European leaders agree on €130bn package for growth
The leaders of Germany, France, Italy and Spain this afternoon agreed in principle to a €130bn (£104bn) package of measures aimed at reviving economic growth in the Eurozone.
But critics say the measures are largely symbolic and debate remains about the whether the nations will issue joint bonds to combat the debt crisis.
After a four-way summit in Rome the Italian Prime Minister Mario Monti said the European Union should adopt a series of growth measures worth about one per cent of the region’s gross domestic product next week’s summit.
“Growth can only have solid roots if there is fiscal discipline, but fiscal discipline can be maintained only if there is growth and job creation,” Monti said.
But the French, Italian and Spanish leaders appear to have made little progress in convincing Merkel that she should mutualise Europe’s debts.
French President Francois Hollande voiced impatience with Berlin’s reluctance, saying it should not take 10 years to create jointly underwritten eurobonds, adding that greater solidarity was needed among member states before they abandon more sovereignty to EU institutions.
“I consider euro bonds to be an option…but not in 10 years,” Hollande said in a direct challenge to Merkel. “There can be no transfer of sovereignty if there is not an improvement in solidarity.”
In contrast Merkel argues that members of the 17-nation currency union must transfer control over national budget and economic policies to Brussels before Germany would consider common debt issuance.
High-end London rents fall for first time in two years
Rents in the most London’s most exclusive and expensive neighbourhoods have dropped for the first time in two years, which estate agencies attribute to the number of redundancies at leading banks.
Research conducted by property consultants Savills has shown that average prime rents dropped by 0.4 per cent to £60 per square foot in the year to mid-June compared to the same period last year.
Lucian Cook, Savills director of research said: “Central London’s prime rental market is dominated by tenants from the financial services sector and is a barometer for what’s happening in the City of London employment market.”
Research from the Centre for Economics and Business Eurozone crisis suggests that the Eurozone crisis will lead to the loss of 25,000 jobs in London, which means that the number of jobs in London’s finance sector will reach a 16-year low.
RBS and Natwest problems could continue into weekend
Customers of RBS and NatWest have continued to face issues with their bank accounts today, as account balances again failed to update properly overnight.
The issues with the banking group’s IT systems have left customers unable to make payments or receive wages, while many others have been left confused about whether they can access the money that they are to suppose to have.
A statement on the NatWest website said today “we are continuing to experience technical issues with our systems. As a result, money credited to accounts may not be appearing on balances” and apologised for the “unacceptable inconvenience” it had caused to customers
NatWest branches stayed open late last night and opened early this morning to try and help customers with ongoing IT issues but the problems may continue into the weekend.
The Financial Services Authority (FSA) told City A.M.: “We are aware of the problem NatWest and RBS are facing with their IT systems. They have kept us fully updated and are working are to fix the problem.”
320 British jobs lost as refuelling work moves to Spain
Around 320 jobs are to go at an aircraft manufacturing plant in Bournemouth, after a consortium producing new air-to-air refuelling jets for the British government decided to move the work to Madrid.
Cobham Aviation Services and Airbus Military today announced that the ten aircraft will be converted in Spain, rather than the UK.
Locating the engineers and design team at one place will allow the consortium to get the planes to the UK “on time and to cost”, said AirTanker.
This announcement caused Cobham shares to drop two per cent to 228.15p in early trading.
Britain’s Ministry of Defense agreed to lease 14 Airbus A330 aircraft from the EADS-led AirTanker consortium for £10.5bn in 2008, to replace its ageing fleet of Lockheed Martin TriStars and Vickers VC10s which have been criticized for lacking the ability to operate efficiently in war zones.
Cobham said that the change would not have an affect on the company’s finance.
The change is expected to take place by the end of next year, which will leave 237 Cobham employees and 83 contractors jobless.
Market report: FTSE drops after Moody’s downgrade banks
The FTSE was down this morning following poor global growth forecasts and the decision by credit ratings agency Moody’s to downgrade some of the world’s biggest banks.
Last night Moody’s lowered the credit ratings of 15 of the world’s biggest lenders to reflect the risk of losses they face from volatile capital markets. But the move was well-flagged, ensuring that the markets were not surprised when they opened this morning.
Instead, with the price of Brent crude oil hovering at around $90 a barrel, it was energy and mining stocks that dragged the index down by one per cent in early trading.
The biggests faller was oil services firm Petrofac, off 4.7 per cent. Fresnillo, Tullow Oil, Eurasian and Vedanta joined the downward slide and lost more than three per cent, while miners Randgold, Kazakhmys and ENRC were all hit.
BHP Billiton fell 2.4 per cent after unexpectedly announcing a major $832m (£541m) investment in its Illawarra coal mining operations in Australia’s New South Wales state.
In banking Royal Bank of Scotland suffered, shedding 0.6 per cent. RBS is set to receive up to £300m less than it expected for a package of branches it is selling to Santander UK. This is because the business has failed to hit a number of targets outlined in the deal, according to press reports.
But the decline was limited at other financial firms, with Barclays down 0.2 per cent, HSBC off 0.1 per cent and Lloyds adding 0.1 per cent.
There was little in the way of corporate news but retailer Marks & Spencer fell by 2.9 per cent after analysts at Macquarie cut their target price for the firm.
Even defensive stocks struggled this morning and gains were few and far between. BT topped the leaderboard, up a measly 0.4 per cent, while Unilever, Vodafone and supermarket firm Morrisons were all up 0.2 per cent.
In the FTSE 250 bookmaker William Hill added one per cent after announcing that it has gained a license from the Nevada Gaming Commission to operate in the United States.
In Asia the Nikkei was down 0.3 per cent and the Hang Seng down 1.4 per cent.
William Hill prepares to launch in US
Gambling firm William Hill is to enter the US market next week, after it was awarded a licence by the Nevada Gaming Commission.
Britain’s largest bookmaker had announced the purchase last year of three American companies but the deal was conditional on the granting of the licence.
The green light from the Nevada Gaming Commission allows the British firm to begin offering sports betting on mobile devices. Online gambling is currently illegal in the US but William Hill will be well-positioned to move fast if the restriction is lifted.
“This now enables us to establish William Hill’s first ever U.S. operation, an important part of our international growth strategy,” said chief executive Ralph Topping.
The company would combine its own brand and product range with the local footprint established by the three firms – AWI, Brandywine and Cal Neva, he said.
The acquisitions are expected to be completed on June 27 for approximately $49m in total.
Xstrata puts £1.3bn copper project up for sale
Mining giant Xstrata has put a stake in a copper project in Papua New Guinea up for sale as it reviews its development projects.
Disposing of the stake, potentially worth more than $2bn (£1.3bn) is a response to uncertainty over global growth, rising costs and falling commodity prices.
Xstrata has not yet decided whether to sell all or part of its 81.8 per cent stake in Frieda River, and a spokeswoman said: “As part of this process we are assessing the interest of other investors in the Frieda River Project in Papua New Guinea.”
Xstrata’s 81.8 per cent share may be worth about $2.15bn.
Greek politicians form government
Greek politicians today agreed a coalition government intent on renegotiating the terms of an international bailout that is staving off bankruptcy but fuelling social tensions.
The government brings together the conservative New Democracy party and Socialist PASOK in an uneasy alliance of rivals facing an emboldened opposition determined to fight against austerity.
Party leaders said a team would be formed to renegotiate the terms of the €130bn (£104bn) bailout, setting up a showdown with Greece’s European partners who say they will adjust but not re-write the document.
“Our efforts have yielded a parliamentary majority to form a durable government which will bring hope and stability,” New Democracy leader Antonis Samaras told President Karolos Papoulias, three days after he narrowly won a Sunday election.
PASOK leader Evangelos Venizelos warned of a “big battle” in Brussels to craft a new deal that would promote growth and contain unemployment.
“The most critical issue is the formation of the national negotiation team and ensuring that it is successful,” he told reporters.
PASOK will back the government in parliament but there was no word on who would serve in the new cabinet. Venizelos said the make-up of the government remained to be fixed and would be discussed tonight.
News Corp bids £1.3bn for Packer’s Australian TV business
One of the longest-running rivalries in the media business is set to come to an end after Rupert Murdoch’s News Corp made a bid of 2bn Australian dollars (£1.3bn) for James Packer’s Consolidated Media Holdings.
Packer is the son of the late Kerry Packer, who fought many battles with Murdoch for control of the Australian press.
But the youngest Packer is preparing to abandon the media in favour of casinos and indicated he would accept the offer in the absence of a higher bid for the pay-TV firm, in which he holds 50.1 per cent.
For News Corp, a successful bid would double its stake in Australia’s dominant pay TV business Foxtel to 50 per cent, and give it 100 per cent of content provider Fox Sports.
The bid by News Corp’s local unit, publisher of The Australian, The Daily Telegraph and Herald Sun, to increase its pay-TV interests comes as it is expected to announce deep cost cuts and job losses in its print business.
Rio Tinto aims for a third of global trade in iron ore
Mining firm Rio Tinto announced today that it will spend $3.7bn (£2.4bn) on increasing its Australian iron ore output by a further 25 per cent in the next three years.
The decision is a vote of a confidence in China’s continued growth and shrugs off fears of global over-supply and waning demand.
Rio Tinto currently runs its mines at an annual rate of 230m tonnes and had already begun work to take output to 283m tonnes.
The latest expansion will hand the company around a third of global iron ore production.
“We are mindful of short-term uncertainties, and remain fully committed to a balanced approach to investment, while maintaining a single A credit rating and a progressive dividend policy,” Rio Tinto chief executive Tom Albanese said.
Rio Tinto also said it had committed a further $501m to fund its share of infrastructure development at its Simandou iron ore prospect in Guinea, a joint venture with China’s Chinalco.