to oversight two years ago. The Securities and Exchange Commission hasn’t examined Madoff’s books since he registered the unit with the agency in September 2006, two people said, declining to be identified because the reviews aren’t public. The SEC tries to inspect advisers at least every five years and to scrutinize newly registered firms in their first year, former agency officials and securities lawyers said.

Madoff was charged on 11 December 2008 by federal prosecutors with a multibillion- dollar securities fraud. He is currently free on a $10m bond.

The Rise of Islamic Banking in a Time of economic Crisis

By Thomas K. Grose

Posted December 10, 2008

Shopping for a business loan during a global credit crisis is tough work even if you're a fast-growing start-up like Ireland's Blue Ocean Wireless. And the scrutiny can cut both ways. Blue Ocean, which supplies wireless communications for merchant shipping, was giving a closer-than-normal look at whether possible lenders could be counted on amid the ongoing financial shakeout.

When the company got a $25 million loan this fall, it came from what might seem an unusual source: the Bank of London and the Middle East, or BLME, which strictly follows Islamic sharia law rather than conventional western banking practices. Read more

Banking competition still strong in Scotland

LONDON, Dec 10 (Reuters) - Competition among banks in Scotland will remain strong despite the likely disappearance of the Edinburgh-based HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) following its merger with Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), businessmen told lawmakers on Wednesday.

Iain McMillan, director of the Scottish Confederation of Business Industry (CBI), said there was still a vibrant banking sector.

"Clearly there is going to be one less high street bank if on Friday the HBOS shareholders vote in favour of the merger," he told the Scottish Affairs Committee.

"But there does seem to be that there is quite a lot of competition there, certainly in the big cities."

HBOS shareholders are due to vote on the government-brokered deal to create Britain's second-biggest bank on Friday. More than 95 percent of Lloyds investors have already voted in favour of the newly-named "superbank" Lloyds Banking Group.

The deal would leave the Royal Bank of Scotland, the Clydesdale and the Airdrie among the surviving Scottish banks.

The banks and financial services sector have been a key driver of the Scottish economy during the past decade, boosting growth by more than 90 percent since 1998 -- more than 7 percent a year.

Up to 14,000 jobs are predicted to go as part of the shake-out of the Scottish financial services sector, a report by the Ernst & Young Scottish Item Club said on Wednesday.

"The knock to our previous star performer in financial services makes this recession unprecedented," Hywel Ball, managing partner of Ernst & Young's Scottish practice, said.

Scotland is entering its first ever services sector-led recession, with its weakest performance since the early 1980s, the report added.

The growth rate is expected to be 0.9 percent in 2008, contracting to -0.4 percent a year later.

But in 2010, growth should recover to 1.5 percent and in 2011 to 2.5 percent.

The recession should be less severe in Scotland than the rest of the UK because of the country's reduced exposure to the housing market and a larger public sector, the Item Club said.

"Scotland's critical mass of banking, insurance and fund management skills, along with a reputation for low rates of labour turnover, may provide the base to retain or attract activities north of the border, with beneficial impacts to the wider services economy," Ball said.

"The key for all businesses is to be outward-looking and competitive. Those that can innovate and diversify will come out the other end of this recession tunnel in a stable or even better position than when they went in."

(Editing by Elaine Hardcastle)

Best balance transfer

This is the no-hassle route; simply get the card, move your debts, then put the card away and pay it off, knowing it’s cheap. Most people will be better off going for a long term cheap ‘stable relationship’ rather than trying to be a credit card tart; as it only takes a few mistakes to make tarting very costly.

The gold standard for long term cards is a ‘life-of-balance' transfer deal; here the cheap rate lasts until the debt you've shifted is repaid in full.

BARCLAY PLATINUM
The current cheapest is barclay platinum card at 6.5% life of balance. You must shift your debts to it within 60 days of opening the account to get this rate, and anything over £5,000 is charged at 6.9%. Do beware though, this card operates a rate for risk policy.

CAPITAL ONEAt the same rate is Capital One Low Rate card locks in debts at 6.5% until your statement date in January 2011, so if you've already got a Barclaycard and can pay off within two years, this is a good alternative. The link provided takes you to a special deal via comparison BeatThatQuote; apply elsewhere and you might get a worse deal.

Alliance n leicester

You can still get an 8.5% return on your savings....

What we should be looking for in an easy-access savings account is:

A good interest rate. Typically, these days, that’s around 6%.

A great guarantee. These are almost impossible to find now.

True easy access.This means you can withdraw your money at any time without penalty.

Relatively safe from a possible bank collapse. This has become more important for many people these days.

Great guarantees used to be linked to the Base Rate, but with the best savings accounts now paying around double the Base Rate, these guarantees are redundant. Now a more attractive guarantee is a fixed rate. Problem is, these are not a common feature of an easy-access account. However, we can improvise an account that ticks all these boxes, and has the best interest rate:

Improvise yourself a perfect, table-topping savings account

We do this using Alliance & Leicester’s Premier Direct account. I say improvise, because it’s not a savings account at all, but a current account. However, it fulfills all our criteria:

A good interest rate. In fact it’s an outstanding interest rate at 8.5% AER. This wallops all the best easy-access savings accounts, which, with many rates falling 1.5% last week, are more like 6%.

A great guarantee. The rate is fixed for one year. That’s great when rates are expected to fall. What’s more, it’s extremely rare that the best easy-access interest rate available is fixed!

True easy access. Like just about any personal current account, you can take money out whenever you like without charge or penalty.

Relatively safe from a possible bank collapse. Alliance & Leicester is probably one of the safest banks in the UK at present.

Catch # 1

Of course there’s a catch. Two rather. Catch one is that you get this rate just on the first £2,500 in the account. Anything over this attracts a pathetic rate that’s not worth mentioning in a savings article. However, we can all still use this account to boost our average savings rate:

If you have no savings, or savings of £2,500 or less

If you have savings of £2,500 or less, you can earn the full 8.5% AER. Here’s how it works for you:

Interest earned on £2,500 in the Alliance & Leicester Premier Direct account

	Interest earned on £2,500	Interest rate after tax
Basic-rate taxpayer	£170	6.8%
Higher-rate taxpayer	£128	5.1%
Non-taxpayer	£213	8.5%

So, that’s between £170 and £213 interest in a year, depending on your tax status.

Even if you have no savings, you can still boost the interest you get by switching to this bank account. If you’re paid, say, £1,200 per month, you could expect maybe £6 or £7 interest per month, or £70 or £80 in the year. (It varies because the amount in your current account does.)

If you have £5,000 in savings

If you have £5,000 in savings, you could still boost your savings-interest rate from, say, 5.5% (most of you won’t be earning more than that at present) to 7% by moving half your savings to the Alliance & Leicester account. With inflation likely to fall somewhat over the next months, this switch should see you actually making a little money, rather than simply slowing the negative impact of rising prices.

Here’s how your earnings would look in a year:

Interest earned on £5,000

	Interest earned in an account paying 5.5%	Interest earned if you split savings between one account paying 5.5% and A&L’s paying 8.5%
Basic-rate taxpayer	£220	£280
Higher-rate taxpayer	£165	£210
Non-taxpayer	£275	£350

A further advantage for the safety conscious is that you’ve split your savings between banks. If one goes down, you’ll still have immediate access to the other half of your cash.

slashed base interest rate

Base interest rates at 2%.

The Bank of England has slashed its base rate to 2%, matching the lowest level in its 314-year history. The last time the base rate was this low was in 1951, when Winston Churchill was in power, and the country was recovering from its massive war effort.

The battle of 2008 is The Great Credit War or The First World Recession. Individuals and businesses have too much debt. Banks are not willing to lend, for fear of exposing themselves to yet more bad debts. People are not spending, instead they are hoarding whatever spare cash they have. (Ed: It’s called saving, stupid, an ancient pastime last seen in the early 1980s!)

House prices continue to fall, plunging an annualised 16% in the year to November, the fastest rate in 25 years. With unemployment on the rise, banks unwilling to sell, some house prices being temporarily propped up by the government’s ridiculous emergency rescue for middle-class mortgage defaulters package.

But think ahead. Think ahead to the days when the economy gets back to some level of normality. Believe it or not, it will happen. Think about mortgage rates of maybe 4%. Think about how attractive the dividend yields on shares are compared to savings rates.

4 swindles to avoid that could save your money

4 annoying swindles by banking sector.

1) ‘No interest' savings accounts

An ‘easy access' savings account should provide just that: easy, no-strings access to your cash when you need it. However, a growing number of so-called easy-access accounts actually have a nasty sting in the tail. If you withdraw any amount in any particular month, then you earn no interest at all on your entire balance for that calendar month.

So, if you withdraw £1 and leave, say, £49,999 in your account, then you earn no interest whatsoever during that month. Therefore, each monthly withdrawal costs a twelfth of your annual interest rate. Hence, three withdrawals (in three different calendar months) per year will reduce your savings rate by a quarter, taking a rate of, say, 6% a year to a more modest 4.5% a year. For the record, I've never opened an account of this kind -- and I suggest you think twice before doing so.

2) 118 numbers (directory enquiries)

In 2003, a whole host of competing 118 services were introduced by telecoms and other firms in a move thought to reduce the BT 192 monopoly. Alas, the outcome was tiresomely predictable: forced to spend millions on advertising, these companies enormously increased the cost of directory enquiries.

NEVER use rip-off 118 services; instead, try finding telephone numbers using google or BT's online Phone Book.

3) Bogus jobs

One remarkable ad claims, "I earn £14,775 per week and so can you". Yeah, right! This amounts to a salary of almost £770,000 a year, the sort of money earned by top sportsmen, financiers and business folk.

In reality, these adverts promise the earth and deliver very little. Some rely on multi-level marketing techniques which appear to offer unlimited potential, but usually fall short. All these ads ask you to send money upfront to learn the ‘secrets' of success -- money which usually disappears into a black hole. If you really want a better-paid job, ask for a pay rise, get some career counselling, or visit well-known recruitment websites.

6) Foreign-currency conversion fees

99% of credit cards charge a handling fee of 2.75% of the value of non-sterling transactions, such as overseas purchases and transactions on foreign websites.

In total, these sneaky ‘currency conversion charges' cost the Brits around £300 million a year. To dodge foreign-currency loading fees, stick to using plastic cards which don't charge extra for non-sterling purchases.

A tracker mortgage not a tracker mortgage?

This isn’t a trick question. Worryingly for borrowers, there are conditions written into some tracker deals which mean they don’t always work the way you might think.

Typically, mortgage lenders offer a tracker at a set margin above or below the Bank of England base rate. So your tracker rate might be 2% higher than the base rate (BBR +2%). That means, today, when the base rate is 3%, your mortgage interest rate would be 5%.

If the base rate fell to 2.5%, the interest rate on your tracker should, in theory, drop from 5% to 4.5% and you’ll be quids in!

But, on the downside, if the base rate increased to 3.5% instead, your tracker rate would rise from 5% to 5.5% making your mortgage repayments more expensive.

Not surprisingly, tracker mortgages are pretty popular right now because it looks like further base rate cuts are on the cards. Experts certainly agree reductions are likely with some predicting the rate could fall as low as 2% -- or even 1% -- next year. (But, of course, there are no guarantees.)