Gold holds near six-month highs before US rate decision

LONDON, Sept 10 — Gold eased today, but stayed near six-month highs after a softer report on the US jobs market last week heightened expectations for US policymakers to signal as early as Thursday that they may take steps to keep interest rates low. Friday’s monthly US employment report showed fewer jobs were created than expected, which boosted the gold price by more than 2 per cent, its strongest one-day gain this month. Gold has risen against a backdrop of mounting expectations for support for the US economy by the Federal Reserve, possibly as early as Thursday when the central bank’s Federal Open Market Committee (FOMC) releases its decision on interest rates. Investment in gold-backed exchange-traded products reached a record high last week, while holdings of US gold futures by speculators rose to their highest in a year. Spot gold was down 0.3 per cent at US$1,731 (RM5,370) an ounce by 1425 GMT (10.25pm local time), having risen last week by 2.7 per cent, racking up a third consecutive weekly increase and its longest stretch of gains since the start of the year. “We should be in for a correction ahead of Thursday, most probably we will see gold come down to US$1,700 or even US$1,695, which would be a healthy correction, and once that is done, then those areas will be a very, very good opportunity at which to buy,” Afshin Nabavi, head of trading at MKS Finance, said. “Beyond that, I think we could test last year’s highs of US$1,920 or even higher. The only thing that is putting some doubt in my mind is that we have seen absolutely no physical demand from anywhere ... so that is why I think we should maybe have a correction so that we can capture that (consumer) interest.” Data on Friday showed the US economy created just 96,000 jobs in August, well below forecasts, which in turn heightened expectations among investors for the Fed to signal that it will announce more bond buying, or quantitative easing, this week. Since the Fed first used QE as a means to encourage growth in late 2008, gold has more than doubled in value, hitting a record US$1,920.30 an ounce last September. The ensuing low level of real interest rates, which strip out the effect of inflation, put pressure on the dollar and help to create a favourable environment for investing in gold, which profits from dollar weakness. “This revising of (US expectations) was something we thought was main event risk and also coincided with the (European Central Bank) providing a much less hostile environment for European assets and that reduces the capital flight from the euro area into the United States,” Michael Lewis, an analyst at Deutsche Bank, said. “The combination of QE (quantitative easing) and dollar weakness has reignited the interest of the private sector. Central banks and the public sector have already been aggressive buyers of gold, so it doesn’t change our view. It makes us more relaxed about the view,” Lewis said. Deutsche Bank analysts expect the gold price to average US$1,726 an ounce this year, before rallying to US$2,000 early next year, making their outlook one of the more bullish from a Reuters mid-year price survey in July.

Malaysians lead as top buyer of London Properties

LONDON, July 25 — Malaysian investors are well on their way to being the leading buyers of London offices for the first time in 2012, helped by a deal to buy London’s landmark Battersea Power Station, as the Far East country seeks a safe haven for its burgeoning wealth.

Malaysians bought £1.3 billion (RM6.5 billion) of London property in the seven months to July 24, more than British buyers and beating the US into second place among overseas investors with £793 million, research by property consultant CBRE Group showed.

“Given what we know about how active the Malaysians are in the market, it looks like they will outspend North American investors this year,” CBRE’s head of central London research, Kevin McCauley, told Reuters.

The figures include mixed-use schemes with a large office component like the derelict Battersea site, which was bought by a team including Malaysian developers SP Setia and Sime Darby for £400 million this month.

It would be the first time Malaysian buyers have outspent any other nation since CBRE started keeping records in 1984, a ranking dominated in recent years by US buyers.

With North America and Europe still recovering from the fallout of the global financial crisis, strong economic growth in China and other parts of Asia has created immense wealth in the Far East, mainly fuelled by manufacturing, construction and commodities.

Far East buyers are attracted to London’s property market by the weakness of Sterling and the fact it is a liquid and transparent investment in a relatively stable political environment, often providing better returns than Asia’s more volatile and smaller markets.

Overseas buyers have invested £26.2 billion in London offices since 2010, CBRE said, and foreign ownership of real estate in London’s City financial district stands at 52 per cent, according to Development Securities.

British investors, who were the biggest buyers 20 years ago, have spent £1 billion mainly on smaller, lower quality properties so far this year, CBRE said. The list of top five overseas investors in 2012 is completed by Germany, Brazil and Qatar.

Other Malaysian deals include investment fund Permodalan Nasional Berhad’s acquisition of two office buildings for about £570 million that house the European Bank for Reconstruction and Development and law firm Olswang.

Who's who in joining the UK labor Inquiry

Nigel Lawson, who served as chancellor of the exchequer under Margaret Thatcher and is now an advocate of splitting banks’ retail and investment arms, is among five members of the House of Lords selected to sit on a parliamentary investigation into the Libor-rigging scandal. Also on the panel from the upper house of Parliament are John McFall, a former chairman of the House of Commons Treasury Committee and another advocate of dividing up banks; the Bishop of Durham, Justin Welby; Liberal Democrat Susan Kramer; and a former civil servant, Andrew Turnbull. Barclays (BARC), the second-biggest U.K. bank, agreed last month to pay 290 million pounds ($453 million) in regulatory fines for manipulating the London interbank offered rate, spurring the resignations of Chairman Marcus Agius, Chief Executive Officer Robert Diamond and Chief Operating Officer Jerry Del Missier. The Serious Fraud Office opened a criminal probe into Libor- rigging two weeks ago.

FTSE gains amid UK inflation drops

The FTSE 100 made modest gains in early trading as investors awaited a key report by US Federal Reserve chairman Ben Bernanke which could open the door to new monetary stimulus measures after recent weak US data. Bernanke will present his latest monetary policy report to Congress today and tomorrow against a background of lacklustre growth, with disappointing jobs data last week. Meanwhile UK figures out this morning showed that inflation fell to its lowest in more than two and a half years in June helped by early summer sales of clothes and shoes. The Office for National Statistics said annual consumer price inflation dropped to 2.4 per cent from 2.8 per cent in May - the lowest since November 2009. Gains in energy stocks and banks provided the main underlying support for the blue chips on hopes for fresh stimulus measures. Oil services companies Amec and Petrofac both advanced by around one per cent. Miner Vedanta lifted by just over one per cent while drinks giant Diageo nudged up by 0.9 per cent. Libor rate-scandal hit Barclays was the top performer among banks, rallying 1.7 per cent to make up at least some of the ground lost recently. Lloyds was up 0.3 per cent in a solid start to the session.

The news all people don't want to hear

Christine Lagarde, the head of the International Monetary Fund, has warned that the world risks a triple crisis of declining incomes, environmental damage and social unrest unless countries adopt a more sustainable approach to economic growth.

Ahead of the Rio+20 Earth summit later this month, she said the rich should restrain their demands for higher incomes while there are still 200 million people worldwide looking for a job and poverty is on the rise.

More room for African Low Cost Airlines

EasyJet founder Sir Stelios Haji-Ioannou is set to launch a low-cost airline in Africa this year after taking a 5% stake in a new venture.

The easyGroup tycoon, embroiled in a long-running boardroom battle with easyJet, is backing a carrier that will operate under his FastJet brand and will be run by former easyJet executives. FastJet will operate from four countries – Kenya, Tanzania, Ghana and Angola – and harbours ambitions to carry more than 12 million passengers a year from 500,000 currently by cashing in on demand for intercontinental travel from a burgeoning middle class in those states.

Haji-Ioannou said the move would help bring low-cost air travel to more Africans. "This is another small but significant step in bringing the dream of low cost air travel to millions of people in Africa – the aviation industry's last frontier. Past experience shows by halving fares, a successful low-cost carrier can encourage those people, who have never previously travelled by air, to fly." He added: "For Africa, with its densely populated cities separated by great distances – this means a potential new market of millions."

HP to axe 27000 jobs

Hewlett Packard has warned of cuts in its UK operation in a global purge that will see it axe 27,000 workers. The US technology company plans to make the cuts, which amount to 8% of its global workforce of almost 350,000 people, as it struggles for sales in a marketplace increasingly dominated by smartphones and tablet computers. HP, which has its headquarters in Palo Alto, near San Francisco, California, said the job cuts, along with other measures, should save it £2.2 billion which it would invest in growth areas like "cloud" storage technology. A spokeswoman said: "We do expect the workforce reduction to impact just about every business and region." One of those leaving is Dr Mike Lynch, chief executive of HP's Autonomy division, formerly a UK-based stand-alone company he founded in 1996 and sold to HP last year for £7.1 billion. Cambridge University graduate Dr Lynch, who made £500 million from the sale, is being replaced by Bill Veghte, HP's chief strategy officer "to help improve Autonomy's performance". Dr Lynch will leave after what the company called a "transition period".

King offers financial advice to Premier League

Last night Sir Mervyn King, the governor of the Bank of England, called for stricter regulation in the banking sector to prevent another crippling financial crisis. This morning he praised UEFA for attempting the same thing.The governor had just finished speaking to BBC Radio 4's Today on the state of the UK economy when he was tackled by sports reporter Gary Richardson on the finances of debt-laden Rangers."I think any football fan has seen clubs get into financial difficulty so many times over the years and then [be] rescued by some white knight who comes along only for that white knight in turn to become the person who is disillusioned and walks away," said Sir Mervyn, an Aston Villa fan, before praising UEFA's "fair play" rules, which will demand more financial discipline from clubs.

Double dip recession fear in the UK

LONDON: Britain's economy slid into its second recession since the financial crisis after official data unexpectedly showed a fall in output in the first three months of 2012, piling pressure on Prime Minister David Cameron's embattled coalition government. The Office for National Statistics said Britain's gross domestic product fell 0.2 percent in the first quarter of 2012 after contracting by 0.3 percent at the end of 2011, confounding forecasts for 0.1 percent growth. Most economists had expected Britain's $2.4 trillion economy to eke out modest growth in the early 2012, but these forecasts were upset by the biggest fall in construction output in three years coupled with anaemic service sector growth and a fall in industrial output. Wednesday's figures will be a deep blow for Britain's Conservative / Liberal Democrat coalition, which has slid in opinion polls since a poorly received annual budget statement in March and risks embarrassment at local elections on May 3. The government is also under pressure over revelations about its close relationship with media tycoon Rupert Murdoch. The government desperately needs growth to achieve its overriding goal of eliminating Britain's large budget deficit over the next five years. Britain's economy contracted by 7.1 percent during its 2008-2009 recession and recovery since has been slow, with headwinds from the euro zone debt crisis, government spending cuts, high inflation and a damaged banking sector. Wednesday's data showed that output was still 4.3 percent below its peak in the first quarter of 2008, and the economy has only grown by 0.4 percent since the government came to power in the second quarter of 2010. Output in Britain's service sector - which makes up more than three quarters of GDP - rose by just 0.1 percent in the first quarter after falling 0.1 percent in Q4 2011, kept down by a fall in output in the large business services and finance sector. Industrial output was 0.4 percent lower, while construction - which accounts for less than 8 percent of GDP - contracted by 3.0 percent, the biggest fall since Q1 2009.

Lloyds Banking Group to sell off £600 million property loan

Lloyds Banking Group is reported to be putting together a sale of £600 million of property loans.

The sale, which has still to be finalised, would be the second big loan sell off in six months for Lloyds, and follows the £923 million loan sale to Lone Star last December.

That sale, called the Project Royal portfolio, was reported to have been agreed with Lone Star at a 40 per cent discount.
Lloyds had to be bailed out by the taxpayer with £22.5 billion of new capital in 2009, leaving the bank 41 per cent taxpayer owned.
Then in February 2010, the bank posted a loss of £24 billion on bad loans for the 2009 year, which it blamed on reckless HBOS lending.
Lloyds still has £21 billion in non-core commercial loans to sell off.

This could be the ray of hope for small and medium sized business

The European Investment Fund has already pledged a cornerstone investment to Palio’s Superflex Fund, taking the fund a third of the way to its first close of £100m.

Following a surge in demand for non-bank finance and an estimated £25bn of debt funding and refinancing needed for UK small and medium-sized enterprises (SMEs) between 2012 and 2016, Palio believes it is carving a new niche in the UK market by providing senior debt and mezzanine loans to businesses with an enterprise value of between £10m and £100m.

Read more: http://www.theengineer.co.uk/policy-and-business/business-briefs/palio-launches-debt-financing-model-for-lower-mid-market/1011800.article#ixzz1myF53ckc

UK Shares to Excel Past Europe

LONDON: Britain’s shares should outperform Europe’s, thanks to higher exposure to fast-growing emerging markets, while a boost from central bank liquidity should help banks rally further, according to ING Investment Management.

Stocks have kicked off 2012 on a high note, but investors have been slow to buy into the rally, meaning there is still plenty of cash left on the sidelines and able to push the market higher in the coming months, said Valentijn van Nieuwenhuijzen.

More reports

NAB review UK operation

National Australia Bank has finally launched a review of its UK business, which is battling a market in the grip of a prolonged recession.

NAB chief executive Cameron Clyne insists the business is still profitable, but margins have been squeezed and lending losses are again on the rise.

The review comes after NAB is said to have rejected a £2 billion ($3.2 billion) offer for Clydesdale last September from private equity firm Sun Capital. Several credit-rating agencies downgraded Clydesdale late last year amid speculation NAB had been planning to offload all or part of the bank

Read more: http://www.smh.com.au/business/nab-launches-review-of-uk-business-20120207-1r2pd.html#ixzz1leTmyfe5

UK inflation falls sharply on cheaper fuel, clothes

LONDON, Jan 17 – British inflation fell sharply in December as fuel prices dropped and retailers lured customers with hefty discounts for clothes, providing cash-strapped households with some relief and the Bank of England with more leeway to ease policy further.

Policymakers are banking heavily on a steep fall in inflation to ease the squeeze on Britons’ budgets, allowing them to step up spending this year and support an economy that is on the verge of recession due to the euro zone debt crisis.

Consumer price inflation fell to 4.2 per cent in December from 4.8 per cent in November, the Office for National Statistics said today, showing the decline in inflation from its three-year peak of 5.2 per cent in September is gathering pace.

It was the sharpest drop in the annual rate since April 2009, when the economy was deep in recession.
“We expect inflation to be back at the 2 per cent target by this autumn, and – while we’re not convinced that it will fall back as far as the Bank of England forecasts – there should still be plenty of room to loosen monetary policy further in 2012,” said Ernst & Young Item Club economist Nida Ali.

“This will also provide some welcome respite for hard-pressed families who have struggled with falling real wages for much of the past five years,” Ali said.

Inflation is still well above the BoE’s 2 per cent target, but the central bank forecasts that it will be below this by the end of 2012, as economic weakness weighs on prices and the effect of 2011’s rises in sales tax and energy prices fade.

BAY likely to acquire HSBC retail loans pending approval

UK-based HSBC is reported to have succeeded in divesting its retail banking business here _ worth 30-40 billion baht _ to the Bank of Ayudhya (BAY).

According to a source in the banking industry, BAY is seeking approval from the Bank of Thailand to acquire HSBC's retail business.

The deal is expected to be complete early next year, said the source.

The pact is not a surprise in the banking industry as HSBC's global policy is to restructure, reducing its focus on retail banking business.



Previously HSBC Thailand reported it was continuing retail banking business as http://www.blogger.com/img/blank.gif
usual amid speculation it might sell some units for global restructuring.

HSBC's retail loan portfolio contains total debt outstanding worth 30-40 billion baht. After approval, HSBC will transfer the loan portfolio, including personal loans and around 500,000 credit cards, to BAY.

BAY's head of consumer finance, Philip Tan, refused to comment, saying the bank is unable to discuss the matter.

He stressed BAY's policy is to search for opportunities in retail business expansion to maintain market leadership in credit card and personal loan business. BAY has 4 million credit card holders, tops in the industry.

"Inorganic growth will be the bank's method of expanding in the retail banking sector, and such opportunities could occur next year," Mr Tan said

CORRECT: Virgin Money Looks To Shake Up UK Retail Banking

LONDON (Dow Jones)--Virgin Money is looking to shake up the tightly knit U.K. banking sector and attract customers fed up with the country's biggest banks, Chief Executive Jayne-Anne Gadhia said Thursday, after agreeing to pay as much as GBP1 billion to buy Northern Rock from the government four years after the lender's near-collapse.

Gadhia told Dow Jones Newswires that Virgin Money will look to take market share from the "Big 5" banks that dominate U.K. retail banking with better customer service and by focusing on online banking. Rather than a hindrance, she said acquiring just 75 branches from the sale means the bank will be more efficient than peers who have "huge overheads" from extensive and often-underused branch networks.

Virgin Money earlier Thursday was named as the new owner of Northern Rock, five months after Chancellor of the Exchequer George Osborne formally put the bank up for sale.

The financial arm of Richard Branson's Virgin empire had narrowly missed out on buying Northern Rock in early 2008, when the government was considering ways to keep it afloat following a dramatic run on the bank and injection of emergency funds several months earlier. Instead, it was nationalized and restructured into a "bad bank" retained by the government and a smaller, "good bank" that will have around GBP14 billion in mortgage loans and GBP16 billion in deposits when its sale to Virgin Money completes Jan. 1.

http://online.wsj.com/article/BT-CO-20111117-710794.html

UK domestic banks offer good reasons for cheer

As the dust settles on the third-quarter reporting season, what have investors learnt about the UK banking sector? Have its prospects improved? Could the sector enjoy a year-end rally or will it continue to lag the wider market?

Based on what has been said over the past couple of weeks, the outlook remains gloomy. The part-nationalised banks – Lloyds Banking Group and Royal Bank of Scotland – have abandoned key performance targets because of the fragile UK economy. Lloyds has also lost its high-profile chief executive to stress.

Read more

Barclays Quarterly Profit Climbs

Oct. 31 (Bloomberg) -- Barclays Plc, Britain’s second- biggest bank by assets, reported a quarterly profit that beat estimates as earnings at the U.K. consumer bank more than doubled and investment bank revenue declined by less than European rivals.

Pretax profit before debt valuation adjustments in the three months to Sept. 30 increased by 5 percent to 1.3 billion pounds ($2.1 billion) from 1.27 billion pounds a year earlier, the London-based company said in a statement today. That beat the 1.24 billion-pound median estimate of 10 analysts surveyed by Bloomberg. Revenue at the Barclays Capital investment banking unit fell 15 percent to 2.25 billion pounds in the period.

Little bank benefits as big ones stumble

s Bank of America and Citibank try to soothe customers fed up with the recent announcement of new banking fees, there’s one group happy to sit back and capitalize on the situation.

Community banks and credit unions say the big-bank fees led to an increased number of inquiring customers at their branches last week, and executives believe the growth will continue to pick up speed over the coming months.

Bank of America announced plans on Sept. 29 to institute a $5 monthly fee, starting next year, for customers who make purchases with their debit cards, and Citibank said Thursday it will raise minimum account balances for its customers, who will be faced with a monthly fee if they fail to meet the new requirements.

Both banks have highlighted options for customers to avoid such fees, but many consumers aren’t buying it.

“They keep shooting themselves in the foot,” said Dick Lavoie, vice president of marketing at Nashua’s Triangle Credit Union. “They keep implementing restrictions on their accounts, so people are finally getting fed up and moving.

“And where are they moving to? They’re coming to credit unions.”

Triangle Credit Union has grown about 7.5 percent in 2011, Lavoie said, and he expects those numbers to rise further after Bank of America’s announcement.

Lavoie even called Bank of America an “ally” because it continues to alienate customers with fees, and those people end up at Triangle or other local banks.

Lavoie said he has witnessed “an awful lot of changes” in nearly 40 years of experience with credit unions, but that the new fee from Bank of America is a blunder of rare proportions.

“Now is not the time to come up with a new fee, in this economy,” he said. “As a personal consumer, I can’t see the justification in it.”

Bank of America spokeswoman Betty Riess said the new fee allows the bank to make ends meet.

“This new fee allows us to continue to offer the service and convenience customers have come to expect from Bank of America,” she said. “We’re making sure customers understand the value and convenience of debit cards and the choices they have to avoid the fee.”

Riess said the fee is “clear and transparent.” It will start in early 2012, and all affected customers will be notified in writing at least 30 days in advance.

“It is a result of the cost of doing business,” said Karen LaPlume, vice president of marketing at Granite State Credit Union. “They’re paying for it on one end, so they have to charge the customer on the other end.”

LaPlume said Granite State Credit Union has seen a “slight influx” in people asking about their checking accounts and fees in New Hampshire over the last week.

“In light of Bank of America being in the news, we are finding that more and more people are coming to us,” she said.

Large regional and national banks are as quick as local banks or credit unions to try to capitalize on the debate.

A TD Bank representative said the bank has “no plans to charge” its customers for the use of debit cards.

“We’re confident in the products we offer now and look forward to the opportunity to take market share,” said Rebecca Acevedo, public relations manager at TD Bank, which is based in Canada.

Still, the organizations with the most to gain are community banks. With a growing presence in small towns and fewer restrictions on customer accounts, local banks believe they offer a viable alternative to large national banks.

Nashua Bank plans to “capitalize with advertising” and will begin a campaign for new customers today by offering a limited-time promotion of $5 to anyone who opens a new checking account, President G. Frank Teas said.

U.K. Bank-Sale Proceeds Should Go to Cut Debt

Ed Balls, the Treasury spokesman for the U.K.’s opposition Labour Party, said proceeds from selling off state-controlled banks should be used to reduce the national debt rather than in giveaways to voters.

The government took stakes of 41 percent of Lloyds Banking Group Plc (LLOY) and 83 percent of Royal Bank of Scotland Group Plc in late 2008 and early 2009, rescuing the companies from collapse. Both are currently trading at about half the average price at which the government bought the stakes.

In March, four people familiar with talks between the banks and Prime Minister David Cameron’s government said a sale could start as soon as next year. While Deputy Prime Minister Nick Clegg has called for the shares to be distributed to taxpayers, Chancellor of the Exchequer George Osborne may prefer a straight sale to raise funds that could be used to cut taxes before the 2015 election.

“Even as bank shares are falling again, David Cameron and Nick Clegg are still betting on a windfall gain from privatizing RBS and Lloyds to pay for a pre-election giveaway,” Balls told his party’s annual conference in Liverpool, northwest England today. “We will commit instead in our manifesto to do the responsible thing and use any windfall gain from the sale of bank shares to repay the national debt.”