Live Blog

August 21, 2014, 7:57am

Insurance outsourcer Quindell has reported an 119 per cent increase in half-year revenue for the six months ended 30 June, news that will boost its defamation charge against analyst Gotham City Research.

Quindell's share price bombed in April when mysterious US analyst Gotham City published a harsh report describing the company as "a country club built on sand", but today's results will help to restore investor confidence.

Half-year revenue of £357m marked a notable increase from revenue of £163.3m a year earlier, while cash generation rose to £1.8m per business day. Profit-before-tax also rose a mammoth 292 per cent to £153.7m.

The Gotham City report alleged that "42 - 80 per cent of Quindell's profits are suspect", and similar allegations were made by blogger Tom Winnifrith of ShareProphets earlier this month.

The board of Quindell reacted angrily to both accusations, taking legal action against Gotham City, and describing the ShareProphets blog as a regurgitation of the same claims but "in an even less professional and even more defamatory manner" in a six-page rebuttal.

Quindell put its strong half-year results down to "strong organic and synergistic growth", with businesses acquired in the past year accounting for less than 10 per cent of revenue, and remains confident of meeting its full-year revenue target of £900m.

Robert Terry, chairman of Quindell said:
 
We have performed well against all of our KPIs [key performance indicators] and have delivered the expected growth, as evidenced by the Group turning cash flow positive in July. 
 
As part of Quindell's continued growth and confidence in future prospects, a maiden dividend of 0.15p was paid in May, as part of our progressive dividend policy, which the Board remains committed to.
 
Shares sank 7 per cent as the market opened.
August 21, 2014, 7:33am

European markets are set to open higher this morning, with investors turning their attention to central bank monetary policy as the Eurozone releases a slew of economic data.

The Eurozone is set to release its flash purchasing managers index (PMI) at 9am, which will provide insight into the health of services and manufacturing sectors in the single currency area.

Economists speculate that the European Central Bank will announce more stimulatory measures following recent weak data in the region. 

Yesterday, minutes from the Bank of England's Monetary Policy Committee meeting revealed that two members voted in favour of raising interest rates. Similarly, last night's minutes from the Federal Open market Committee meeting indicated that the US is moving in the same direction after one member voted in favour of raising interest rates. 

Attention is now likely to shift towards when rates will start to rise, especially if US and UK economic data continues to improve.

Corporate news

Quindell reported an 119 per cent increase in revenue its interim results for the six months to 30 June. Cash flow for the company also significantly beat expectations. 

Phoenix Group announced positive results for the six months to 30 June, following a significant reduction in debt and the completion of a number of key projects.

Premier Oil also reported a strong performance for the six months to 30 June, with the company performing well on all fronts and production up by 11 per cent.

Interserve-Shanks has announced a £950m contract with Derbyshire County Councils to build and operate a new waste treatment facility in the Derby.

Data in Focus

  • 9:00am, Eurozone, manufacturing purchasing managers index for August
  • 9:30am, UK, net public sector borrowing for July
  • 9:30am, UK, retail sales for July
  • 1:30pm, US, jobless claims for July
  • 1:45pm, US, manufacturing purchasing managers index for August
  • 2:00pm, Eurozone, consumer confidence for August
Dilma Rousseff
August 20, 2014, 10:51pm

As the South American country limbers up for elections, the government is trying to stoke the economy with  a second injection of cash in less than a month.

The second bundle is under a quarter of the size of the first (R$10bn plays RS45bn), but has still required another loosening of regulations.

The central bank relaxed rules on reserve requirements to free up this batch of cash, while the first injection required an easing of compulsory deposit rules. 

From a central bank statement: 

It is hoped that the measures will improve small businesses’ access to credit and strengthen foreign trade.

Brazilian president Dilma Rousseff has faced growing displeasure from the public, fuelled by inflation of 6.49 per cent, low growth a large current account deficit and concerns about corruption in the run up top the World Cup.

Her re-election prospects are still seen to be good, but economic data out next week may show the country to be in a technical recession. The race was made more competitive recently by the death of a rival, Eduardo Campos. 

Campos's replacement, Marina Silva, is seen to be widely popular.

Cristina Fernandez de Kirchner
August 20, 2014, 9:08pm

Argentina may have found a way out of its default debacle, but it could be messy and is unlikely to end in repayments for the holdout creditors.

Read the background to the saga here.

President Cristina de Kirchner, relentless populist to some and hero to others, is proposing a debt swap and the markets have listened: according to the Financial Times, Argentina's benchmark restructured bonds, due in 2033, have fallen to their lowest level since 19 June.

What a debt swap means is the South American nation will change the intermediary bank (trustee) that distributes repayments on its behalf; ditching the incumbent Bank of New York Mellon (BNYM) and appointing an Argentine replacement in its stead.

This debt-swap would allow Argentina to repay bondholders under Argentine law, rather than US jurisdiction. The value owed would not be altered. 

A change of jurisdiction would help Argentina immensely, given that New York judge Thomas Griesa blocked BNYM from delivering $539m in repayments, causing Argentina to default. 

Such a move would mean very little chance of the holdout creditors being paid back the money they claim they are owed, at least until Kirchner leaves office. 

Argentina defaulted back in 2001, and many creditors (around 93 per cent) agreed to 65 per cent haircuts on the money they were owed.

Not all did however, and a group of hedge funds headed by Elliot Management have been chasing Argentina to pay up.

Argentina argues that it cannot legally pay the holdout group the full whack without triggering a clause meaning Kirchner's government would have to offer the improved terms to all bond holders. That, they claim, would have led to bankruptcy. 

Janet Yellen
August 20, 2014, 8:13pm

The Federal Reserve has released the minutes from its 29-30 July meeting on monetary policy.

As with the minutes published by the Bank of England earlier today, there was a certain amount of dissent from some of those present regarding the key issue of interest rate rises. 

From the release:

Some participants viewed the actual and expected progress towards the Committee's goals as sufficient to call for a relative prompt move toward reducing policy accommodation to avoid overshooting the Committee's unemployment and inflation objectives over the medium term.

Unlike the UK economy, which saw an unexpected drop in inflation this week, the Fed can be relaxed as the US rate shows signs of settling around the two per cent target.

Of course, the US central bank also has a mandate to oversee a revival in the labour market, and there too there has been improvement, despite slightly underwhelming figures last time around. 

Here is a snippet on inflation:

Participants noted that inflation had moved somewhat closer to the Committee's 2 per cent longer-rub objective and generally saw risks of inflation running persistently below their objective as having diminished somewhat.

And on the positive state of the jobs market, which will be crucial in and rate-hike decision:

Participants generally agreed that both the recent improvement in the labor market conditions and the cumulative progress over the past year has been greater than anticipated and that labor market conditions had moved noticeably closer to those viewed as normal in the longer run.

The comment on the jobs trends was tempered by the "subdued rise" in wages. Sounds familiar

There was a reaction in the bonds market, where both two-year and ten-year US bond yields rose by three basis points, to 0.46 per cent and 2.47 per cent respectively, reflecting a growing pressure to raise rates. 

Job centre
August 20, 2014, 7:58pm

The rise in the employment rate since 2008 has largely been amongst the self-employed, according to new data from the ONS. 

What is more, the percentage of the workforce that answers only to itself is at 15 per cent, the highest rate for 40 years. To make matters worse, the average salary for a self-employed person is down 22 per cent on 2008/9. 

This is indeed a very different labour market to that of the pre crisis era. 

As the graph shows, there has been a steady rise in the number of self-employed people. This rise has been a major force behind higher employment rates.

The problem is that self-employed people have suffered a fall in wages, which could well be because such a large proportion of the group are skilled tradespeople. A greater supply of, for example, builders, means more price competition. 

Median wages have been dropping and to compound the problem it has seemingly become more difficult for a self-employed person (assuming they wanted to) to gain work in a company.

The self-employment rate has jumped not because more people are becoming self-employed, but because fewer people are leaving self-employment. 

These are perhaps trends we can expect to see after a period in which the economy has been struggling to regain its pre-crisis size.

What it does show us however is that, although the unemployment rate is coming down (6.4 per cent at the last measure), there is still space for conditions in the jobs market to improve. 

Real wages are low, and the self-employed are suffering from the cost of living crisis.

 

Oil well
August 20, 2014, 5:22pm

An independent Scotland could start to feel the impact of depleting oil and gas reserves in just 15 years, according to a leading figure in the oil industry.

Former chief executive of Wood Group, Sir Ian Wood, has warned that Alex Salmond has massively overestimated the amount of recoverable oil and gas left in the North Sea.

The SNP have quoted predictions that Scotland has 24bn barrels of oil left. Wood believes this number could be off by between 45 and 65 per cent.

However, the much more important consideration for Wood is how long these energy supplies will last.

"We now have a mature offshore oil and gas basin with depleting reserves, and even with everything possible being done to maximise recovery, we will be down to very low levels of production by 2050," Wood told EnergyVoice.com.

If correct, Wood's analysis would be a serious blow to the argument that an independent Scotland could raise enough tax revenue to fund its high levels of public spending.

Careful not to make a partisan point, Wood said: “I believe the debate should not be about nationalism, but growth and economic success, and the quality of life for citizens and all that goes with that. Against these measures, it’s very hard not to conclude the case is heavily weighted towards Scotland remaining in the UK and getting the best of both worlds – I want the best for future generations of Scots.”

The Aberdeen-born businessman said tax revenue from oil and gas over the next five years will be less than 40 per cent of the Scottish government's current prediction - equivalent to £370 for every person in Scotland.

If Scotland ditches the rest of the UK Wood said it could lead to the ironic situation where Scotland might have to import energy from south of the border, hitting its balance of payments.

August 20, 2014, 5:17pm

In the wake of Russia's ban on some European food products, Poland has asked the European Commission to complain to the World Trade Organisation (WTO).

Poland sent the request to European Trade Commissioner Karel De Grucht, who represents the EU in WTO cases.

Marek Sawicki, Poland's agriculture minister has said that preliminary consultations are underway, and the first decision on the lawsuit could come as soon as September 12.

On 7 August, Russia slapped sanctions on imports of dairy, vegetable, fruit, meat and fish products from the EU, the US and other markets. Polish farmers have been hardest hit by the tit for tat sanctions between Russia and the West. 

The Russian Federation is an important market for Polish produce, with total food exports amounting to roughly  €1.13bn a year. Thanks to the food bans, Poland is sitting on 700,000 tonnes of fruit that would have otherwise gone to Russia.

Russia's crackdown on foreign food was in response to a series of actions taken by western countries following the annexation of Crimea and Russia's jingoistic conduct in Ukraine.

"The United States,' Australia's and Canada's opinion will also be important," Sawicki was quoted as saying by Polish news agency PAP. "I believe Deputy Prime Minister (Janusz) Piechociński will engage in talks with those countries," he added.

Should the WTO hand Poland victory in this case, Russia could face fines for restricting markets. The European Commission has already taken action against Russia's embargo on pork imposed in April. European food is not the only thing under threat from an increasingly isolationist Russia: Vedomosti recently reported that the Kremlin was considering extending bans to imported cars

Nakhla meteorite
August 20, 2014, 4:33pm
The question of whether there is - or ever was - life on Mars has rumbled on for centuries, but a meteorite that landed on Earth more than 100 years ago could offer scientists new clues about the environment of our neighbouring planet. 
 
The Nakhla meteorite, which landed in Egypt back in 1911, has already provided the first evidence of water on the red planet, but until now signs of life have eluded astrobiologists. 
 
They came close in 2006, when NASA scientists broke open a fragment of the meteorite and found "an abundance" of complex carbon materials inside, resembling the effects of bacteria present in Earthly rocks. At the time, however, their findings were criticised on the grounds that carbon is the fourth most abundant element in the universe.
 
But a recently discovered oval-shaped structure within the Nakhla meteorite has a slightly different composition to the rest of the meteorite. This was caused during the development of its structure, when the wall of the ovoid was isolated from the rest of the system through the formation of a layer of Iron oxides and hydroxides. 
 
Scientists from Greece and the UK believe it could hold new secrets about the existence of life on Mars, and have been using X-rays and electron microscopy to prise secrets from the rock. 
 
The main finding, published in the journal Astrobiology, is that the ovoid is made of clay - the first documented presence of extensive clay in Nakhla. This is a crucial discovery because clay is an  important material for giving rise to the geological conditions necessary for life formation.
 
They also discovered the ovoid's sub-surface contained multiple niche environments, each slightly different from the others. If these are also present on the shallow subsurface of Mars, life could have the potential to develop, the scientists concluded. 
 
While this is no definitive sign of life on Mars, it is an indication that it could have existed, the team said. 
 
Professor Sherry L. Cady, who was involved in the study, said: "Though the authors couldn't prove definitively that the object of focus was evidence of life, their research strategy revealed a significant amount of information about the potential for life to inhabit the subsurface of Mars." 
 
It's not just the potential for life originating on Mars that the study has helped scientists to understand, either; it is objects like the martian ovoid that could, ultimately, pave the way for our own relocation to Mars in the future.
 
“These studies may also be useful for assessing the possible habitability of the martian subsurface,” the report concludes. 
Luis Suarez
August 20, 2014, 3:47pm

Barcelona will go to the Court of Arbitration for Sport (CAS) in a bid to a fight a Fifa ban on all transfer activity until January 2016.

Fifa imposed the ban spanning two transfer windows in April this year, after discovering that the Catalan club had breached regulation regarding the signing of players under the age of 18.

Barcelona appealed the ruling, allowing them to continue signing players this summer, but Fifa has today stood by their original decision and state that the ban will start in January 2015.

On their official website today Fifa described the decision as "an affront to the spirit of our Masia [the club's academy], a world renowned example of academic, human and sporting education", and say they will "continue defending its interests before the highest sporting authority, in this case the CAS".

Fifa also ordered Barcelona to pay a £295,000 fine and has given them 90 days in which to "regularise the situation of all minor players concerned".

The organising body said in a statement this morning:

FC Barcelona is to serve a transfer ban which will see the club prevented from registering any players at both national and international level for two complete and consecutive transfer periods, starting with the next registration period [January 2015].

Barcelona have been busy bolstering their squad while the ban was suspended pending appeal, spending over £100m on new players (including a reported £65m on Luis Suarez), the Blaugrana's largest ever transfer outlay in a single season.

Fifa's original investigation found that Barcelona were guilty of "serious infringement" of their rules in ten signings made between 2009 and 2013.

Fifa's regulation on international transfers state that international transfers of players over the age of 18 are only permitted under the following conditions:

  • The players parents move to the country in which the new club is located for reasons other than football.
  • The transfer takes place within the European Union (EU) or European Economic Area (EEA).
  • The player lives no further than 50km from a national border and the club he wishes to join is within 50km of that same border.

 

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