Live Blog

April 17, 2014, 4:19pm

Germany's capital city has followed the lead of Brussels and banned the insurgent taxi service Uber.

The San-Francisco based company was served with an injunction by a Berlin court for hurting competition.

In a sign that European taxi drivers are increasingly worried they may have to provide a quality service at a decent price, the injuction was brought forward by none other than  Richard Leipold, a taxi operator and chairman of the city's taxi association.

"This isn't a student start-up against a big taxi cartel. Uber is backed by Google. If I'm wearing gym shorts I don't want to compete against someone wearing hobnailed boots," said Leipold.

Uber's response to the decision didn't quite buy Leipold's protestations of underdog status.

"Choice is a beautiful thing. Berliners love it. We love it. Big Berlin taxi companies don't," Uber said in a statement.

The company said the decision would curb consumer choice, limit new economic opportunities and said it would "vehemently" contest the decision.

Yesterday Brussels called time on the app-enabled taxi service, with threats of €10,000 (£8,200) for each violation.

The ban was sadly predictable. In March, Brussels' minister for public works and transport Brigitte Grouwels along with several taxi companies, had accused Uber of violating taxi regulations, according to newspaper De Tijd.

In France, Uber has been subjected to the so called "15-minute" law, which requires taxi apps to wait 15 minutes after customers place a booking to pick them up.

However, this has not been enough to appease the militant taxi unions of Paris. Paris taxi groups have since been lobbying for a doubling of the regulation to a "30-minute."

Uber's use of smartphone software and surge pricing policy have made it a force to be reckoned with. It is part of an industry that a few short years ago that was non-existent, but now app-based service companies boast almost 12,000 vehicles.

April 17, 2014, 1:02pm

The European Parliament has voted for a host of new laws and regulations governing so called "legal highs."

The time taken to ban psychoactive substances deemed to be harmful has been slashed from two years to ten months. If there is perceived to be an immediate risk, a substance can be placed under a one year ban within weeks.

The new rules are supposed to ensure the substances in question will no longer be available for recreational use, whilst the EU Drugs Agency conducts a risk assessment. Those who continue to produce, supply and distribute these substances may now find themselves facing a 10 year prison sentence.

However, national drug warriors who find the measures too timid need not fear. MEPs were keen to stress that the regulations were passed “without prejudice to the right of member states to criminalise the possession of drugs for personal use at national level”.

Unfortunately for drug prohibitionists of both a national and supranational stripe, the market for such substances has grown and is continuing to grow at a pace that neither will be able to control effectively.

In 2011, a Eurobarometer survey found that five per cent of EU 15-24 years olds had used such substances at least once, with a peak of 16 per cent in Ireland, and close to 10 per cent  in Poland, Latvia and the UK.

It is not just the number of people taking legal highs that has been on the up, but the number of particular substances available to consumers. The United Nations found that between 2000 and 2005 the number of legal highs being produced was roughly five a year, by 2011 this had rocketed to close to one a week.

The European Monitoring Centre for Drugs and Drug Addiction, commenting on the explosion of legal highs, said:

Although it is impossible to know the exact number of new psychoactive substances on the market experts have advanced estimates running well into the thousands

In fact, at the tail end of 2013, the International Narcotics Control Board reported there had been a 300 per cent increase in internet sites providing these substances to Europe in just two years.

The concentration of sites providing legal highs is particularly striking in the UK, with 150 new substances entering the UK market in the three years up to 2013, according to the Centre for Social Justice. The number of UK based websites selling such substances stood at 130 at the end of 2013.

Attempts by EU regulators to crack down on the fast growing production of legal highs not only carries a very small chance of success, but may stand a considerable chance of causing active harm.

Substances currently available legally, if not advertised for human consumption, can be sold in an environment not controlled by criminal gangs and cartels, who appeal to violence instead of the law when disputes arise.

However, if the European Parliament believes the solution to legal highs is the one in place for cannabis and cocaine, EU citizens will not need a crystal ball to forecast the failure of the supranational government's approach to drug policy.

April 17, 2014, 12:10pm

State-backed bank RBS has today responded to a report by Lawrence Tomlinson, which alleged that the bank's Global Restructuring Group (GRG) was systematically defrauding small business customers.

Clifford Chance was appointed to investigate the claims made, and RBS state that the investigation has "concluded that there was no evidence to support this damaging and serious allegation."

Known as the Tomlinson Report, Clifford Chance investigated claims that the GRG was culpable of "systematic and institutional" behaviour, and artificially distressing what were viable businesses, and putting them "on a journey towards administration, receivership and liquidation."

Clifford Chance do state that some customers "complained that they experienced insensitive, rude or aggressive behaviour", but that "evidence on the files did not allow us to reach a conclusion as to customers' concerns about their interactions with the bank during the process or the behaviour of any individual at the bank."

The investigation involved the review of written documents, and not interactions in meetings or over the telephone, and as such Clifford Chance were "unable to verify such allegations about behaviour". A number of complainants commented "that they felt pricing of restructured facilities lacked transparency", said Clifford Chance.

RBS CEO Ross McEwan said that the trust customers have in RBS "was put at risk" by Tomlinson's allegation.

This allegation had a profound effect on the bank and on the work of a team that successfully turns round the vast majority of businesses that it works with. We could not let this allegation hang over us. That's why we acted quickly to appoint Clifford Chance to get to the truth of this claim. We are determined to earn back the trust of our customers.

April 17, 2014, 9:02am

The Co-op has unveiled losses of £2.5bn. The group admitted it had been a "disastrous" year, going so far as to say it was the worst in its 150-year history.

Interim chief executive Richard Penny cook, commented "these results should serve as a wake-up call to anyone who doubts just how serious the challenges we face are."

Co-op sales were down £500m from the previous year, with profits from the company's food division falling by eight per cent to £247m.

However, there were elements of good news amongst the doom and gloom. General insurance profit rose from £13m in 2012 to £33m last year. The funeral part of the business saw a rise in profit of three per cent. 

The troubled group has been subject to constant pressure in recent weeks, with former City minister Lord Myners accusing Co-op managers of making inept decisions.

The group recently came under fire from workers, as the Unite union voiced its support for major reforms of the mutual's governance structure. Unite insisted that the board should not be allowed to hold up the necessary changes.

"On a daily basis we see the speed the sector is moving and with such pace, that unless the review is completed, there will be no chance of the Co-op being able to compete in such a cut-throat sector,” said Unite’s Adrian Jones in a letter to the Co-op’s regional boards.

On Friday, the group's banking arm reported losses of £1.3bn, which makes up a little less than half of the group's losses for 2013. The bank's former chairman, Paul Flowers, was charged with offences over class A and class C drugs yesterday.

April 17, 2014, 8:32am

What was the scariest period of the Cold War?

It's commonly accepted as being the Cuban missile crisis, a standoff in October 1962, and widely thought of as the closest we've come to all out nuclear conflict.

Lars Christensen, chief analyst at Danske Bank and a fellow of the Adam Smith Institute, suggests that financial markets paint a different picture of events.

The S&P 500 flat-lined for 13 days in October 1962 - suggesting the threat wasn't that scary after all. If we were really on the brink of an all out war, "we would certainly have expected the US stock market to drop like a stone," says Christensen.

To say things were quite tense would be an understatement. So why no collapse? For those that considered the prospect of nuclear war as a case of Mutually Assured Destruction (MAD) the answer is obvious: There would be no winner, and the US and Soviet Union had no incentive to start such a conflict.

If anything, the scariest period was in the run up to the crisis. In his note, "A brief history of bear markets", TIAA-CREF chief investment strategist Brett Hammond notes that the Cold War saw the S&P 500 fall 27 per cent by June 1962.

Perhaps this drop can all be attributed to other key events - Sputnik launch, or the Bay of Pigs invasion. More likely, investors had already priced in the costs of a nuclear standoff by October, and events during those 13 days didn't seem to affect the probability of collapse.

That's not to say that the events didn't affect consumers and investors more generally. Christensen says that the regime uncertainty represented by the Cuban missile crisis would have reduced aggregate supply, and as such real GDP, and inflation for a given monetary policy stance. And that's what we got in the late 1960s.

The crisis did also "raise volatility without impacting stock-market levels," according to Nicholas Bloom's paper "The impact of uncertainty shocks".

The best bit? "The market was of course right," notes Christensen, after 13 days the stand-off ended, with no Third World War.

April 17, 2014, 7:53am

European markets are expected to open flat this morning as poorer than expected results from both Google and IBM offset the well-received dovish comments of Federal Reserve chair Jane Yellen.

Google shares dipped as much as five per cent in after hours trading last night, after it reported revenues for the first quarter of the year of $15.42bn (£9.18bn), about £100m short of what was expected, but higher than the $12.95bn reported in 2013’s first quarter.

Net income increased to $3.45bn from $3.35bn in the same period during 2013.

But investors will be reassured by Yellen's remarks to the Economic Club of New York that the US would "likely require low real interest rates for some time."

The Fed chair said it could take as long as two years for the US to reach full employment and there was still a significant risk of inflation remaining too low.

Corporate data

The world's largest spirit maker Diageo attributed weak sales in the nine months to 31 March on adverse currency movements and uncertain GDP outlook in emerging markets.

Housebuilder Taylor Wimpey has increased its order book volume by 13 per cent to 8,139 and reported the average selling price of homes in the total private order book have risen by 22 per cent to £249,000.

Rating agency Standard & Poor's have increased their outlook on Thomas Cook gorup from stable to positive.

Oil giant Shell has announced a gas find at the 'Rosmari-1' well in offshore Malaysia.

Data in focus

  • 1:30pm: US April initial jobless claims
April 17, 2014, 7:30am

Diageo, the world's largest spirits maker, has reported a rise of 0.3 per cent in organic net sales growth for the nine months ended 31 March. However, organic net sales fell by 1.3 per cent for the quarter.

Diageo is having a tough time in emerging markets due to currency volatility and worries over the GDP outlook.

Volume declined two per cent and organic net sales fell by 1.3 per cent for the quarter. Adverse currency movements and the ending of the distribution agreement with Jose Cuervo hit net sales, which fell by 7.4 per cent for the nine months to 31 March.

Ivan Menezes, chief executive of Diageo, commented:

Our performance reflects the challenging environment we are operating in. Consumers in North America are most resilient, as are consumers of our reserve brands in most markets. In Western Europe the economy, consumer confidence and our business are all improving slowly but consistently.

The company said it was determined to deliver the operating efficiencies it had identified. 

April 17, 2014, 6:28am

Asian markets have seen minor gains after the US posted better than expected industrial production figures, and the chair of the Federal Reserve Janet Yellen reaffirmed the Fed's commitment to supporting the recovery.

Investors were reassured by Yellen's remarks to the Economic Club of New York that the US would "likely require low real interest rates for some time."

The Fed chair said it could take as long as two years for the US to reach full employment and there was still a significant risk of inflation remaining too low.

However, Google's failure to meet analyst expectations for its first quarter results has had a negative impact on the Japanese tech sector. IBM also weighed on markets after reporting its lowest quarterly revenue in five years.

Japan's Nikkei is down 0.1 per cent, while the Hong Kong Hang Seng Index has advanced 0.2 per cent. The Shanghai Stock Exchange Composite Index is up 0.01 per cent, while the Topix has added 0.03 per cent. South Korea's Kospi has taken a hit of 0.3 per cent.

April 16, 2014, 4:31pm

Economists aren’t great at measuring happiness – or a lack thereof – no matter how hard they work on complex methodologies in a bid to record our levels of contentment.

But one of the more simple, and therefore arguably powerful, measures has long been known as the Misery Index. It’s simple – high unemployment and high inflation makes for a miserable population.

The aftermath of the global economic slump has caused the index to spike, yet one economist – George Buckley of Deutsche Bank – says it is now at its lowest rate in six years.

In other words (my words, admittedly) we are now happier than we’ve been since 2008. Buckley uses the claimant count rate in his calculations, which produces the graph below:

With today’s upbeat labour market news, the misery rate is now five per cent on Buckley’s measure – under half the level it reached in September 2011. The last time it was lower was in March 2008.

Using the more traditional measure – which uses the unemployment rate, rather than the claimant count rate – the UK’s misery reading is at 8.5 per cent, still markedly down on recent years in which it surpassed 13 per cent.

Yet we still have some way to go to be top dogs in Europe. Those happy Germans have a jobless rate of 6.7 per cent and annual inflation of one per cent, producing a misery rating of just 7.7 per cent.

Something to aim for, ja?

April 16, 2014, 4:19pm

It’s the video they wish we’d never seen, five top City names take part in a fundraising video for the Young Vic theatre which sees them rip open their shirts and sing at the top of their voices.

The video was never supposed to be public, it was aired for 400 guests at special screening back in October but was spotted on the Young Vic YouTube channel and laid bare for the masses, pun intended.

The clip, titled “Life’s a Pitch,” sees ICAP boss Michael Spencer, former JP Morgan bigwig Bill Winters, Citigroup’s Derek Bandeen, Markit’s chief exec Lance Uggla and founder of Clearbrook Capital Partners Robin Saunders pitch a fictional musical to a “Young Vic executive”.

It’s called “Birthday Suits” and it’s about a group of bankers who moonlight as strippers. Even when we say that, you still won’t believe how good it is until you watch.