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Cityam 2013-01-29

Cityam 2013-01-29

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BUSINESS WITH PERSONALITY
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If the declining trend of unemploymentsustains a brief pause, or a slight blip, thenmarkets could transition into ‘cheeringbad news’ on the basis of maintainingultra-loose monetary policy as long asinflation is largely contained.
- Ashraf Laidi 
 Ashraf Laidi JamesChenPeterEsho JoshuaRaymond
 
coming from a one per cent gainin the price of HSBC. But duringthe day, the index hit 6,311.26, thehighest level it has reached sinceMay 2008. This means the UK’s 100 largestfirms have added some 5.4 percent to their collective value sincemarkets opened on 2 January, bringing the index from 5,969.5 toits current level just under 6,300. And yesterday’s currency movements were just as marked.Pound sterling lost 0.8 per centagainst the dollar to reach a fivemonth low of $1.5673. Sterlingalso dived 0.7 per cent against theeuro, to
 €
1.1643, with pounds buying fewer euros than at any point in the last 13 months.Lee McDarby at Investec put thismove partially down to Mark Carney’s speech last week, in which the incoming Bank oEngland governor said monetary policy was not “maxed out,” andthat he was willing to considerpolicy frameworks other than thetraditional inflation target. Thishints at nominal GDP leveltargeting –a policy that could seeincreased monetary intervention.
FTSE
28 Jan22 Jan23 Jan24 Jan25 Jan
6,3256,3006,2756,2506,2256,2006,1756,150
6,294.41
28 Jan
BUSINESS WITH PERSONALITY
Zombie firmmassacre aslenders scare
 TENS of thousands of firms couldclose unnecessarily, taking withthem a million jobs, if banks cut back the support they offer to zom- bie companies, the Institute for Turnaround (IfT) warned yesterday. The group said that after years of helping struggling firms banks arerunning out of patience and lookingto sell on their loans. That would enable increased bank lending to more productive firms, asthe authorities want. But if bankssell those firms’ debts onto investors who are not interesting in their long-term future, the firms could be lost.IfT chairman Iain MacRitchie warned a “zombie company mas-sacre” could take place, particularly in the troubled specialist retail andconsumer electronics sectors – which would leave even more empty spaces on UK high streets.“There is every possibility that mas-sive amounts of value will be lost inshort order, thousands of jobs willdisappear,” he wrote to IfT members. The IfT estimates 75,000 zombiefirms struggle to pay the interest ontheir debts at the moment but could be turned around if they act fast. That equates to 3.6 per cent of allUK firms. But banks denied taking atougher line on zombies.“Trying to return firmsto health by giving themtime to restructure oractively getting involvedhas been an effective strate-gy –50 per cent of thosein intensive care areturned around,” saidLloyds’ Stephen Pegge.
Icelandic residents voted against the deal to repay Britain and the Netherlands in a referendum in 2010
ICELAND’S government will not haveto pay back the UK for bailing outdepositors who lost money in thecountry’s banks in 2008, a top courtruled yesterday. The move leaves the UK £2bn out of pocket, and the Treasury is likely tohave to wait for years to get the money  back as the failed banks’ estates areunwound.Iceland can escape paying back themoney because the European Free Trade Association (EFTA) court ruledthat the financial crisis was so severethe country could disregard previousdeposit guarantee plans. The guarantees had been drawn upin case a single bank failed, ratherthan the whole industry, the courtsaid, noting the very severe systemicnature of the crisis which hit thenation’s banks.But MPs reacted with shock, warningthat the ruling casts doubt on the reli-ability of the guarantee system as a whole, undermining confidence inthe protection states give savers.“While I am sure there will be rejoic-ing in the streets of Reykjavik, many inthe City will be surprised and disap-pointed by this ruling,” said Mark Field, Conservative MP for the Cities of London and Westminster.“This is a worrying precedent whichthrows into the air a lot of questionmarks around the future of govern-ment guarantees, with the notion of  what an exceptional crisis is.” And Labour’s John Mann MP, a mem-
www.cityam.com
FREE
 ber of the influential Treasury SelectCommittee, warned governments toreconsider the whole idea of guaran-teeing deposits in all instances.“This ruling has huge ramifications –this blasé attempt by all governmentsto guarantee all deposits is now insome jeopardy,” he told
City A.M.
He argued consumers should bearmore of the risk if they want to seek  very high returns on savings, ratherthan leaving the government to pick up the whole tab if their bank fails.Icelandic institution Landsbanki went under in 2008, including itsonline arm Icesave, which had 300,000UK customers. The British governmentdecided to bail out depositors entirely,rather than just up to the then limit of £50,000 through the Financial ServicesCompensation Scheme (FSCS). The UK loaned Iceland’s Depositorand Investor Guarantee Fund £2.25bnand the FSCS £1.4bn, and another£780m to cover the amount over theusual limit. Half of that has been paid back in the years since as the bank’sremains are picked apart.“We note the judgment of the EFTA Court and will study it in detail,” said a Treasury spokesperson.Iceland’s government said: “It is aconsiderable satisfaction that Iceland’sdefence has won the day; the EFTA Court ruling brings to a close animportant stage in a long saga.”
WE SAMPLE TOP CHEF ANGELA HARTNETT’S CHAMPAGNE SPECIAL
BY TIM WALLACE
FTSE 100
6,294.41 +9.96DOW
M
13,881.93 -14.05NASDAQ
3,154.30 +4.59£/$
M
1.57 -0.01£/€
M
1.16 -0.01€/$
M
1.34 -0.01
BY TIM WALLACE
ICELAND LET OFF
£
2
BNDEBTTO UK
ISSUE 1,807 TUESDAY 29 JANUARY 2013
THIS IS NOT AUSTERITY
 Andrew Lilico in The Forum, Page 18See Page 24
TRADIN
 
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 THE FTSE100 index rose throughthe 6,300 barrier to a 56-monthhigh during yesterday’s trading, just as sterling dived to a 13-month low against the euro, and afive-month low versus the dollar. The index closed up 9.96points –0.2 per cent –at 6,294.4, with more than half of that
BY BEN SOUTHWOOD
FTSE breaks 6,300 mark –as sterling slides to deeper lows
 
Certified Distributio
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from 26/11/12 to 30/12/12 is 127,678
Zombie firms have beenblamed for slow growth
DEBATE:
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KRUG EXTRAVAGANZA

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