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FTSE 100 5,775.24 -53.43 DOW 11,993.16 -51.24 NASDAQ 2,700.97 -14.64 /$ 1.62 +0.01 / 1.16 unc /$ 1.40+0.01 Certified Distribution31/01/11 - 27/02/11 is 107,265

www.cityam.comIssue 1,342 Tuesday 15 March 2011 FREEBUSINESS WITH PERSONALITY

nNIKKEI FALLS SIX PER CENT IN FIRST HOUR OF TRADING n THIRD NUCLEAR REACTOR EXPLODES

JAPAN REACTOR CRISISRAISES NUCLEAR FEARS

JAPAN fought to keep control of itsdamaged nuclear power plants yes-terday, as explosions at two more ofthe Fukushima plant reactors fuelledfears of a partial meltdown fromfailed cooling systems and ham-mered the markets this morning.

Japans Nikkei 225 index fell sixper cent in the first hour of tradingthis morning, after suffering thefastest decline since October 2008yesterday. Utility, transport andmanufacturing stocks were hit hardagain as the countrys weakenedinfrastructure hampered the ongo-ing rescue efforts.

World stocks slid to six-week lowsyesterday as traders reacted to theunfolding disaster.

Officials reported an explosion atFukushimas reactor 2 early thismorning, where yesterday workershad raced to prevent meltdownwhen the improvised seawater cool-ing system failed leaving nuclearrods temporarily exposed.

Non-essential workers were evac-uated from Fukushima early thismorning after fears of a radiationleak.

Plant operator Tokyo ElectricPower Company (TEPCO) said therods in Fukushimas reactor 2 werehalf-covered with water at 9amlocal time (midnight GMT), and thatlevels continued to improve in allthe units.

There is the possibility that dam-age was done to the suppressionpool, said a spokesperson during anews conference, referring to thestore of water under the reactor

meant to prevent meltdown. Thewater injection operations are

being continued.Chief cabinet secretary Yukio

Edano said earlier yesterday somedamage has been detected at reac-tor 2, though no data was availablethis morning.

A separate blow-out at

Fukushimas reactor 3, thought tobe caused by a hydrogen build-up,

sent flames and black smoke intothe air at 11am local time yesterday.

Radiation levels at the plants,located 240 km (150 miles) north ofTokyo, climbed from 1,941 to 8,217microsieverts an hour at 9am localtime, TEPCO said well above the

legal limit of 500 microsieverts anhour.

Across the country, officials saidat least 10,000 people have diedsince the earthquake and subse-quent tsunami on Friday.

About 450,000 people have beenevacuated nationwide in additionto 80,000 from the exclusion zone

around the nuclear power plants,and almost 2m households remain

without water. The Japanese gov-ernment is currently taking the nec-essary precautions evacuatingnearby communities, putting peo-ple in safe shelters and distributingpotassium iodide to those at risk,the World Health Organisation said.

FOCUS ON JAPAN: P2, P3, P4,MARKETS: P15; P18

BY MARION DAKERSJAPAN QUAKE

The nuclear plantshave been shaken,flooded and cut offfrom electricity

Yukiya Amano,International Atomic

Energy Agency

Fukushimas reactor 3threw off black smokeafter an explosion at11am yesterday

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News2 CITYA.M. 15 MARCH 2011

Japan counts thecost of a truly

horrific tragedy

SLOWLY but surely, more horror sto-ries are emerging from the rubblethat is Tsunami-hit Northern Japan.The death toll will undoubtedly bemany orders of magnitude higherthan the few thousand so far con-

firmed by the authorities, while thebig issue last night was the extremelyserious problem at several Japanesenuclear power plants. While thisseries of accidents still appears to beno Chernobyl, there is some radiationleakage and the situation is far moredangerous than it looked to be onSunday. Outsiders are finding itimpossible to work out true levels ofrisk. If the situation isnt resolved, asecond wave of panic is likely, in themarkets and among investors if notamong the astonishingly stoicJapanese public.

As to the actual economic damage,the Kobe earthquake of 1995 pro-duced losses worth around two percent of GDP; this disaster could costup to five per cent. Rich economiesinevitably bounce back from severenatural disasters; after a sharp slumpin GDP, output inevitably shoots backup again as reconstruction effortsbegin. It will be no different this time,despite Japans excessive public debtand unfavourable commodity prices.

But one should not confuse a risein GDP as repair work kicks in in afew months time with a rise in

EDITORS LETTER

ALLISTER HEATH

JAPANS tsunami damage may costinsurers more than $60bn (37bn), andlead to premiums rising for the firsttime in years, analysts said yesterday.

Reinsurers such as Swiss Re andMunich Re are likely to consider this aone-in-200-year event, which wouldmean they face losses of up to 2bn(1.7bn) each.

The losses are likely to count as amarket-changing event that wouldend the trend of falling insurance pre-mium rates, Panmure Gordon analystBarrie Cornes said. In our view, theloss will be so large that it will proba-bly provide the trigger to ensure a re-rating of the non-life sector, assufficient capacity [capital] is with-drawn to allow rates to rise, he said.

While damage to homes is coveredby Japans government-backed earth-quake insurance programme, interna-tional insurers cover all commercialproperty, industry and marine claims.

Goldman Sachs analysts said SwissRe would bear SwFr 1.9bn (1.3bn)losses if it categorised the catastropheas a one-in-200-year event. Rival SCORhas said it will bear about 185m slightly less than the 260m analystsexpected it would bear from a one in250-year event.

Standard & Poors analysts saidMunich Re may also be exposed to2bn if it was characterised as a one-in- 200-year event. They forecast a pre-tax cost to the firm of500bn-800bn.

Swiss Re closed 4.5 per cent downand Munich Re 3.4 per cent lower. InLondon, Lloyds insurers Catlin andBeazley ended down 3.2 per cent and2.83 per cent respectively, but Amlin

Japans insured lossmay surpass $60bn

wealth. That would be to fall foul ofwhat Frederic Bastiat called the bro-ken window fallacy: a country doesntbecome richer when its assets aresmashed up, even if mending themtemporarily creates new jobs.Earthquakes dont boost a nationswealth, they make it poorer;resources that could have been allo-cated to other things need to bediverted to the rebuilding effort. Vastamounts of Japans capital have beendestroyed, including several nuclearpower stations worth at least $5bneach, as well as tens of billions worthof housing and commercial property.One need not agree with the moreextreme estimates of the value of the

destruction one analyst puts thedestroyed capital at $1 trillion to seethat replacing what is broken is dif-ferent to adding to the stock ofwealth. So much for the economics today, however, all eyes will be on thenuclear reactors.

NOT ALL RICH FOLK ARE BANKERSFor those people who hate all bankersand financiers, the 50p tax rate onincome over 150,000 a year is usuallywelcomed as an anti-City tax. It is por-trayed as a targeted, punitive measureto exercise retribution for the reces-sion (which the public attributesalmost exclusively to high-earningbankers as a class). There is a lotwrong with this naive argument,including the fact that the causes ofthe crisis were hugely complex andincluded central banks low interestrates, government guarantees, intel-lectual errors about statistical pat-terns and numerous other policies.

Yet another point is even more fun-damental: most people on highincomes dont actually work infinance. Jo Johnson, the Tory MP forOrpington, was keen to find out whoactually paid the tax; the Treasuryspermanent secretary Sir NicholasMacpherson has obliged. Of the275,000 paying the new 50p tax(which will reach 52 per cent in Aprilwith extra employee national insur-ance) only 63,000 work in financialintermediation, such as banks andfunds. I would guess a few thousandothers on similar incomes yet not inthis list could be described as quasi-investment bankers (lawyers specialis-ing in corporate finance and so on).But the vast majority of those payingthe new tax work in other fields.

The widespread view that the onlyrich people in the UK today arebankers is absurd. A little more than2,800 people in firms under theFinancial Services Authoritys remitearned more than 1m in 2009, theregulator revealed last year. Even if wewere to assume that this number hasgone up, and that other quasi-bankers(consultants, lawyers, top partners atprofessional services firms) ought tobe added in, it is fair to assume thatno more than 4,000 people in City-style jobs make 1m a year. Yet HMRCestimates that around 13,000 peoplein the UK earn 1m (down 1,000 fromits peak).

Most are the entrepreneurs whoare meant to grow us out of recession,non-finance company directors, topbusiness people, entertainers andfootballers. None are to blame for thecrisis all are being hammered.

[email protected] me on Twitter: @allisterheath

The third nuclearreactor of theFukushimaDaiichi nuclearplant is seenburning after anexplosion in thissatellite imagetaken 14 MarchOpposite: A tech-nician in protec-tive gear scans achild for signs of

radiationPictures:REUTERS, GETTY

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowNight Editor Katie Hope

Business Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Micha Theiner

CommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

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JAPANESE EARTHQUAKE AND TSUNAMI

BYALISON LOCK

INSURANCE

ANALYSIS l Swiss Re

SwFr

03 Jan 21 Jan 10 Feb 01 Mar

60

59

58

57

56

55

54

53

52

51

50

49.3614 Mar

and Chaucer, which updated the mar-ket, gained 2.2 per cent and 2.3 percent. Jefferies analyst James Shucksaid Amlins strong retrocession covershould cap its liability at about $150-160m. Chaucer said it had little expo-sure to Japans nuclear industry.

But Shuck added that with a 70 percent chance of large aftershocks, loss-es were likely to rise yet further.

UK ART MARKET LOSES OUT TOCHINESEBritain has lost its position as theworlds second largest art market toChina, in a sign of intensifying com-petition and a shift in the geographi-cal distribution of wealth towardsAsia, according to a new study. TheUKs share of the global art marketfell by 5 percentage points to 22 percent in the four years to 2010.

FULLERS XIX NOW VALUED AT $100MSimon Fuller, creator of the AmericanIdol television series, has signedFormula One driver Lewis Hamiltonin his first deal since launching XIXEntertainment, his new media com-

pany that has secured investment intwo deals valuing it at $100m.

SHOPPERS GET WISE TO DODGYPRICINGResearch for furniture retailer CSLsuggests consumers are no longerfooled by dodgy pricing policies.The study found that almost all con-sumers think furniture retailers areguilty of misleading pricing.

PAYE FIASCO: 10,000 HAVE TAX DEBTSCANCELLEDA quarter of those who appealedagainst last years shock tax demandsfrom HM Revenue & Customs hadtheir tax debts cancelled, it hasemerged. David Gauke, a Treasuryminister, disclosed that 23pc of those

who used the extra-statutory conces-sion A19 were successful.

MCKINSEY SCRAMBLES TO LIMITINSIDER TRIAL FALLOUTMcKinsey has launched a concertedeffort to try to reassure clients andlimit the damage to its reputationfrom its involvement in one ofAmericas biggest insider tradingcases.

OBR CRITICISED OVER MISLEADINGFISCAL FORECASTSThe OBR has come under fire for fail-ing to include the projected value ofasset sales in forecasts for the publicfinances. Andrew Tyrie, chairman ofthe Treasury Select Committee, saidnot including the estimated proceedsfrom assets such as the student loan

portfolio may give a misleadingassessment of the countrys finances.

WHAT THE OTHER PAPERS SAY THIS MORNING

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STOCKS in nuclear energy companiesand uranium miners plummeted yes-terday as safety fears threatened to hitthe industry.

In New York trading, uranium min-ers Cameco and USEC were two of themain losers, ending the day down

13.42 per cent and 10.56 per centrespectively.Meanwhile in France, where over 70

per cent of energy comes from nuclearpower, shares of the partly state-ownednuclear equipment provider Arevadropped by 9.61 per cent.

Also in Paris, energy giant EDF sawshares fall 5.28 per cent, as the wholeCAC 40 Index declined by 1.29 per centin the days trading.

Areva is bidding to be part of newnuclear power plants in the UK, at sitessuch as Sizewell in Suffolk, andHinkley Point in Somerset.

Energy minister Chris Huhne prom-ised a safety review into the industry,yesterday.

However, nuclear developmentshould not be affected in countrieswhere it is politically favoured, accord-ing to Jeremy Nicholson of the EnergyIntensive Users Group.

The UK government sees theurgency for new, low-carbon energy,

he told City A.M. Theres little cause forconcern over new plans which incor-porate robust safety features devel-oped since the Fukushima plant wasbuilt in 1971. New plants are evensafer, as they should be we have verystringent standards in western Europe,quite rightly.

Yet in Germany a political furorebroke out yesterday, with chancellor

Angela Merkel forced to back down onthe governments decision to extendthe life of several nuclear plants.

We will suspend the extension ofthe life of Germanys nuclear powerstations, which was decided onlyrecently, she said.

And in neighbouring Switzerland,approval procedures for three newnuclear power stations were suspend-ed in order to revisit safety standards,the government announced yesterday.

BY JULIAN HARRIS

ENERGY

ANALYSIS l A diagram of the nuclear electricity generation process. A meltdownoccurs when there is a catastrophic failure of the reactor core, with a potential forwidespread radiation release.

WATER

STEAM

TurbineControl

rods

Powerlines

Generator

Nuclearfuel

Reactor

Containmentbuilding

Pump

Primary water loop Secondary water loop

News 3CITYA.M. 15 MARCH 2011

Nuclear fears

spark drop inenergy stocks

FUKUSHIMA DAIICHI NUCLEAR PLANT

Q.WHAT CAUSED THE FUEL TOOVERHEAT?A.The failure of the electricity sup-ply for the cooling pumps. At thefirst sign of a tremor, the reactor start-ed to shut down by inserting the con-

trol rods and the reactor ceased toproduce power. Even after the reactorhas shut down, a nuclear power sta-tion still produces about 5-10 per centof its heat. When the cooling waterstops flowing the fuel dries out andthe temperature rises extremely.

Q.WHAT CAUSED THE EXPLOSION?

A.It is possible that the nuclearfuel, once it has become uncov-

ered, became sufficiently hot to sepa-rate the water and steam that isaround into the separate componentsof oxygen and hydrogen. This mix-ture of hydrogen and oxygen explod-ed.

Q.HOW DOES THIS COMPARE TOPREVIOUS DISASTERS?A.This scenario is far closer to theThree Mile Island accident in1979, Pennsylvania which did notcause any cases of cancer than toChernobyl in 1986. There is a con-tainment holding the overheatedcore, which in the Three Mile Islandcase saved the day. At Chernobyl,the reactor did not have a contain-

ment, exposing thebare core to the atmos-phere.

Q.WHAT ARE THE RISKS OF EXPOSURETO THE RADIOACTIVE CORE?

A.We should take comfort from thefact that the Japanese authorities,

are saying that the containment thatsits around the reactor, which is avery strong structure of concrete andsteel, is holding. That is important tostress. Answers from Dr William Nuttall, ofCambridge Judge Business School, a lec-turer in technology policy and a lead aca-demic at the Cambridge Nuclear EnergyCentre

QA&

ANALYSIS l Areva

20 Dec 7 Jan 27 Jan 16 Feb 8 Mar

38

36

34

32

31.5014 Mar

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THE DISASTER in Japan pummeledmanufacturing and luxury goodsstocks yesterday, alongside insurersand energy firms, as markets acrossthe world ended lower.

Burberry, which says it makes a sig-nificant portion of its profits from itsJapanese licenses, fell 4.3 per cent inLondon trading yesterday.

Hermes, which makes 19 per centof its sales in Japan, fell 3.1 per centin Paris trading.

LVMH, the owner of Moet,Hennessy and Louis Vuitton, tum-bled 3.1 per cent as the recovery inhigh-end retail looked under threat.

Japan makes up 11 per cent of theworlds luxury goods sales, rankingsecond globally behind the US.

As far as the European consumersector is concerned in the wake ofthe earthquake, we believe that theearly cycle recovery rally in Luxury

now seems vulnerable, said MFGlobal.

However, the need for temporarypower to aid rescue efforts propelledAggreko to the top of the FTSE risers.

Manufacturing stocks fell on wor-ries that supply chains will be dis-rupted. Hitachis operations at sixplants in the country remained sus-pended yesterday, pushing its NewYork- and Tokyo-listed shares downmore than 15 per cent.

Peugeot Citroen said yesterday ithas halted production of its electriccars, which are made in Japan, help-ing send its shares down 1.9 per cent.

Toyota fell 4.6 per cent after it saidit has suspended all production inJapan until at least Wednesday.

Boeing shares fell 1.3 per cent inNew York trading after its head ofcommercial aeroplanes said the 787Dreamliner faces further delays if itsJapanese suppliers are disruptedbeyond a few weeks. MARKETS: P15

Luxury firmstake a tumble

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BYMARION DAKERS

JAPAN QUAKE


North-east Japan has beendevastated by Fridaysearthquake and followingtsunami Picture: REUTERS

THE earthquake and tsunami in Japancould bring forwards a crucial tip-ping point for market confidence inits sovereign debt, according toMoodys Investor Services.

Ratings agencies have so far held offreviewing the status of Japans debt,which S&P recently downgraded, say-ing that it will take time for the fiscal

consequences of the tragedy tobecome clear. The countrys debt-to-GDP ratio is forecast to exceed 200 percent this year.

Moodys said it understood thatTokyo will have to suspend tackling itsdebt in order to provide relief to themillions left homeless by the disaster.

But the agencys Thomas Byrne said:A tipping point may be reached atsome point if the market loses confi-dence in the soundness of government

finances... The earthquake may haveshifted such a potential tipping pointa bit forward.

S&P agreed that there would be noimmediate effect on Japans rating butsaid: The additional costs will add tothe already existing fiscal weaknesses.

Around 90 per cent of Japans publicdebt is owned by domestic savers,many of them pension funds, whichhas so far enabled it to keep interestrates low despite its high debt load.

Moodys: Earthquake costs couldaccelerate Japanese debt crisisBY JULIET SAMUEL

JAPAN QUAKE

JAPANESE EARTHQUAKE AND TSUNAMI

High-end stocks face pressurebut love for labels will endureAS anyone who has visited Tokyowill know, Japan is a voracious con-sumer of luxury labels. A naturalthrowaway culture by necessity,thanks to the tiny size of Japanesehomes, has led to a constantdemand for the latest thing.According to MF Global, Japanaccounts for 23 per cent of theglobal market for luxury goods,compared to 25 per cent for Europeand the US.

Burberry, which gets around 20per cent of its earnings from Japanthanks to lucrative licensing deals,lost 4.68 per cent yesterday, astraders predicted belt-tighteningwould hit sales.

The luxury firms rivals are also

exposed: Japan accounts for 19 per

cent of Hermes sales; 12 per centof Richemonts sales; and nine percent of LVMHs sales. PPRs LuxuryBusiness Group, which owns YvesSaint Laurent and Gucci, gets 16per cent of sales in the region. Allwere under pressure yesterday

We still think the sell-off inthese stocks is likely overdone. Theinvestments of wealthy Japanesewill be hit and there will be a shortperiod where the country frownsupon those who show off wealth ata time of national crisis butJapans love affair with luxury islikely to endure.

BOTTOMLINEAnalysis by David Crow

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Its more than just a plan. Its a Big Plan.

What you might call a total overhaul of the

Tube, and its already well under way. In fact

weve already laid over 200km of new track,

improved safety, and refurbished more than

half of the 270 existing stations. Weve done a

lot, but theres a lot more to do. Please bear

with us. Were doing everything we can to

keep disruptions to a minimum.

Keep up with the upgrade plan and

how

EMBATTLED tycoon VincentTchenguiz has blamed last weeksSerious Fraud Office (SFO) raid for aseries of actions which led to his prop-erty management company, PeverelGroup, entering administration afterfailing to repay a loan.

Bank of America Merrill Lynchdemanded repayment within 24hours of the raid of a 124.6m loanplus 11.4m accrued interest, anotherVincent Tchenguiz company,

Consensus Business Group (CBG), saidin a statement.

Since November 2009 the bankhas agreed not to call in the loan butas soon as news of the investigationbroke that was it, said one sourceclose to the brothers.

Peverel Group manages some200,000 residential units throughoutthe UK and controls a number of sub-sidiary operating companies

The bank demand came just a dayafter Vincent and his brother Robert

Tchenguiz were arrested with sevenother people when police raidedaddresses in London and Reykjaviklinked to a Serious Fraud Officeinvestigation into the collapse ofIcelands Kaupthing Bank.

We have been in consensual dis-cussions with Bank of AmericaMerrill Lynch, since late 2009, aboutthe financial structure of the groupand we regret that their suddenactions have forced this group in toadministration, Vincent Tchenguizsaid in a statement.

We believe that their actions are a

direct result of the very public com-mencement of the Serious FraudOffices investigation into events sur-rounding the collapse of Kaupthingbank.

Separately Vincents brother Robertissued a statement threatening to suethe SFO. He said he had asked hissolicitors, Ian Burton and RichardSallybanks, now backed up by formerhead of public prosecutions KenMacdonald, to determine whetherthe searches were obtained legally.

Tchenguiz onattack afterfirm collapses FRENCH carmaker Renault yesterdaymade a public apology to three execu-tives accused of industrial espionageafter the Paris prosecutor said the trio

had no case to answer.Bank accounts in Switzerland and

Liechtenstein, alleged to havebelonged to the executives and seenas key to the case over Renaults elec-tric car technology, did not exist, pros-ecutor Jean-Claude Marin said.

The response of authorities inthose countries has enabled the pros-ecutor to dismiss a certain numberof theories, notably that which wasput forward in the initial complaintby the company Renault, Marin said.

Renault chief executive CarlosGhosn and chief operating officerPatrick Pelata apologised to the threemen following Marins comments,

pledging to repair the injusticeagainst them after they were fired inJanuary.

Bertrand Rochette, MatthieuTenenbaum and Michel Balthazardhad denied any wrongdoing from thestart and have taken legal actionagainst the carmaker.

They (Ghosn and Pelata) are com-mitted that reparations be made tothe three executives, and that theirhonour in the public eye be restored,Renault said in a statement.

Renault sayssorry over falsespy claims

Robert (r) and Vincent Tchenguiz are under pressure from the SFO Picture: The Picture Library

BYDAVID HELLIER

REGULATION

AUTOMOTIVE


TIME LINE | AFTER THE RAID

Wednesday 9 MarchThe Serious Fraud Office, together with theCity of London police, raid the offices of theTchenguiz brothers, Robert and Vincent. Thebrothers are released without charge later

that day.

Thursday 10 MarchIn Cannes, the brothers annual party at theMipim property conference aboard theiryacht goes ahead as planned. But the broth-ers do not attend.Bank of America demands immediate repay-ment of its 124.6m loan.

Saturday 12 MarchVincent Tchenguiz tells friends that he has no

alternative but to seek administrators forPeverel, his property management company.Both brothers tell friends of their growinganger at the way the SFO conducted its raid.

Monday 14 MarchZolfo Cooper is appointed as administratorto Peverel in the first financial blow to theTchenguiz brothers empire.Robert Tchenguiz appoints a former head ofpublic prosecutions Ken Macdonald, toexamine whether the SFO obtained searchand arrest warrants legally.Robert dismisses the SFO raid as a publicitystunt designed to draw attention to thebodys uncertain future.

Phoebe Torrance

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NASDAQ stock exchange is poised tomake a hostile takeover bid for theNew York Stock Exchange (NYSE), afterentering late stage talks with Bank ofAmerica Merrill Lynch to fund theattempted break-up of NYSE andDeutsche Boerses merger.

Nasdaq is close to securing $5bn(3.1bn) of financing for its takeoverbid, which could be unveiled as soonas today.

The firm has teamed up withIntercontinental Exchange, whichwould snap up NYSEs European assetsunder the break-up plans.

However, talks were said to be ongo-ing last night and it was unclear whatfinal shape the possible bid wouldtake.

Nasdaq has been consideringmuscling in on the NYSE-DeutscheBoerse merger for several weeks, as it

attempts to reposition itself amid aflurry of mergers and takeovers acrossthe worlds stock exchanges.

NYSE announced its $10bn mergerplan with Deutsche Boerse last month,although politicians on both side ofthe Atlantic have said the deals couldface competition hurdles.

Nasdaq and Bank of Americadeclined to comment, while the NYSEand Intercontinental Exchange didnot return calls yesterday.Bringing Nasdaq and NYSE together

would create a stock-trading power-house in the United States and Europethat also dominates US options andlistings businesses. It would be a boldmove by Nasdaq chief executive RobertGreifeld, and, if successful, wouldredraw the global exchange map.

Any bid would follow weeks of spec-ulation that Nasdaq, the odd one out

amid a merger frenzy, would jumpinto the fray with its own bid for anexchange operator.

Nasdaq movesin on NYSE bidBYMARION DAKES

STOCK EXCHANGES

EUROPEs largest hedge fund manag-er, Brevan Howard AssetManagement, will see another of itstop executives move to Switzerlandthis year.

Australian co-chief executive NagiKawkabani said the decision to leaveLondon is purely a lifestyle choice.

But the move will inflame fearsthat London is becoming a less attrac-

tive home for top-earners due to itsstringent rules on pay and effectivetax rate of 51 per cent on personalincome. Brevan Howard has seen araft of its staff move to Switzerlandsince opening an office in Geneva in2009. Last year, Alan Howard, co-founder of the firm, moved there andthe asset manager has plans to doubleits Geneva headcount this year. It has

$32.6bn (20.1bn) in assets undermanagement.

Brevan Howard chief to ditchCity for Switzerland this year

HEDGE FUNDS

SAUDI Arabia sent troops into Bahrainyesterday to help put down weeks ofprotests by the Shiite Muslim majori-ty, a move opponents of the Sunni rul-ing family on the island called adeclaration of war.

The Saudi capital, Riyadh, said thatit had responded to a security threatby deploying its troops on the streetsof its neighbour. They are to protect

strategic sites such as bridges and gov-ernment buildings. Shiites make upabout 15 per cent of the population inSaudi Arabia, a key US ally and theworlds top exporter of oil.

Bahrain has been gripped by itsworst unrest since the 1990s after pro-testers took to the streets last month,inspired by uprisings that toppled theleaders of Egypt and Tunisia.

The intervention in Bahrain came asDavid Cameron yesterday insisted thatthe UK will not be dragged into a war

with Libya.The government is coming underincreasing pressure to decide if it willintervene in the region as Libyan leaderColonel Gaddafi regains control of keystrongholds. Gaddafis jets bombedLibyan rebels yesterday, aiding a count-er-offensive that has pushed insurgents100 miles east in a week. Cameron said:There is no intention to get involved inanother war. What is being looked at ishow do we tighten the pressure on anunacceptable, illegitimate regime.

Saudi troops enter Bahrainas Gaddafi fights back rebelsBY STEVE DINNEEN

WORLD


Anti-Gaddafi rebels are struggling to hold the towns they took earlier Picture: GETTY

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SPANISH energy company Iberdrolawill sell a six per cent stake to Qatarssovereign wealth fund, in a strategicalliance valued at 2bn (1.7bn).

Qatar Holdings, which is part ofthe Qatar Investment Authority, willbuy 338m new Iberdrola shares at adiscounted price of5.63 each, belowthe companys previous closing priceof5.96.

Iberdrola said that the deal willboost its balance sheet and protect its

credit rating.The company has been looking to

limit its debt since the acquisition ofBrazilian power company ElektroEletricidade e Servicos in January thisyear for 1.8bn.

It also pledged 2.5bn last week tobuy out minority shareholders in itsIberdrola Renovables arm, whichfocuses on renewable energy.

The deal will give Iberdrola a bal-last against its largest single investor,Spanish construction group ACS,

which holds a 20.2 per cent stake inthe company.

ACS, run by chief executive Pervez,is suing Iberdrola for seats on itsboard, with Perez saying last monththat he was more committed thanever to being its biggest shareholder.

Qatar Holding bought the HarrodGroup from Mohammed Al-Fayed inMay last year, and was linked to a bidfor Manchester United in December.

Iberdrolas stock price climbed 2.6per cent in early trading on theMadrid Stock Exchange, before set-tling to close 0.3 per cent up at 5.98.

Qatari wealthfund buys 6pcof Iberdrola SHARES in healthcare groupSouthern Cross plunged by up to 60per cent yesterday as the companyadmitted it was struggling in the face

of NHS and council budget cuts.The company has appointed KPMG

to look at restructuring options aftercuts in local authority spending wors-ened its trading outlook.

It said yesterday that it was nolonger in talks with potential buyers.while it also admitted it was in dan-ger of defaulting on debts. The jointblow sent its stock into a nosedive.

The companys lenders are awareof an impending banking covenantbreach but remain fully supportive ofthe actions which the company is tak-ing to address its problems,Southern said.

The firm provides care to more

than 31,000 people, with the bulk offunding coming from the NHS andcouncils. Budget cuts have left thecompany reeling as it struggles tomeet rents on its buildings.

On potential takeovers Southernadded: The board considers that noneof these proposals are likely to result ina meaningful offer being made in theforeseeable future and has decided notto pursue them further.

Southerns shares closed 64.6 percent lower yesterday at 5.57p.

Southern Cross

shares dive on

debt worries

Galleon founder Raj Rajaratnam is on trial in the US for insider trading Picture: PA

BY ELIZABETH FOURNIER

ENERGY

HEALTH


ANALYSIS l Iberdrola SA


6.6

6.2

5.8

5.4

5.9814 Mar

A DISGRACED former McKinsey & Copartner has testified that Galleon fundmanager Raj Rajaratnam paid him a$1m (617,856) bonus for tippinghim about an acquisition by chip-maker Advanced Micro Devices (AMD),a client of the consulting firm.

Anil Kumar told jurors yesterday hesupplied confidential details aboutAMDs 2006 purchase of graphics chip-maker ATI Technologies to

Rajaratnam, who is on trial on crimi-

nal charges of running a vast insidertrading network.

He called me at home and he said,I just wanted to thank you. That wasfantastic, we are all cheering you atthe office right now, Kumar testifiedin Manhattan federal court. Thatmade me very nervous.

Prosecutors in the trial are expectedto name David Palecek, a McKinseypartner who died last year, as a thirdtarget for Raj Rajaratnam to recruit tohis alleged insider trading ring.

BYHARRY BANKS

INSIDER TRADING

Galleon witness testifies

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LABOUR shadow chancellor Ed Ballsyesterday claimed the governmentcould create 110,000 jobs and build25,000 new homes by clobbering thebanks with a 2bn tax on bonuses.

Balls, who is seeking to flesh outLabours economic policy ahead of theBudget on 23 March, said the taxwould boost jobs and growth.

He urged the government to spend600m on a job creation scheme forunemployed youths similar to thenow-defunct future jobs funds whichhe said would generate 90,000 jobs.

Labours future jobs fund wasscrapped last year by the coalitionafter a Department for Work andPensions study showed that 50 percent of participants were back on ben-efits within seven months of joining

the scheme.Balls said the government should

also put 1.2bn towards building25,000 new homes, which he saidwould create a further 20,000 jobs bringing the total to 110,000.

A further 200m should be used toboost the regional growth fund, hesaid.

Balls accused chancellor GeorgeOsborne of pursuing a reckless exper-iment to cut too deep and too fastand said the economy had taken aturn for the worse.

However, he remained tight-lippedon which spending reductions Labourwould oppose and how it would fundthe cost to the cash-strapped excheq-uer.

And he repeated his call for a reduc-tion in fuel VAT, despite claims thatsuch a tax cut would fall foul ofEuropean laws.

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BYDAVID CROW

POLITICS

Fitch says UKs AAA ratingsafe due to spending cuts

Politics 9CITYA.M. 15 MARCH 2011

CITY VIEWS: IS LABOUR RIGHT TO CALL FORTHE BANK BONUSTAXTO BE REINTRODUCED? Interviews by Phoebe Torrance

IN ASSOCIATION WITH

www.RateSetter.com Customer Phoneline: 08442490115

Save or Borrow peer to peer at RateSetter.com

No. People who would otherwisecome to work in banks in the UK,paying othertaxes, would bedriven away towork elsewhere.It wouldnt helpthe govern-ment.

PETER SYMES |JLT

No. If we end up with a bonustax on banks it would cascade toeveryone else.Everyone has achoice in life, ifyou end up in abank, whyshould you betaxed more?

DAVID JONES |QBE

Yes. They earn a lot of money andwere in a mess because of them.It would make adifference,because theyget a lot inbonuses. Itwould help to fixour finances.

TOLA ADERINOKUN |SONY GLOBAL

Labour callsfor 2bn taxon bonuses

BRITAINS top-notch credit ratinglooks increasingly secure thanks tothe governments spending cuts anda recovering banking sector, ratingsagency Fitch said yesterday, in a sig-nificant boost for the chancellor.

However, Fitch said there was a riskthat inflationary pressures couldspur a sharper-than-expected rise ininterest rates which might hurt theeconomy.

The strong budgetary consolida-tion effort and declining fiscal risksarising from the UK financial sectorsupport the stable outlook on theUKs AAA ratings, said Maria Malas-

Mroueh, a director in FitchsSovereign team.

Fitch said the governments deficitreduction plan was credible and itexpected the 23 March budget to reaf-firm the governments commitmentto fiscal tightening.

The opinion of the ratings agencywill provide a welcome fillip forGeorge Osborne, who is fightingclaims from Labour that he is cuttingtoo far and too fast.

However, Fitch noted that uncer-tainty over how much spare capacityremained in the economy as well asthe pace of economic recovery hadincreased the potential for monetaryand fiscal policy errors.

POLITICS

THE public sector has failed to justify arapid rise in salaries for top executives,according to an influential new report.

Will Hutton, the executive vice-chair-man of the Work Foundation, has rec-ommended senior public servants payshould be directly linked to their per-formance and should be subject to fargreater public scrutiny.

Under his proposals public servantswill have a percentage of their basicpay at risk each year, with the moneyearned back by meeting performancetargets.

However, he fell short of recom-mending a fixed limit on pay multi-ples, whereby executives could onlyearn 20 times more than their lowestpaid workers.

He also warned against using thePrime Ministers pay as a benchmarkfor the earnings of other senior publicservants.

Instead he said both the public sec-tor and listed companies should berequired to track and publish their paymultiples to make it easier to compareearnings of top executives.

Hutton: Public

sector pay hikeis unjustified

POLITICS

FACT CHECKER |WITHDAVID CROW

THE CLAIM | CUTTING VAT ON FUEL WOULD BE

ILLEGAL UNDER EUROPEAN LAWSHADOW chancellor Ed Balls willtomorrow force a House of Commonsvote on fuel VAT, in a bid to earn politi-cal capital from soaring petrol prices.But George Osbornes allies claim thatcutting VAT on fuel is illegal under EUlaw. Rubbish, say Labour spinners: allOsborne needs to do is apply for anexemption. So who is telling thetruth?

VAT RATES AND THE EUThe EU allows memberstates to have two sep-arate rates of VAT: aheadline rate (20 percent in the UK) and areduced rate (fiveper cent in the UK).A third rate of VATat 17.5 per centcould be intro-duced on someitems under EU law but not fuel.

The government could collect fuel VATat the existing reduced rate of five percent, but it would cost the exchequersome 4.2bn in foregone revenue.

APPLYING FOR AN EXEMPTIONThe chancellor could apply to theEU for a so-called derogation. Ifthe EU agrees, that would allowhim to introduce a third rate ofVAT for fuel. In 1997, the then

Labour government appliedfor a third rate of VATfor domestic fuel.However, the EU rarelygrants VAT deroga-tions in fact there arecurrently just three.Cyprus, for example,has a reduced rate ofVAT on cylinders of liq-uefied natural gaswhile certain regionsin Portugal pay lower

VAT than others.

THE VERDICT |

Balls is perfectly right to claim that itwould be possible to apply to the EUfor permission to introduce a thirdrate of VAT at 17.5 per cent especiallyfor fuel. However, that doesnt meanthe EU is likely to grant a derogation.

John Whiting, the head of the Officefor Tax Simplification, said it would beunlikely the EU would grant a dero-gation on something as fundamentalas petrol. Lowering VAT on fuel isnot a credible option.

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ROBERT THELIONHEART

SERENADESSELFRIDGESROBERT Tchenguiz will henceforth beknown as Robert the Lionheart, after thebillionaire property developer was spottedsinging The Lion Sleeps Tonight from thefilm The Lion King in Selfridges.

The sighting took place at 5.30pm onthe evening of the now infamous yachtparty at MIPIM in Cannes last Thursday,when a social contemporary of the broth-ers recognised Robert from their commonhaunts in Knightsbridge in the 1980s.

While Vincent Tchenguiz made hisexcuses from the Cannes party jokingthat like F Scott Fitzgeralds hero JayGatsby he doesnt show up at the partieshe throws his brother Robert was back

in London, treating his son to a triparound the retailers toy department.

Talk about loud: he was singing in thejungle, the mighty jungle from The LionKing at the top of his voice over and overagain, said this columns source, whoadded that the property mogul seemed tobe in a bit of a world of his own.

Robert Tchenguiz confirmed the sight-ing at the Oxford Street store to TheCapitalist, although he took pains to makeclear that he was singing the Lion Kingtune with his young son, inspired by the

City is an insanely competitive placecomes from Ernst & Young, which hiredthe worlds former number two playerPeter Marshall just in time for the SquareMiles largest squash tournament.

Marshall (pictured above), who joinedthe auditing giant as a healthcare consult-ant in July last year, missed out on lastyears Square Mile Corporate Challenge,which runs alongside the pro event theISS Canary Wharf Classic.

But he was quickly drafted onto theteam for this years tournament,

where he helped Ernst & Young beat

Barclays Capital to take a place inthe semi-final againstPricewaterhouseCoopers.

Even though Marshall retiredfrom professional squash in 2002,

his racket skills should still be sharpenough to give the Citys finest play-ers more than a run for theirmoney watch this space to seewhether he can take Ernst & Youngall the way to the grand final next

Friday, where the firm will meeteither Credit Suisse or the FSA.

toy lions they were looking at.Whatever you say, Robert sing when

youre winning, and all that.

TOP OF THE WORLDBASIL Geoghegan, former investmentbanker with Goldman Sachs and DeutscheBank, has earned a reputation for highachievement over his City career.

But advising Anglo Irish Bank at theheight of its crisis will seem like a walk inthe park compared to his latest challenge:climbing Mount Everest to raise funds forthe Forgotten Irish campaign for theIreland Fund of Great Britain, of whichGeoghegan is co-chairman.

Taking advantage of a two-month win-

dow before he starts a new role at Citi,Geoghegan has started his training inearnest, involving giving up alcohol, sleep-ing in a hypoxic tent and climbing in theAlps three days a week (pictured right in

training with his daughter Julia).Geoghegan, who has so far scaled Mount

McKinley, Mont Blanc and Kilimanjaro,intends to reach the summit of the worldshighest mountain in late May and says thefeat is a very personal challenge to help avulnerable group for whom every day is achallenge. To support his climb, seewww.justgiving.com/BasilGeoghegan.

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The Capitalist10 CITYA.M. 15 MARCH 2011EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

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RIO TINTO, the mining giant,moved closer in its bid to gain con-trol of rival Riversdale Mining yes-terday, after a $3.9bn (2.4bn)improved offer spurred moreshareholders to accept the bid.

In a notice to the AustralianSecurities Exchange, Rio said thenumber of shares it either ownedor had received acceptances inrespect of the offer had risen from17.86 per cent to 26.13 per cent byFriday night.

A further 8.37 per cent of shareshas been put into an institutionalacceptance facility that would turnthe shares over to Rio if the bidpassed the 50 per cent threshold.

The international mining giantlast Thursday raised its original$16-a-share cash offer for Riversdaleto $16.50, pricing the coal minerand its African operations at$3.9bn.

It also extended the offer periodfor a third time to 1 April,although the cut off date for the$16.50 offer is 23 March.

Rios offer, which has been rec-ommended by all of Riversdalesboard, is still waiting for votes fromRiversdales two largest investors,Indias Tata Steel and Brazils CSN,which hold a combined 47 per centof voting rights.

Riversdale shares closed atA$15.45 on Australian SecuritiesExchange, down 0.45 per cent onthe day, while Rios shares closed

at 3,975p on the London StockExchange, a rise of 0.3 per cent.

The acquisition of Riversdalewould be Rio Tintos first majortakeover since its $38bn acquisi-tion of Alcan in 2007.

A Rio Tinto spokesman declinedto comment yesterday.

Rio moves closer to

Riversdale takeover

BYKASMIRA JEFFORD

MINING

THE TOTAL level of cash raised through initial publicofferings (IPOs) in Asia so far this year has hit its highestlevel since before the recession.

Companies from the region have generated a total of$20.8bn (12.9bn) from stock market offerings sinceJanuary, according to data provider Dealogic.

The figure comes after a boom year for Asia-Pacific IPOs which had at this point last year notched up $18.2bn and despite market volatility in the Middle East.

In 2009, only $314m had been raised in Asia-Pacificstock offerings by this point in the year.

The $5.5bn offering by Hong Kong port operatorHutchison Ports Holdings Trust on the Singapore StockExchange has driven up the figure, in a strong year todate for Asian firms.

Several large flotations of Chinese firms also helped toboost the figure.

Asian share offeringshit pre-recession highsCAPITAL MARKETS

TOP shareholders in AssetCo, thelargest fire-engine supplier to theLondon Fire Brigade, have criticised itsboard for not considering a takeoverapproach more carefully.

The Aim-listed company yesterdaysaid it had rebuffed months of bidtalks and taken out an emergency loanof 1.45m as it prepares to raise morecash from its shareholders.

One of the firms top investors, how-ever, told City A.M. that certain institu-tions would have been in support of atakeover bid.

The company has a duty of care to

its shareholders to consider a bid at asignificant premium carefully and wecant understand why it didnt do it,said the shareholder. The announce-ment comes one month after prob-

lems with its short-term fundingbroke-up talks with a third party.

AssetCo is understood to havereceived a formal bid from a MiddleEastern investor after it turned toshareholders last month for emer-gency funding. But the companyrejected the approach, calling itopportunistic.

Independent directors consider thecurrent approach to be opportunisticand not in the interest of shareholdersas the indicated price range includedan offer at a discount to the currentmarket price, it said in a statement.

Next Monday AssetCo will ask share-holders to approve the proposed plac-ing of new shares to raise 16m, which

will help repay the short-term loanfacility from its principle banker.

AssetCos loan announcement reas-sured investors and sent shares up 24per cent, closing at 19.75p.

AssetCo to raiseshareholder cash

despite bid supportBYKASMIRA JEFFORD

SUPPORT SERVICES

BERKSHIRE Hathaways purchaseof Ohio chemical maker Lubrizolfor $9bn (5.6bn) is one of thebiggest deals ever for Berkshirechairman Warren Buffett, who isquickly making good on the prom-ise of major acquisitions that hemade in his annual shareholderletter last month.

The price tag for Lubrizol is at apremium of 28 per cent to its clos-ing price on Friday, valuing thelubricant additive company at $135per share. Lubrizols shares gained27.7 per cent to close at $134.6 yes-terday close to the offer price.

Berkshire Hathaways annualreport for 2010 also detailed thetype of acquisition Buffett wouldbe seeking, after he declared toshareholders that his trigger fin-

ger is itchy to start spending thefunds $38.2bn cash pile.

The criteria included companieswith at least $75m of pre-tax earn-

ings, consistent earning power,

good returns on equity whileemploying little or no debt, andsimple businesses.

Lubrizol seems to be an exact fitfor Buffetts strict criteria. Its rev-enue last year hit $5.4bn, when itgenerated a cash flow of close to$690m.

Its also a market leader in itssector claiming the worldslargest market share in the lubri-cant additives business, even inthe face of competition fromExxon and Shells Infineumjoint venture.

The company will keep itsOhio base, and continue to bemanaged by current chiefexecutive James Hambrick.

Lubrizol is Buffetts secondbiggest acquisition in the lastfive years after BurlingtonNorthern, which he paid

$26bn for in November2009. The deal is expectedto be completed by thethird-quarter of this year.

Buffett on acquisition trailwith $9bn Lubrizol deal

BY ELIZABETH FOURNIER

PROFILE

ANALYSIS l Rio Tinto

p


4,700

4,500

4,300

4,100

3,900

3,975.0014 Mar

EUROPEs insurers would see their free capital cut bymore than a third by new higher solvency require-ments imposed from 2013, regulators said yesterday.

Incoming Solvency II regulation would cut firmssurplus capital by 44 per cent or a total 86bn (74bn)if implemented without any relaxation of the rules,the European Insurance and Occupational PensionsAuthority found.

Where insurers applied their own internal riskassessment models, or calculated the value of theirassets using transitional measures, their free capitalwould be cut by just 3bn, or one per cent. But the newrules do not yet specify when and to what extent regu-lators would allow companies to use such internalmodels or transitional arrangements. QIS5 has shown

that Solvency II will be more onerous than the existingregime, said PwC partner Philippe Guijarro.

European insurers toface capital squeezeINSURANCE

WARREN BUFFETT

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THE cost of Irelands debt continued torise to all-time Eurozone highs yester-day, putting pressure on new PrimeMinister Enda Kenny to secure lesspunitive rates on its 85bn (73.5bn)bailout despite demands that thecountry raise its low 12.5 per cent cor-porate tax rate in return for any relief.

The corporate tax issue moved cen-tre-stage over the weekend whenFrench President Nicolas Sarkozydemanded that Ireland put up the taxin return for a one per cent cut in the5.8 per cent interest rate it pays on itsbailout.

But Kenny refused, promptingEurozone leaders to keep Irish interestunchanged while lowering Greecesrate by one per cent. Following themove, the yield on five-year Irish debtspiked above 9.9 per cent, with rateson ten-year debt similarly jumpingbriefly above 9.69 per cent.

This was in sharp contrast to Greekyields, which dropped slightly to 14.3per cent on five-year and 12.4 per centon ten-year bonds. Greeces debt waseffectively restructured as a reward forits progress on reducing its deficit,with bond maturities extended from

four years to 7.5.The Eurozone pact also agreed to

move forwards with a common cor-porate tax base policy for the entireEU, to be drawn up by the EuropeanCommission.

However, the proposals, which willbe announced tomorrow by EU com-missioner Algirdas emeta, will notmandate uniform tax rates. Instead,they will attempt to standardise theway corporate taxes are levied, forexample, regarding the offset of lossesfrom past years.

But Pinsent Masons tax partnerEloise Walker told City A.M.: Irelandfears that the common corporate taxpolicy could be a precursor to an EU-wide corporate tax rate.

Overall, the Eurozone pact brokeredon Saturday has received a conditionalwelcome from markets. Fitch Ratingssaid the deal was progress but willnot resolve market concerns over thesolvency of some highly indebtedeuro area member states. And theHouse of Lords EU Committee said ithad strong reservations about how itwould be enforced.

In a sign that bond investors are stillnervous, Portuguese yields spiked above7.8 per cent on five-year debt yesterday.Spanish yields, however, were down.

BRITISH vacuum technology producerEdwards Group is plotting a Londonlisting to raise at least 375m.

The firm provides chipmakers withvacuum technology needed to makemicroprocessors, used in productssuch as Apples iPad.

Its private equity backers own a com-bined 90 per cent stake of the firm,

which was valued at 1.5bn last year.CCMP Capital and Unitas Capital,

the buyout vehicles once operated byUS investment bank JP Morgan, own 45per cent of the company each, whilstmanagement retains the rest.

The owners must offer at least 25 percent of the company in order to list inLondon.

Edwards did not give any detail ofthe expected size of its offering,although said it will not include anynew shares.

It will announce price details over

the coming weeks, and is expected tolist before the end of next month.

The former chief financial officer ofdrinks giant Diageo, Nick Rose, willstep in as chairman of the firm follow-ing the listing.

Founded in 1919, the West-Sussexbased firm made pre-tax profits of130m on revenues of 641m.

Edwards chief executive MatthewTaylor said: This is a very exciting timefor Edwards as we work towards apotential IPO and listing.

The group has been transformed

over the last four years, developing intoa world class operation.

Owners of British technology companyEdwards plot stock market offering

THE British economy is set for a slowbut stable pace of expansion, theOrganisation for Economic Co-opera-tion and Development (OECD) saidyesterday.

The OECD indicator is consistentwith the view that a modest economicupturn remains intact for the UK,despite a GDP contraction of 0.6 percent in the final three months of lastyear, commented Howard Archer ofIHS Global Insight.

However, the UKs prospects remainbelow those in some OECD memberstates such as Germany and the US,where robust expansion is forecast.

The US indicator jumped by 0.6points in January, recording a score of103.2. The UKs indicator hasremained steady for three straightmonths, at 101.9.

All scores above 100 point to aboveaverage growth. The indicatorsattempt to predict turning points ineconomic activity six months ahead.

We project British GDP to grow by1.6 per cent in 2011, Archer said.

The latest figures bode well for theglobal economic recovery, withmonthly upturns across the OECDarea, and specifically in Europe andAsia.

Januarys scores were up 0.4 pointsagainst the previous month, through-out the OECDs 33 member countries an annual improvement of 2.1points, clearly indicating expansion.

UK is set forsteady but

slow growthWORLD ECONOMY

Fears of Irish

default growover tax rowBY JULIET SAMUEL

EUROZONE CRISIS

BYRICHARD PARTINGTON

TECHNOLOGY


JONATHAN Wilcox is leading the JPMorgan Cazenove advisory team on theEdwards Group initial public offering(IPO).

The US investment bank is acting asjoint lead adviser together with Swisslender UBS on the listing.

As head of UK equity capital marketsat JP Morgan, Wilcox has led many ofthe banks highest profile deals in recentyears, including rights issues forStandard Chartered and Rio Tinto.

He also handled the IPO for Jupiter

Asset Management last year.The team from JP Morgan also

includes head of UK corporate EdByers, who is responsible for some ofthe firms most important brokeragerelationships.

Managing director in the banks indus-trial team Andrew Truscott and UK cor-porate finance executive director ChrisNicholls are also advising.

Swiss bank UBS team is led byChristopher Smith and Adrian Lewis.

As vice president of investments forthe bank, Smith has recently advised USmedia firm Perform on its London listing.He also worked on the advisory for a242m share raising by British super-market chain Sainsburys.

Morgan Stanley; led by Scott Matlockand Ben Grindley, and Deutsche Bank;led by Lorcan OShea and Edward

Sankey, are also advising on the listing.

JONATHANWILCOX

JP MORGANCAZENOVE

INDUSTRIAL production in theEurozone started the year on the up,official data showed yesterday.

Production rose by 0.3 per cent onthe previous month, despiteDecembers figure being hugelyrevised upwards to show a 0.3 percent expansion, rather than the pre-vious estimate of a 0.1 per centdecline.

Compared to the same time lastyear, Euro area industry was up 6.6

per cent, and up 6.8 per cent acrossthe wider European Union.

Adverse weather in early Januaryis likely to have led to continued dis-ruptions to business, and we expectthe rate of growth to improvemarkedly in February, added Markiteconomist Chris Williamson.

The purchasing managers indicesalso point to an acceleration inFebruary, Williamson said. Amongmember states for which data areavailable, industrial production rosein 14 and fell in five.

Industrial production stillrising across the Eurozone

EUROZONE ECONOMY

Industrialists defied bad winter weather in much of the euro area

3i mandate will be coup for BarCaps Renwick

IF, as seems likely, 3i decides toappoint Barclays Capital as itsjoint corporate broker at the endof the month it will be further

proof that Barclayss strategy of

building up its equities business isbearing fruit.

Since hiring Jim Renwick as headof UK Equity Capital Markets and cor-porate broking in April 2009, Barclays

Capital has won six FTSE 100 broker-ships.Renwick, formerly of UBS, must

take a lot of the plaudits for this but ithas to be said that the bank will alsobe benefiting from the strong lendingrelationships it already has withclients, to which it can now offer equi-ty advice.

Some say that Renwick will be hardpressed to serve the banks growingnumber of broking clients, which

include Barclays (no surprise there),National Grid and Resolution.

But the team is a dozen strong andincludes other experienced namessuch as Alisdair Gayne (ex Morgan

Stanley), Jon Bathard-Smith (also exMorgan Stanley) and BertieWhitehead (formerly of Citigroup).

So long as Barclays Capitalemploys enough supporting players,it will be able to keep its growingnumber of clients happy, says onecorporate broker.

As well as the corporate broker-ships, Barclays Capital was also cho-sen as one of three advisers to the LSEon its bid for Canadas TMX, along-

side RBC Capital Markets and MorganStanley.

Joshua Critchley, the formerGoldman Sachs banker turned headof RBCs equity capital markets and

corporate broking, is still gettingtongues wagging with the sky-high-packages being offered to bankers tojoin his team.

Talk at the PLC awards dinner theother evening was of the 350,000ishpay and golden hello packages said tobe being offered to encourage peoplelike former Arden chief executiveJeremy Grime and colleague SarahSpikes to join RBC.

Together with Peter Lenardos, the

three Arden colleagues last yeartopped the Extel survey.

Tough for Arden, which by allaccounts is a good place to work andyet can not really compete with the

sort of sums on offer from RBC butone must be a little concerned for theCanadian firm if it doesnt win thebusiness to match the pay packages itis offering. The Arden hires come ontop of others from Cenkos.

Meanwhile, its not all one-way traf-fic out of Arden. John Goold, one ofthe firms original founders, lastweek returned from Oriel Securitiesto be its head of institutional sales.

[email protected]

INSIDE TRACK

DAVID HELLIER

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HOUSEBUILDER Bovis Homes yester-day said its 2010 profit more thandoubled and that it had made anencouraging start to 2011.

Bovis reported a pre-tax profit lastyear of 18.5m, compared with 7.5mthe year before.

The company had been expected topost a profit of 18.54m, according toa poll of analysts.

Chief executive David Ritchie said:The group has delivered a strongimprovement in profit in 2010, drivenby increased volumes, stronger salesprices and delivery of cost savings.

Bovis spent 203m on land in 2010,acquiring 3,700 plots mostly locatedin the south of England, and hasagreed terms to buy another 2,500this year, it said.

The average selling price of a Bovishome rose by 3.9 per cent to 160,700in 2010, and the group achieved 1,901completions in the year, up from1,803 in 2009.

The company, which expects toopen 33 new sales outlets in 2011,said it had made an encouraging startin the first nine weeks of the year,with reservations up 11 per cent.

The company said it would restoreits dividend with a proposed pay-ment of 3p for 2010 as a result ofthe positive figures. The last time adividend was paid was 2008.

Economists are predicting a testingyear for housebuilders and mutedgrowth at best, as economic uncer-tainty and a struggle to access creditdeter buyers from entering the mar-ket. Bovis said mortgage availabilitywill continue to restrain buyers in2011 but expects prices to remain sta-ble as a whole.

The Kent-based group, which isdebt free, added: With the supply ofconsented land likely to be con-strained in the future, given the plan-ning environment we believe thatthis is an excellent time to invest.

VODAFONE may receive far less thanit had hoped for its stake in its Frenchjoint venture, sending its sharesdown two per cent yesterday.

It is in talks with Vivendi over thesale of its 44 per cent stake in SFR butit is understood the French firm isonly willing to pay 6bn. Vodafonehad hoped for closer to 7bn for the

asset, which it is purging as part of itsstrategy to offload non-core assets.

Vodafone chief executive VittorioColao has said he will not be forcedinto making the sale and several ana-lysts said although they did not thinkthat 6bn was an unfair price, theythought that Vodafone could wait tosee if the price improves.

A crucial part of the deal will bewhether Vodafone and Vivendi canagree a long-term roaming deal whichwould allow Vodafone customers toaccess the SFR network in the future.

In November Vodafone sold its3.1bn stake in Japanese carrier

SoftBank. Earlier last year it con-firmed the 4.3bn sale of its interestsin China Mobile. Other non-core ven-tures likely to be disposed of sooninclude Vodafones 25 per cent stakein Polands Polkomtel.

A final decision on its large minor-ity stake in US-based Verizon Wirelessis not expected until 2012 but ana-lysts expect Vodafone to maintain itsinterests after indications dividendpayments will resume later this year.

Vodafones shares closed 1.8 percent lower yesterday at 175.74p.

Vodafone may have to settle for 6bnfor stake in French joint venture SFR

RECRUITMENT specialist HydrogenGroup reported a 67 per cent jump inits full-year revenue yesterday, with2010 figures reaching 123.4m.

The groups net fee income rose 64per cent to 27.6m and pre-tax profitsincreased to 2.5m, compared with0.3m before exceptional costs in2009.

Hydrogen chief executive Tim

Smeaton said significant investmentshad been made in the company

throughout 2009 and 2010, and thatthe latest figures showed they werestarting to pay off.

Our key plan over the past fewyears has been the internationalisa-tion of the business, Smeaton toldCity A.M. And the 138 per centincrease in international net feeincome shows were moving in theright direction.

Hydrogen has offices in Singaporeand Sydney as well as London, and

plans to open a new office in HongKong in the first half of this year.

Hydrogen Group revenueup 67 per cent in 2010RECRUITMENT

CITY firms are struggling to hang onto staff despite plans to increase

salaries and bonuses by more thaninflation, according to two surveys byrecruitment firms.

Financial recruiter Robert Half saysthat a survey of 280 chief financialofficers (CFOs), shows 61 per cent oflisted firms are planning to put upsalaries in coming months, morethan two thirds of them by five to sixper cent and a fifth by seven to 10 percent.

The research also shows that

increases in bonuses will just aboutmatch inflation, with a third of CFOsplanning to put them up by three tofour per cent, and half planning toraise them by five to six per cent.

Numbers from rival City recruiterAstbury Marsden show why: it saysthe number of applications itreceived in February has soared to7,400, a 47 per cent jump year-on-yearas disgruntled employees consideroptions and prepare to ditch theircurrent employer.

The data shows that non-top tierinvestment bankers, in particular, areupset about their pay levels.

Astbury Marsden chief operating

officer Mark Cameron: saysDissatisfaction about pay isinevitable among such a hyper-com-petitive cohort as investment bankers they see bonuses as the way to keep

score and they hate to lose.He added that some investmentbanks are reporting staff turnover forthe first quarter of 20 per cent wayabove the usual churn that followsbonus season.

The rise in applications has notquite been matched by an equivalentjump in vacancies, but there werenonetheless 30 per cent more jobsadded to the recruiters register thisFebruary than last.

Applications up for City jobsBY JULIET SAMUEL

RECRUITMENT

Bovis doubles

profit on landgrab policyBY JOHN DUNNE

HOUSEBUILIDNG

BY STEVE DINNEEN

TELECOMS


Bovis chief David Ritchie said the group spent 203m on land in 2010 Picture: Micha Theiner

NEWS | IN BRIEF

Hongqiao cuts IPO size to $1bnChina Hongqiao Group, Chinas biggestprivately owned aluminium hydroxideproducer, will relaunch its Hong Konginitial public offering as soon as next

week, after cutting the size to about$1bn (620m). The company had ini-tially targeted raising up to $2.2bn,but pulled the deal in January due tomarket volatility. The group now plansto sell around 1bn shares at betweenHK$7.20 (57p) and HK$8.30 each.

Carlyle and Tiger invest in shipsCarlyle Group has formed a joint ven-ture with maritime investment firmTiger Group to buy more than $5bn(3.1bn) worth of ships with a groupof other investors to tap growing ship-ping demand in the region. The jointventure will commence operationsimmediately and has committed toinvest equity capital of $900m in thenext five years. Private equity firmCarlyle said the venture would buycontainer, dry bulk, tanker vessels andother assets. Their partner Seaspanand the Washington Family will investin container vessels purchased by thenewly-formed firm, it said.

St Ives to sell magazine armPrinting company St Ives said itagreed to sell its loss-making maga-zine business for 20m to a unit of pri-vate equity firm WalsteadInvestments. St Ives, which prints arange of products from books to CDand DVD cases, said it would receive15m in cash on completion of thedeal and 5m in loan notes. WalsteadInvestments is backed by Bank Leumi,Israels largest bank. St Ives magazinebusiness has been struggling in recentyears as excess capacity in the marketlowered prices, and advertising andcontent moved to digital formats. Thedivision posted a pre-tax loss of 5.1mon revenue of 70.5m.

ANALYST VIEWS: WILL THE BOVIS FIGURESIMPRESS INVESTORS? Interviews by John Dunne

KEITH BOWMAN | HARGREAVES LANSDOWN

Bovis has weathered the credit crisis relatively well, and is in bettershape than many rivals. Despite a broadly positive update, the shares are general-ly assessed as being up with events, with rival housebuilders potentially offeringbetter value. As such, market consensus opinion denotes a Hold.

MARK HUGHES | PANMURE

Although the group has seen a good start to the year with reservationsup 11 per cent in the first nine weeks, given the early stage of the year, we main-tain our forecasts for now. Our target price rises from 450p to 459p as we moveto 2011 multiples, though our recommendation remains Hold

RICHARD CURR | PRIME MARKETS

Bovis has invested heavily in new land plots, which is a clear sign ofconfidence, but it is perhaps the reintroduction of the dividend that draws the linein the sand and moves the recovery from tentative to solid. We believe theshares offer an attractive sector play at current levels.

BANK of America (BoA) became thelatest target of hacker groupAnonymous when confidentialemails were leaked online.

Anonymous, a group sympatheticto WikiLeaks, say the documentsrelate to the issue of whether BoA hasimproperly foreclosed on homes.

However, the emails do not appearto be as damning as the hackers hope,with little evidence backing up theclaims that BoA foreclosed homes

without proper documentation.The emails involve a discussion

between employees of BoA subsidiaryBalboa Insurance regarding remov-ing documents from loan files for agroup of insured properties.

There was some indication thatmaterial pointed to in the emails hadbeen recently removed, with manylinks leading to blank pages.

A BoA spokesman said the docu-ments were stolen by a former BalboaInsurance employee, and were notrelated to foreclosures.

BoA emails leaked onlineby Anonymous hackersBANKING

ANALYSIS l Bovis Homes

p

20 Dec 12 Jan 1 Feb 21 Feb 10 Mar

460

440

420

400

380

442.5014 Mar

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Northland Capital PartnersThe full-service investment bank hasappointed Tim Metcalfe as director of

corporate finance in its London office.For the past seven years, Metcalfe hasled Westhouse Securities London-

based corporate finance team.Previously, he held positions at NMRothschild and Robert Fleming & Co.

Cordea SavillsThe property fund manager hasappointed Nick Hayward as director of

institutional business. Hayward joinsfrom JP Morgan Asset Management,where he was a client portfolio manag-er for real assets in Europe.

Yorvik PartnersThe debt broker-dealer has appointedPaolo Taddonio as chief executive.Taddonio, who joins the firm immedi-ately, was previously head of fixed

income, currencies and commodities forthe Americas at Socit Gnrale.

White & CaseThe law firm has appointed MaximTelemtayev as executive partner in thefirms office in Almaty, Kazakhstan.

Telemtayev joins from Macleod Dixon,where he was managing partner for thelaw firms practice in the Republic ofKazakhstan.

MGM AdvantageThe retirement income specialist hasappointed Andrew Tully to the newlycreated role of retirement income tech-nical manager. Tully joins from

Standard Life, where he held the role ofsenior pensions policy manager.

Sacker & PartnersThe pensions law firm has promotedClaire van Rees to associate. Van Reesjoined Sacker & Partners from Hogan

Lovells in 2010 and has six years pen-sions experience.

FXallThe electronic foreign exchange plat-form has appointed Kevin Lupowitz aschief information officer. Lupowitz, whojoins from Liquidnet, will be responsiblefor leading FXalls technology strategyand creating opportunities for growth.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

SJ BerwinThe international law firm has appointed TonyAngel, chief executive of healthcare technologygroup Vantage Diagnostics, as a non-executivedirector. As managing partner of Linklaters from1998 to 2007, Angel presided over a 57 per cent

turnover increase and a 108 per cent profitincrease. In 2008, he joined ratings agencyStandard & Poors as executive managing direc-tor and head of EMEA, where he was responsi-ble for more than 1,000 employees worldwide.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Wall Street suffersin quake aftermath

US stocks fell in the wake ofJapans devastating earthquakeyesterday, but other than specif-ic industries such as nuclear

power, the broad impact on equitieswas expected to be short-lived.

Trading volume was unusually low

compared with other sell-offs, com-ing in at 7.68bn shares traded on theNew York Stock Exchange, theAmerican Stock Exchange andNasdaq, below last years daily aver-age of 8.47bn. The recent pullback instocks had been accompanied by highvolume.

Im encouraged that were seeinglighter volume on a down day sincethat could suggest less enthusiasmfor selling, said Hank Herrmann,chief executive of Waddell & ReedFinancial.

Nuclear power stocks fell afterexplosions at a Japanese plant. TheMarket Vectors uranium and nuclearenergy exchange traded fundslumped 12 per cent while the GlobalX Uranium ETF sank 17 per cent. Butthe Market Vectors Solar Energy ETFof alternative energy shares climbed7.2 per cent.

Shaw Group sank 9.2 per cent to$34.87 in the session while Camec

dropped 13 per cent to $32.62 on theNew York Stock Exchange. Bothnuclear power companies traded onvolume that was more than 10 timestheir 10-day average.General Electric, which has com-bined nuclear ventures with Hitachi,dropped 2.2 per cent to $19.92 andwas the top percentage decliner onthe Dow.

This is a knee-jerk reaction, but itcould put a lid on building newnuclear plants, said James Dunigan,chief investment officer at PNCWealth Management.

Japanese ports handling aboutseven per cent of the countrys indus-trial output sustained major damage,disrupting the f low of goods globally.

The Dow Jones industrial averagewas down 51.24 points, or 0.43 percent, at 11,993.16. The Standard &Poors 500 Index was down 7.89points, or 0.60 per cent, at 1,296.39.The Nasdaq Composite Index wasdown 14.64 points, or 0.54 per cent, at2,700.97. Texas Instruments fell 2.2per cent to $33.80 in extended-hourstrading after the chipmaker said itwill lose revenues due to productiondelays at its Japanese facilities fromquake-related interruption of power.

US-listed shares of Japanese compa-nies declined and the BNY Mellonindex of leading Japanese AmericanDepositary Receipts lost 5.3 per cent.Toyota Motor, which said it would sus-pend production at all its Japanese

car plants, fell 4.6 per cent to $81.73yesterday.

THE FTSE 100 share index hit afresh three-month closing lowyesterday, with some sectorsseen vulnerable to further falls

as the extent of the damage in Japanafter the earthquake and tsunamisbecomes clearer.

Luxury goods firms such as

Burberry Group and insurers includ-ing Aviva and Catlin Group wereamong the top fallers as Japan facedthe economic impact of a disasterthat has killed thousands.

The FTSE 100 closed down 53.43points, or 0.9 per cent, at 5,775.24.The blue-chip index has lost almost200 points in the past four tradingdays with sentiment weighed on byviolence in Libya, Eurozone debtworries and Japan.

British-listed insurers fell furtherwith Aviva and Catlin each fallingmore than three per cent.

The earthquake, tsunami and theaftershocks expected this week arelikely to generate one of the largestreinsurance losses seen, said KevinRyan, analyst at Investec Securities.

If this happens, it will affectinsurance and reinsurance pricingand it may affect equity markets.

Fashion group Burberry shed 4.3per cent as analysts said demand for

luxury products would suffer inJapan.

The market doesnt forget and in1995 following the Kobe earthquake,a smaller disaster compared to lastFridays one, we must rememberthat the Nikkei lost over 20 per cent.As things stand weve lost nearly 10per cent, a trader said.

Temporary power generatorsprovider Aggreko rose 8.2 per cent asdemand for its services was seencoming from Japan. The firm said itwas ready to equip Japan with someof its self-contained gas and diesel

generators if asked.Meanwhile gas firm BG Group wasup 3.7 per cent. Disruptions tonuclear power supply could seeJapanese LNG (liquid natural gas)demand increase. This would reduceglobal LNG oversupply and support arecovery in European gas and powerprices, UBS said in a note.

BG Group signed a 20 year LNGsales deal with Tokyo Gas last week.

Away from Japan, strong sales ofthe second-generation iPad in itsopening weekend boostedImagination Technologies up 5.5 percent. Its graphics chip is used in thepopular tablet.

Lack of confidence amonginvestors dogged the FTSE, which isalso under pressure from technicalindicators, which suggested that theindex is vulnerable to further signif-icant weakness.

The index was below 5,812, the 50per cent Fibonacci retracement of

the November low to the Februaryhigh. The next support, a 61.8 percent retracement is at 5,744.

Graham Secker, European equitystrategist at Morgan Stanley, saidthe bank had moved to a moredefensive stance, with telecomslooking particularly favourable, ashe saw a peak in leading indicatorsbeing reached.

Risky assets such as banks, minersand integrated oils were all down assectors.

Heavyweight Vodafone was a sig-nificant drag on the index, slipping

2.2 per cent after the FinancialTimes said European telecoms andentertainment group Vivendi is notwilling to pay much more than6bn for Vodafones stake in SFR.

Miner Vedanta rose 1.6 per centafter the Indian regulators said theyhad wrapped up an investigationinto the firms $9.6bn (5.9bn) pur-chase of some of Cairns assets,fuelling speculation that the acqui-sition will win approval.

FTSE hits a three-month lowas Japanese disaster deepensTHELONDONREPORT

THENEW YORKREPORT

p

20 Dec 12 Jan 1 Feb 21 Feb 11 Mar

6,100

5,800

5,800

5,900

5,950

6,000

6,050

ANALYSIS l FTSE5,775.24

14 Mar

BEST OF THE BROKERS To appear in Best of the Brokers email your research to [email protected]

ANALYSIS lWPP

850

830

830

830

760

14 Feb 21 Feb 28 Feb 7 Mar 14 Mar

p 772.0014 Mar

WPPCiti rates the marketing group buy /medium risk with a target price of950p. The broker has downgraded its 2011-12 forecasts by one to threeper cent thanks to currency movements, but still expects organic growthof 5.6 per cent this year once the firm gets through the traditional mid-year doldrums. Citi says WPP remains a cheap play on global advertisingstrength, though believes rival Publicis has more short-term catalysts.

ANALYSIS lAMEC

1220

1180

1140


p 1115.0014 Mar

AMECEvolution Securities has downgraded the energy services firm to addfrom buy with a target price of 13.50. The broker expects delays to UKplans to build 11 new nuclear reactors over the next 15 years in the wakeof the Japanese earthquake, hammering AMECs nuclear expansion.However, Evo adds that nuclear power only accounted for nine per cent ofAMEC sector revenue in 2010 and that the shares remain good value.

ANALYSIS lAshmore

370

350

330

310


p

311.7014 Mar

ASHMOREPeel Hunt rates the investment manager buy with a target price of 410p.The broker thinks Ashmores recent expansion into emerging markets is asensible long-term move, though expects immediate benefits to be mod-est. Peel Hunt has kept its 2011 forecasts unchanged, but has hiked its2012 earnings per share forecast by five per cent to 28.8p, supported bythe firms purchase of a stake in Emerging Markets Management.


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disaster is still unknown. However, shebelieves the drop in domestic demand, aswell as the reduction in factory output, willmost likely see a second successive quarterof contracting GDP and therefore a slip

back into recession.David Jones of IG Group is optimistic in

medium term though, suggesting thatthings might turn once the costs ofclearing up after the disaster and theuncertainty surrounding the nuclear issuescurrently weighing heavily on marketsbecome clearer. Jones says that with theNikkei having dropped around fifteen percent in the last three months, some confi-dence might return in the next few days.CFD investors might consider backing thismid-term optimism.

Hopefully, Japan can recover from thiscatastrophe as quickly as possible and itslost economy will find its way out of thedoldrums. But realistically most investorsare pessimistic about its long-term future earthquake or no earthquake.

T

HE Great Kanto earthquake struckJapan in 1923, killing over 100,000people. In consequence, one dayevery September, children train for

the next earthquake. Tragically, last Fridaythat training was once again put to use. OnMonday, the Nikkei index slumped 6.18 percent, with the prospect of further falls overthe coming days.

Sentiment towards Japan has been bear-ish for years in fact, it hasnt recoveredfrom the bursting of its property bubbletwenty years ago. But as Angus Campbell ofLondon Capital Group says, the disaster hasbeen incredibly bad timing. We haveseen anaemic growth in Japan and thiscomes at a time when there were smallglimmers of hope forming. Campbell sug-gests that the reaction to the Kobe earth-quake could be illustrative. Sixteen yearsago Kobe struck and the Nikkei plunged byaround 25 per cent over six months.

Companies involved in the nuclearindustry have come in for the biggestdrumming. Tokyo Electric Power, whichmanages the Fukushima plant, fell 24 percent, while Toshiba, which makes nuclearreactors, is down 16 per cent. Baum is wor-ried about the industry recovering as theJapanese have been long term exporters ofsafe nuclear technology, as well as worldleaders in research and development innuclear energy. Carmakers have alsotaken a tumble. Nissan and Toyota aredown 9.5 per cent and 8 per cent respective-ly. Construction is the only area that lookedbullish. Nishimatsu Construction is up 21per cent and Kajima is up 17.9 per cent.

Lisa Baum at Cantor Index says that it ishard to know what is going to happen inthe long-term, while the full extent of the

The country hasbeen in the doldrumsfor years and thisdisaster wont help,says Philip Salter

Uncertainty hangs over

Japan in wake of quake

LAST week brought up a host of challenging issuesfor investors which seem likely to build in intensity,at least in the short-term. The terrible earthquakeand tsunami which hit Japan on Friday has added

to nervousness leading to a general loss of risk appetite.The sell-off in equities, the surge in the yen and lastweeks dollar rally all conspired to wrong-foot investors.Consequently, markets which have out-performedrecently (such as oil and precious metals) have comeunder pressure as hedge funds and others rush tolighten up their long positions to raise cash.

The sell-off in oil was exacerbated by the shiftinggeopolitical situation across north Africa and theMiddle East. In Libya, forces loyal to Gaddafi success-

fully counterattacked anti-government rebels. Thisincreased the likelihood of a quick resolution to theunrest. In addition, the planned Day of Rage in SaudiArabia passed without major incident. But there wereviolent protests in Bahrain on Sunday and Saudi forceshave crossed over the causeway between the twokingdoms and have entered the main island. This hasthe potential to destabilise the region far more thanprotests within Saudi Arabia alone, as it pits Sunniagainst Shia in a highly visible manner. The prospect ofan escalation in these tensions saw traders move backtentatively into crude oil yesterday.

Precious metals are also proving to be highlyvolatile. Last Friday, silver prices were slammed lowerfor a second day in a row with $36 per ounce provingto be a significant resistance level. Given the stunningrally in silver over the last six weeks, some profit-tak-ing and consolidation would seem in order. Altho

cityam 2011-03-15book

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