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FTSE 100 5,786.09 +67.96 DOW 1,2036.53 +178.01 NASDAQ 2,692.09 +48.42 /$ 1.63 +0.01 / 1.15 +0.01 /$ 1.42 unc Certified Distribution31/01/11 - 27/02/11 is 107,265

SFO denies

Tchenguizcase is stunt

THE Serious Fraud Office (SFO) hitback at claims that its raid on Robertand Vincent Tchenguiz was a public-ity stunt designed to bolster the repu-tation of the threatened body.

A spokesman for SFO directorRichard Alderman said: There issome suggestion that we have takenthis action to put ourselves in a betterposition for the new serious fraudand crime landscape that is to come. Ican say there is no connection at all.Operations of this kind take a lot ofplanning. It also took the cooperationof authorities in Iceland to mountthis case.

The embattled billionaire brothershave seen their Peverel Group proper-ty management business fall intoadministration after Bank of AmericaMerrill Lynch recalled a 125m loanfollowing the SFO raid of their busi-nesses earlier this month.

The two men were arrested withseven others on 9 March but werereleased the same day withoutcharge. The raid was part of the SFOsinvestigation into the collapse ofIcelandic bank Kaupthing. The raidharked back to the bodys most high-profile cases in the late 1980s and1990s such as the Guinness affair,Barlow Clowes and Polly Peck. RobertTchenguiz said the SFO probe wasdesigned to generate maximum pub-

licity for its own ends given its uncer-tain future. The coalition hasthreatened to merge the SFO withother fraud bodies. INTERVIEWP:21

BY ROGER BAIRD

FRAUD

Protestors in Yemen yesterday where the government has vowed to use the army to defend itself against a potential coup Picture: GETTY

VIOLENT anti-government protests inseveral Middle Eastern countriesaccompanied a third day of air strikesin Libya yesterday, as the ten-countrymilitary coalition squabbled over thenext move.

As Gaddafis compound in Tripoliwas damaged by the strikes yesterday,David Cameron told Parliamentenforcing a no-fly zone had come justin the nick of time to prevent a mas-sacre, and that the intervention wasnecessary, legal and right.

He added in a near seven-hourCommons debate that the UN-endorsed action has destroyed almostall of Libyas air defences, paving theway for an effective no-fly zone.

MPs last night backed the militaryaction by 557 votes to 13.

Confusion remained about whetherGaddafi himself could be directly tar-geted, with Downing Street last nightclaiming he could legitimately be tar-geted if he is a threat to civilians.

The government attempted to dis-tance itself from the chief of thedefence staff, General Sir DavidRichards, who repeated his stance thatGaddafi would absolutely not be alegitimate target under the UN resolu-

tion.The US government aims to transfercontrol of the air assault on Libya with-in days, President Barack Obama said

ARABIAN UNRESTHITS FEVER PITCH

BY MARION DAKERSWORLD NEWS

www.cityam.comIssue 1,347 Tuesday 22 March 2011 FREE

LONDON INTALENT WAR

EXODUS OF TOP

BANKERS TO ASIA

PICKS UP PACE P3

BUSINESS WITH PERSONALITY

at a press conference yesterday. Obamahinted that other nations should takecharge of the UN-backed campaign.

Russia and China, which bothabstained from Thursday nights UNSecurity Council vote authorising allnecessary measures to protect Libyancivilians, both criticised the bombings

yesterday.But the head of the 22-nation ArabLeague, Amr Moussa, insisted that thegroup still respects the UN resolution

following reports of dissent.Elsewhere, at least 18 senior mili-

tary staff and seven ambassadorsfrom Yemen defected to the opposi-tion movement yesterday, on a daywhen tanks patrolled the capitalSanaa to quell increasingly violentprotests. The Syrian army was also

deployed to the city of Deraa yesterdayafter a day of riots.Israels air strikes in the Gaza Strip

yesterday wounded at least 19 people

in response to mortar fire at the week-end, for which Hamas claimed respon-sibility.

Global stock indices rose yesterdayas fears of further catastrophe in Japansubsided, but oil prices were squeezedup once more by the Middle Eastunrest. Brent crude spot prices

jumped one per cent to $115.36 a bar-rel, adding to a 22 per cent gain in thepast three months.

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News2 CITYA.M. 22 MARCH 2011

Inflation means bigger Budget cuts

ITS Budget time again. Tomorrow isGeorge Osbornes big day; he will betasked with reinvigorating the coali-tions flagging support without givingup on austerity. There will be plenty ofnew policies, most of which have beenheavily discussed already. But here area few thoughts that you wont haveread elsewhere.

Total public spending in cash termsis due to rise from 696.8bn this yearto 701.8bn in 2011-12, 713bn in 2012-13, 724.2bn in 2013-14, 739.8bn in2014-15 and 757.5bn by 2015-16. Innominal terms, spending is going up

every year. But such figures dontadjust for the fact that the purchasingpower of sterling keeps on declining. Apound in 2015-16 will be worth lessthan a pound today. So it makes sense

to adjust for inflation. In real terms,total public spending will fall byaround four per cent over the period,a smallish but significant and painfuldecline after years of massive growth.

But all of this begs a simple ques-tion: what if inflation turns out to bemuch higher than the Treasury isassuming? Such an outcome wouldreduce the real value of spending bymore than the four per cent describedabove, thus accelerating the cuts orit could allow Osborne to spend morein cash terms, thus partly appeasinghis critics, while still reducing spend-ing by the same amount in real termsand satisfying the markets.

The measure of inflation used totranslate cash public spending intoreal spending is the GDP deflator. Itreflects prices of domestically pro-duced goods and services, including

investment goods, government servic-es and exports, but does not includethe price of imports, unlike measuressuch as the CPI and RPI. At themoment, the Treasury is assuming

inflation on the GDP deflator measureof just 1.9 per cent in 2011-11, downfrom 2.9 last year. This is a strangeassumption to make at a time when allother measures of inflation are soar-ing. If it were revised up by just one percent (to 2.9 per cent, like the previousyear), an extra 7bn would be cut fromreal public spending at the stroke of apen. So this is important.

There is another reason why infla-tion will matter tomorrow, whetherOsborne admits it or not. Public sectorwages are being frozen for two yearsfor those earning 21,000 or above.The government claimed yesterdaythis will save 3.3bn a year by 2014-15,but this is based on dubious inflationforecasts. The real value of the cutcould be larger than the governmentadmits. Lets see what Osborne has tosay.

GIVING YOU A VOICELondons business and financial com-munity needs to be heard. Thats whyCity A.M. in partnership with topwebsite PoliticsHome is today

relaunching its special panel to gaugeour readers views. It made a splashduring the election campaign; it willdo so again this time. Each week, wewill send a short smartphone friendlyemail with a couple of questions tomembers, and publish the results inthe paper. Signing up is easy: if youwork in business or finance, go towww.cityam.com/panel to answer afew short questions. The data is com-pletely confidential and will not beshared with any other party and nei-ther will your responses. Were givingsuccessful applicants the chance towin a free luxury holiday for two toParis. In September, well put thosepanellists who have responded to atleast 80 per cent of the surveys into aprize draw. Good luck.

[email protected] me on Twitter: @allisterheath

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BahrainLibya

Egypt

Yemen

SaudiArabia

Palestine

Tensions simmer inthe Arab WorldWhat happened where

David Cameron says almost all of Libyas airdefences have been destroyed, allowing theno-fly zone to be patrolled by Allied forces. He says the action has prevented a bloodymassacre in rebel stronghold Benghazi.

LIBYA

A vote saw 77 per cent of Egyptians backpro-democracy amendments to its constitution. Its stock exchange will reopen tomorrowafter a seven week closure. It will be subject toa six month supervision order.

EGYPT

Yemen's ambassador to Saudi Arabia, and 12military commanders defected from the regime. The threat of violent conflict escalated lastnight, with the government vowing to use thearmy to defend against the threat of a coup.

YEMEN

Hamas fired more than 50 rockets into Israelfrom Palestinian territory this week. Israel retaliated with strikes in Gaza, claim-ing to have hit a smuggling tunnel used byHamas.

PALESTINE

King Hamad bin Isa al-Khalifa said a foreignplot to end his reign has failed. At least 95 people are missing since agovernment crackdown. Only 20 have been offi-cially arrested by the security forces.

BAHRAIN

Demonstrators gathered in support of SaudiKing Abdullah, diffusing the threat of violence. The Saudi government is hoping a 57bnhandout will help restore order after weeks ofsimmering tensions.

SAUDI ARABIA

HEDGE FUNDS TOLD TO ACCEPT HIGHTAXES AS THE PRICE OF LONDON LIFEHedge funds should accept highertaxes as the cost of doing business inLondon and stop threatening to moveelsewhere, according to one of theworlds best-known copper traders.Michael Farmer, a Conservative partydonor who runs the near-$1bn RedKite metals hedge funds, is rareamong managers in defendingLondon, with many others telling thegovernment that the 50 per cent toptax rate is hurting their ability toattract the best traders.

PHOENIXS BOOK VALUE RISES BY140M WITH ASSET RESTRUCTURINGPhoenix Group, the zombie lifefund business formerly known asPearl Group, has added about 140mto its book value by restructuring

assets. The company said it could notgive details about the release of capi-

tal ahead of its full-year results nextTuesday, but said the 139m addition

to its embedded value was material.

LIBERTY TO BUY KABEL BW FOR 3.2BNLiberty Global, the US cable operator,has agreed to buy Germanys KabelBaden-Wrttemberg for 3.2bn(2.8bn) in what would be a leaptowards national consolidation, pro-vided antitrust officials give it thegreen light. People briefed on thematter said Liberty, which ownsGermanys Unity-Media, clinched thedeal with Kabel BWs owner EQTPartners after rival bidders droppedout.

SPECIALIST LITIGATION FUND TORAISE $100MA distressed-debt investment special-ist, Commercial Intelligence FundsGroup, aims to raise $100m for a newfund to finance lawsuits, debt claimsand arbitration cases in emerging

markets, which would be one of thebiggest of its kind.

ROYAL MAIL WIELDS AXE IN LONDONTwo distribution centres in the capi-tal will be among 64 to close, cutting1,700 jobs including 1,000 line man-agers Royal Mail plans to cut 1,700jobs and close two of its main Londondistribution sites. About 1,000 linemanagers will lose their jobs, accord-ing to the scheme outlined yesterday,with 750 to go in London alone in thestruggling companys latest sweepingcull.

NEWS CORP BID DRAWS 40,000SUBMISSIONSMinisters have received nearly 40,000submissions to the public consulta-tion over News Corporations pro-posed bid to buy the 61 per cent ofBSkyB that it does not already own.The Department for Culture, Mediaand Sport said that the consultation,

had attracted more than 38,000responses when it closed yesterday.

FORMULA ONE CLEARED OF MAKING$50M CORRUPTION PAYMENTSFormula One chief Bernie Ecclestoneclaims an investigation has clearedhis business of any wrongdoing inconnection with allegedly corruptpayments made in connection withthe sports sale to private equity firmCVC. The outcome of the investiga-tion, carried out by Ernst & Young andFreshfields, should stop the scandalcasting a shadow over this weekendsstart of the F1 season.

SOUTHERN CROSS RISES ON BOARDSHAKE-UPBeleaguered care homes businessSouthern Cross clawed back some ofits recent losses as it announced ashake-up of its board ahead of a majorrestructuring. Last week the firm sawits shares crash 65 per cent when it

announced the end of an offer periodfor potential private equity bids.

RUSSIA TO INVEST $10BN IN FUNDRussia will invest $10bn (6.1m) in anew direct investment fund it is set-ting up to attract foreign investmentin an attempt to help modernize theeconomy, a government official saidyesterday. The Kremlin is betting thatforeign investors will be more likelyto invest in Russian business with thestate as a partner, a possible safe-guard against loss.

DOLCE & GABBANA EXPANDING INCHINAItalian fashion brand Dolce &Gabbana unveiled plans for 15 newstores across China in an effort toboost business in the worlds fastest-growing luxury-goods market. Thecompany currently operates 26 storesin China, including Hong Kong. Thefashion house said the 15 new bou-

tiques will be opened within the nexttwo years.

WHAT THE OTHER PAPERS SAY THIS MORNING

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LONDON investment banks are facingan unprecedented brain drain of tal-ented executives to Asia, according to aleading financial executive searchfirm.

Sheffield Haworth, which has350,000 executive candidates on itsbooks, has reported an acceleration inthe rate at which top bankers are emi-grating east. Chief executive TimSheffield told City A.M.: The Asia-Pacific market offers high growth, lowtaxes and significant career upsides.And theres less political pressure onpay from outside the industry.

The data shows the Wests financialcentres becoming net exporters oftalent: of 516 executives surveyed whomoved to Asia in 2010, 31 per cent

came from New York and London, ver-sus just eight per cent in 2009.And the eastwards migration is

exacerbating a severe skills gap inLondon. One senior banker in Londontold City A.M. that investment bankshere now struggle to find enough top-notch candidates domestically.

Sheffield warns that onerous taxregimes and high tax regimes are com-pounding this effect. The EU, in par-ticular, now has the most stringentpay rules in the world.

Last year alone saw dozens of divi-sion heads leave for Asia. UBSsMatthew Koder left London for Bankof America-Merrill Lynch in HongKong, Goldman transferred financialinstitutions MD Peter Enns from NewYork to Hong Kong and BarCap movedsenior banker Marco Schwartz fromLondon to Hong Kong.

Ken Brotherston, chief executive ofsearch firm Kinsey Allen, says he hasseen a similar trend: You start doingthe maths between what you get taxed

in the UK and in Hong Kong and sud-denly those numbers start to makequite an appealing argument.

Brain drain at

London banksBY JULIET SAMUEL

RECRUITMENT

THE US Treasury Department said itwill begin later this month to sell off$142bn (87bn) in mortgage-backedsecurities it acquired to combat the2007-2009 financial crisis.

The move to dispose of its portfolioof agency-backed MBS by selling$10bn worth each month was seen as

a signal of the governments confi-dence in the recovery, and is expected

to reap $15bn to $20bn profit.Markets were caught by surprise at

the announcement of a fresh supplyof high-quality debt coming to mar-ket, and prices for competing US gov-ernment debt fell while agency MBSspreads versus Treasuries widened.

The Treasury holdings are primari-ly 30-year fixed-rate MBS guaranteedby either Fannie Mae or Freddie Mac,

the mortgage giants that were takeninto public ownership in the crisis.

US Treasury Department to selloff $142bn in securities holdings

US POLITICS

GEORGE Osborne will use tomorrows

GEORGE Osborne will use tomorrowsBudget to clamp down on tax avoid-ance, announcing a raft of measuresthat he hopes will net the exchequer4bn.

The chancellor first unveiled manyof the proposals in December, includ-ing plans to close certain VAT and for-eign exchange loopholes. At the time,

the Treasury said the measureswould raise around 500m a year or2bn over the course of the parlia-ment. But tomorrow Osborne willsay he hopes to raise twice thatamount by closing down a number ofother loopholes to net an extra 1bnover four years.

And City A.M. understands theOffice for Budget Responsibility willrevise up its estimate of how muchthe measures announced in

December will generate by 1bn.Osborne will clamp down onEmployer Financed RetirementBenefit Schemes (EFRBs) a kind ofoff-shore pensions trust that is notsubject to the same taxes as regis-tered schemes by taxing contribu-tions at 50 per cent.

Meanwhile, the chancellor willannounce that private and corporatejets will be subject to Air PassengerDuty for the first time.

Osborne aims to make extra1bn from tax clampdown

News 3CITYA.M. 22 MARCH 2011

Chancellor George Osborne plans to clamp down on tax avoidance Picture: PA

BUDGET 2011BYDAVID CROW

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Focus on Japanese disaster4 CITYA.M. 22 MARCH 2011

The earthquake andtsunami that hasdevastated Japansnorth-easterncoastal area is set toleave reinsurerSwiss Re with a$1.2bn loss fromclaims.

Picture: GETTY

BILLIONAIRE investor Warren Buffettyesterday called Japans stock marketsell-off after the disasters of the pastweek an extraordinary event thathas created a buying opportunityfor shares in local companies.

Japans Nikkei index ended lastweek more than ten per cent lowerafter fears of damage to companieslong-term growth prospects causedinvestors to sell.

But Buffett said the event did notalter Japans long-term economicprospects. He would certainly not

sell Japanese stocks and believed themarket would recover.

THE earthquake and tsunami inJapan will cost reinsurance giantSwiss Re an estimated $1.2bn (739m)before tax, it said yesterday.

The loss would be from exposure tocommercial and industrial claims forthe catastrophe, it said, and not fromdamage to homes or the Fukushimanuclear power plant.

Insurance cover on commercialproperty also excludes nuclear con-tamination and in a statement SwissRe said it believed the nuclear powerplant crisis is unlikely to result in asignificant direct loss for the propertyand casualty insurance industry.

It stressed that the figure was cal-culated from its own internal modelof the event rather than real claims,and a final figure based on real lossesto its clients would take an extendedperiod of time to emerge.

The figure showed Swiss Res expo-sure to the catastrophe was about 70per cent of its maximum loss from aone-in-250-year event, ExecutionNoble insurance analyst JoyFerneyhough said. Analysts expected

a loss of about $1.3bn-1.35bn.Chief executive Stefan Lippe did

not discuss how the loss would affectSwiss Res 2011 catastrophe budget.

We extend our sympathies to theJapanese nation as they cope with thehuman tragedy and the destructioncaused by this event, he said. Weremain committed to using ourexpertise and experience to supportclients in Japan.

Swiss Re is the third insurer to pro-vide an estimate for its loss. Smallerreinsurer SCOR said last week it esti-mated losses of185m (161m) whileUS insurer AIG said it anticipates a$700m loss. Swiss Re has alreadytaken an $800m loss from the earth-quake to hit New Zealand last month.

Swiss Re sees

$1.2bn lossfrom Japan

THE Japanese government has the fis-cal and credit means to deal with a dis-aster which could cost twice as muchas the 1995 Kobe earthquake, ratingsagency Moodys has affirmed.

Japan, which has public debt twicethe size of its $5 trillion (3.08 trillion)economy, is rated Aa2 by Moodys,which said its base-case assumptionsremain broadly unchanged from aweek ago

It expects Japans economy to startgrowing again in the second-half of2012, thanks in part to reconstruction

efforts. It added that investors wouldstay confident in Japanese bonds.

Moodys: Tokyocan pay its wayBuffett backsJapan stocks

BYALISON LOCK

INSURANCE

FINANCIAL MARKETS

JAPAN CRISIS

ANALYSIS l Swiss Re

CHF

10 Jan2010 24 Jan 7 Feb 21 Feb 7 Mar

60

56

52

48

50.8521 Mar

JAPANS Nikkei 225 index opened 2.1per cent higher this morning after aplanned holiday closure yesterday, asthe countrys nuclear situation lookedserious but unchanged from Friday.

The International Atomic EnergyAgency (IAEA) said FukushimaDaiichis reactor 2 was still emittingwhite smoke, and workers were evacu-ated for two hours when unit 3 start-

ed to blow out smoke or steam.The agency has reported ongoing

higher-than-normal radiation levelsup to 200km away from Fukushima.

Finance minister Yoshihiko Nodasaid this morning that Japan willcooperate as appropriate with otherG7 members to protect the yen fromsharp rises, following Fridays inter-vention in the currency markets.

The death toll from the disaster hasrisen to 8,450 with 13,000 missing.

Japanese marketsgain in early tradingBYMARION DAKERS

JAPAN QUAKE

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US broker Charles Schwab will buysmaller retail brokerage

optionsXpress in a $1bn (620m) dealaimed at helping Schwab take advan-tage of investors stronger embrace ofoptions.

The all-stock deal valuesoptionsXpress at $17.91 per share, a 17per cent premium over its $15.33 clos-ing price on Friday. Under the termsof the deal, each share of Chicago-based optionsXpress would beswapped for 1.02 shares of Schwab.The deal is a nod to retail investorsincreased comfort with using optionscontracts to speculate and hedge.

CITIGROUP has joined the Americanbank stampede to hand capital back toshareholders following the Feds deci-

sion on Friday to remove its ban on div-idend hikes.The bank announced yesterday that

it will reinstate a $0.01 quarterly divi-dend and, in a bid to ditch the stigmaof being a penny stock, will imple-ment a reverse stock split, whereby itturns every ten current shares intoone new share without any change innet value.

The action will see 29bn Citi sharescondensed down into 2.9bn overnight,with the price likely to go from around$4.40 to $44. Those left with fraction-al shares will be given cash instead.

But some investors expressed scepti-cism, saying that shares subject toreverse stock splits tend to under-per-form because the underlying issueskeeping the share price down are notaffected by the action.

Matthew McCormick of Bahl &Gaynor Investment Counsel said: Its

not enough for me to express interestin the stock.

Citi chief executive Vikram Panditappeared to be using the announce-ment to signal that Citi has moved onfrom the financial crisis.

Citi is a fundamentally differentcompany than it was three years ago,

he said. [These moves] are importantsteps as we anticipate returning capi-tal to shareholders starting next year.

Citi is one of the last major USbanks to make an announcement onits dividend.

JP Morgan has hiked its quarterlydividend five-fold to $0.25 andannounced plans to buy $15bn of itsown stock, while Goldman will re-pur-chase $5bn of shares sold to WarrenBuffets Berkshire Hathaway duringthe crisis.

Citi to mergeshares andpay dividend

PRIVATE equity firm Apollo GlobalManagement yesterday lowered the

expected price range for its initialpublic offering, filing detailed termswith US regulators almost a weeklater than originally expected.

Apollo plans to sell 26.3m sharesfor $17 (14.81) to $19 each, accordingto a filing with the regulators.

Last week Apollo, co-founded bychief executive Leon Black, delayedthe launch of its $500m IPO in thewake of the crisis in Japan that rattledglobal stock markets and raised con-cerns that volatility could also hurtthe IPO market.

Apollo lowersIPO price range

Charles Schwabbuys brokerage

BY JULIET SAMUEL

BANKING

FINANCIAL SERVICES

PRIVATE EQUITY

BARCLAYS has managed to offload$586m (359m) of toxic assets to anAmerican real estate investmenttrust (REIT), but investors are waitingto hear about the sale of Protium,the 7.5bns worth of toxic assetsthat Barclays converted into a loanin 2009.

The bank would not say what prof-it or loss it made on the $586m assetsale to CreXus InvestmentCorporation, which is dependent onthe REIT successfully issuingbetween 50m and 57.5m new sharesover the next month for around$700m.

The sale shows that many banksare finding it less difficult thananticipated to find buyers for toxicreal estate assets bought in the run-

up to the financial crisis.But the key moment for investorswill be if Barclays manages to find abuyer for Protium. It technically soldthe assets in 2009, but it was forcedto lend the money for the purchaseitself and is keen to get the loan offits books. To that end, it wrote down532m of the 7.5bn loan last year.Analysts expect a full economic salein the next two quarters, possiblypreceded by further writedowns.

Barclays offloads toxic assetsbut Protium still awaits buyer


ANALYSIS l Citigroup

$

7 Jan 28 Jan 18 Feb 11 Mar

5.1

5.0

4.9

4.8

4.7

4.6

4.5

4.4

4.4321 Mar

BY JULIET SAMUEL

BANKING

Chief executive Vikram Pandit is trying to signal change at Citi Picture: GETTY

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ENERGY suppliers were yesterdayissued with a last chance warningover soaring gas and electricity bills.

The big six companies BritishGas owner Centrica, EDF, npower,E.on, Scottish Power and SSE weretold by the industry watchdog Ofgemthey face a full-scale inquiry if they donot clean up their act.

They have eight weeks to respondto criticism in a review. Ofgem saidconsumers are baffled by the numberand complexity of tariffs on offer.The total has risen from 180 to 300since 2008 and only 20 per cent of billpayers are regularly switching.

Competition is stifled because thebig suppliers have a stranglehold onelectricity generation. Ofgem has

ordered the big six to sell off 20 percent of their power stations. AnOfgem spokesman said: In 2008 we

gave them a left hook to try to knocksome sense into them and now weregiving them the right hook.

Christine McGourty, director ofEnergy UK, said: Energy companieswill be examining Ofgems findingscarefully and will work closely withthe regulator to ensure that the mar-ket is working effectively for con-sumers in every way possible.

Energy secretary Chris Huhne wel-comed Ofgems proposals.

Ofgem in lastwarning forthe Big SixBY JOHN DUNNE

ENERGY

CENTRICA has reported that itsNorth American subsidiary, DirectEnergy, has agreed to acquire theNew York-based energy retailerGateway Energy Services for $90m(55m) in cash.

Gateway has more than 275,000gas and electricity customer

accounts, located mainly in New YorkState, New Jersey and Pennsylvania.

This acquisition will furtherstrengthen Direct Energys positionas a leading competitive energyretailer in North America, increasingits residential and small business cus-tomer relationships to more than800,000 in the US.

Chris Weston, president of DirectEnergy, said: Competitive retail mar-kets in the North Eastern United

States provide us with opportunitiesto grow.

Centricas US unit agrees to buyNew York rival for 55m in cashENERGY


ANALYST VIEWS: WHAT DO OFGEMS PLANS MEAN FOR THE BIG SIX?By John Dunne

KEITH BOWMAN | HARGREAVES LANSDOWN

The awkward balance between share-holders, customers and required asset invest-ments continues to generate stresses in the UK,which are being magnified by the rising oil price.While power companies provide attraction forinvestors consensus opinion is for now,broadly neutral. Emerging markets arealso increasing demand.

TINA COOK | CHARLES STANLEY

. While the Big Six have demonstratedprogress in some areas, there is further scope toreduce tariff complexity and improve electricity,market liquidity and transparency.The challenge is to balance the needs of con-sumers with the heavy burden of invest-ment on suppliers.

ANGELOS ANASTASIOU | INVESTEC SECURITIES

It is not clear how the 10-20 per cent auctioning of power will work in practice, but it would seem likely thatcompanies will work towards some variation of the proposals. As a general observation, we believe that the governmentwould not particularly want the supply industry to be sent to the Competition Commission for two years or so, at atime when it is encouraging many of the same companies to invest many billions of pounds over the next decade.

Energy secretary Chris Huhne said Ofgems plan was good news for customers

ANALYSIS l Centrica

p


350

345

340

335

330

325

320

315

327.8021 Mar

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OFCOM will this morning announceplans for the largest ever single auc-tion of mobile spectrum in the UK.

Spectrum the waves that mobilephones transmit on is in hugedemand by operators after the explo-sion in data traffic, which has heaped

pressure on their networks.The last spectrum auction, at the

height of the dotcom boom in 2001,raised 22.5bn for the government.However, analysts expect the latest 4Gauction to fetch far less, with a figurecloser to 5bn expected.

The auction will sell two separatesections of spectrum. One will be the800Mhz wavelength freed up by theswitchover to digital TV.

The second will be a newly released

2.6Ghz section. The auction will nottake place until the first-half of next

year and it is unlikely the UK will seeany of the 4G spectrum in use until atleast 2014.

The UKs smallest network carrier 3has called for the government to puta mechanism in place to ensure it isable to buy up a section of the 4Gspectrum. Its chief executive KevinRussell says it is in danger of beingswallowed up in the next round of

consolidation if it misses out in theauction.

Ofcom to lay out spectrum auction plans

ONE of sports retailer JJBs major land-lords refuses to back the struggling

firms last-ditch attempt to avoidadministration, City A.M. can reveal,putting the success of todays compa-ny voluntary agreement (CVA) vote tothe wire.

Land Securities, which leases

around eight stores to JJB, has toldother landlords it will vote against thecontroversial CVA at an investor andcreditor meeting today.

Other major landlords including

Prupim, Hammerson and PeelHoldings are set to approve therestructuring, which will see rentsmove from a quarterly to a monthlypayment and up to 89 unprofitablestores closed.

Its likely to sneak through, butwithout the support of all four of itsbig landlords, JJB needs to really con-vince the smaller ones, said one per-son familiar with the situation.

JJB needs the support of 75 per centof its unsecured creditors and 50 percent of all shareholders to stave offadministration.

JJB hopes its second CVA in as manyyears will save at least 150 shops.

JJB landlord refuses CVA

BYMARION DAKERS

PROPERTY

RARE diamond producer Gem is inearly-stage takeover talks with Africa-focused rival Lucara Diamond, it con-firmed yesterday.

London-listed Gem, which toldinvestors last week it was eyeingacquisitions for growth, said any dealwould currently be classed as areverse takeover because recentreserve statements show its assets tobe lower than Lucaras.

But Gem said it would publish anupdated statement of reserves andresources at or before the time of thecompanys interim managementstatement in April 2011.

That statement will includereserves at Gems Gope project inBotswana, which it bought from DeBeers and Xstrata in May 2007 and isexpected to produce about 780,000carats of diamonds annually from2013. This may change the terms ofthe deal.

Toronto-listed Lucara, which likeGem holds diamond assets in Botswanaand Lesotho in Africa, said it was nottalking to Gem exclusively. The compa-ny is in regular contact and in discus-sions with many companies in thediamond sector, one of which is Gem,as part of its strategy to continuouslyreview possible growth opportunities,Lucaras president William Lamb said.

Gems shares closed up 5.3 per centat 284.2p on the news.

Gem sharessparkle onLucara talks

SHAREHOLDERS at fire enginemakerAssetCo clashed with former ownerPelham Olive over raising cash for thebusiness yesterday.

Three of Assetcos large sharehold-ers said they were willing to provide itwith new funding via a share place-ment if it appoints a new executivechairman, but its existing chief execu-tive, John Shannon, and Oliveopposed the move, saying betteroptions are on the table.

AssetCo needs 3-4m in workingcapital after raising 16m in a sharesale it announced earlier this month.Shareholders North Atlantic Value,Gartmore Investment and UtilicoInvestments said they can provide upto 3.33m in additional funding each,in exchange for new ordinary sharesat a price of 10p per share.

But Olive, who still holds a 1.5 percent stake, objected to the placementslarge discount to AssetCos current15.5p share price. In a letter to RichardDay at Arden Partners, AssetCos nom-inated adviser, Olive complained ofbeing kept almost completely in thedark during the whole process ofemergency fundraising during the lasttwo or three weeks.

Olive added he was mystifiedwhy shareholders had not progresseda bid by investment group Arcapita,which is in advanced talks to buyAssetCo. Day did not respond to arequest for comment.

Investorsclash overAssetCo

JJB chief executive Keith Jones is trying to secure the retailers second landlord rescue plan

BYALISON LOCK

SUPPORT SERVICES

BY STEVE DINNEEN

TELECOMS

BYALISON LOCK

MINING

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IAN Hannam, managing director at JPMorgan Cazenove, is lead adviser toGem Diamonds on its acquisition trailand a highly-experienced mining andresources dealmaker.

He is currently also advising

Heritage Oil & Gas, Nat RothschildsVallar mining venture, which is due toseal its first purchases in April, andothers such as Fresnillo. He hasnotably been unable to participate inmetals trader Glencors forthcomingIPO due to his long-standing roleadvising its rival Xstrata and closelinks to its chief executive, Mick Davis,since they worked on the 2001 merg-er and 2005 London listing of BHPBilliton. Advising Gem alongside him

are Barry Weir and Neil Passmore.

MEET THE ADVISERS

IAN HANNAM

JP MORGAN

CAZENOVE

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COMPANIES launching takeover bidswill be subject to stricter timetablesand increased disclosure require-ments, under new proposalsannounced by the UK Takeover Panelyesterday.

The reforms, which have beenplanned since criticism of the Krafttakeover of Cadbury in January lastyear, aim to make the bid process fair-er on the target company, but couldprove onerous for bidders and dampenthe recovering M&A market.

Top of offeror companies gripes isthe introduction of a mandatory four-week deadline for a deal to be con-firmed after initial interest is declared.

At the moment, the Panel assessesdeals individually and issues a so-called put-up-or-shut-up deadlineaccordingly.

In 2010 the Takeover Panel issuedeight put-up-or-shut-up notifications.Of those deals only two went ahead the Kraft takeover of Cadbury andBabcocks acquisition of VT Group.

Put-up-or-shut-up can kill deals,said David Pudge of law firm CliffordChance. Bidders may have to change

their tactics and be better preparedbefore takeover talks are announced.

The changes are particularly worry-ing for private equity firms, whichoften fund buyouts through leveragedfinancings with lengthy due diligencerequirements.

Adding to concerns are plans forbreak fees and other inducements tobe banned, leaving bidders unable torecoup cash if a target leaves talks.

Also on the Panels reform list arerules on fee transparency, which couldsee parties from financial advisers toPR firms forced to disclose theirexpected fees from a transaction.

Though the change was expected,advisers are still worried thatincreased speculation on fees willdetract attention from the value of apotential bid to the offeree.

These changes hit the wrong targetand may in fact damage the interestsof target company shareholders, saida spokesman for the British VentureCapital Association.

Recognising employees interests isalso in the Panels sights, with propos-als to discipline companies that renegeon employment promises made dur-ing negotiations.

Takeover rule

changes setto hurt M&ABY ELIZABETH FOURNIER

REGULATION


Goldman Sachs rues decision on the ISS IPO

THERE was massive disappoint-ment at Morgan Stanley andGoldman Sachs last Thursdayover the sudden and unexpect-

ed decision to pull the 1.6bn flota-

tion of Danish outsourcing group ISS.While both banks had reason to

rue the chain of events which led tothe issue being dropped, GoldmanSachs could be forgiven for thinking

it lost the most.For Goldmans involvement wasnot just in selling the deal to clientsaround the world. One of its privateequity funds owned a 45 per centstake in ISS itself.

As ever, some rivals took the oppor-tunity to point out that Goldmansinvolvement in two sides of a dealmay have made it difficult for it toadvise as objectively as it could havedone if one of its funds had not been

the second largest seller of stock.Private equity sellers are well

known for driving a hard bargainwhen selling out in IPOs and in thiscase Goldmans role in pricing the

issue may have led some buyers todoubt whether they would be gettinga decent deal.

Undoubtedly there would havebeen great care taken to ensure thatthe Goldman team, headed byRichard Gnodde, acted in exactly thesame way as it would have done with-out its private equity interest. But, astragedy unfolded in Japan and warapproached in Libya and nervesfrayed all round, the float was pulled.

As one broker put it: The Goldmaninvolvement in two elements of thedeal would have been one more rea-son for somebody not to buy it.

Going forward, not everybody

believes the ISS deal to be beyondrevival, with one broker expecting anaccelerated bookbuild deal, whichinvolves shares being sold to a smallergroup of clients within a short time.

Under such a scenario, ISS couldcome to the markets within the nextfew weeks using the same figuresthat were prepared for the originaldeal. All we need are the nuclearfears in Japan to die down and forevents in the middle east not to go too

far out of control, the broker said.Last week Inside Track reported on

the moves RBC has been taking tobeef up its equities business, hiringliberally and offering bloated pay

packages.This week there is news of BrettJacobs choosing to leave RBC to joinup with Panmure Gordon. Jacobs hadbeen lured to RBC on the promise ofthere being potential to build up asmaller caps investment bankingbusiness. His departure suggests theidea is being shelved by a bank that isincreasingly devoting itself to thelarge cap sector.

[email protected]

INSIDE TRACK

DAVID HELLIER

Takeovers that could have been affected

Kraft Foods/Cadbury, Jan 2010Despite saying it would stay open, afteracquiring Cadbury, Kraft decided to closeits Somerbury factory. Under new rulesbidders can be disciplined if they dontfulfil statements made during a bid.

Britannia/Co-opFirst touted in October 2008, the merg-er between Britannia Building Societyand Co-operative Financial Services was-nt confirmed until January 2009 wellover the new mandatory four-week limit.

KNOC/Dana Petroleum, Sep 2010An approach was first rumoured in earlyJuly, but no takeover was confirmed until24 September. International firms areused to deadlines and inducements thatwont be allowed in the new UK regime.

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ESSAR Energys directors are campedout in the Deutsche Bank offices onGreat Winchester Street this week,with a relentless schedule of meetingswith investors, analysts and press.

City A.M. found Essar Energys vicechairman and Essar Group chief execPrashant Ruia surrounded by DietCoke cans and half-eaten fruit (theschedule hasnt allowed for lunchbreaks), still chipper after a long day

talking up Essar Energys performancesince its rocky 1.1bn float last May.Operationally weve had a strong

year, said Ruia in a confident tonewith a slight Indian accent. Werefinding markets are better and thelong-term power tariffs in India arebetter. Theres lots going on, this yearwill be a transformative one for us.

He winced at hearing Essars sharesdropped seven per cent after yester-days maiden results, but insisted theproject delays that have spooked themarket are being solved.

Yes, these projects are one quarterbehind schedule but from an overallperspective, if you look at where wewere in May last year, weve made sig-nificant progress, he said, addingthat he aims to have the companyfocused on operations rather than fin-ishing off new power plants withinthe next two quarters.

He said India is close to resolving itsdebate about energy security, and is

likely to be committed to coal duringits growth: India was looking to buildup a nuclear option, but I think thatwill come in for some review in lightof whats happened [in Japan].

Ruia is normally based in Mumbaito oversee Essar Group, ownedby the Ruia family, though he spendsenough time in London to have afavourite restaurant (Woodlands inMarylebone). He dismissed talk of a

conflict between his role at EssarEnergy and its parent, Essar Group,which owns a 78 per cent stake.

Weve got a completely independ-ent management team, which isfully operational, many of whom arehere in London, he said, pointingto CEO Naresh Nayyar in the nextroom. Essar Energy is not a full-timerole for me. Theyve got 3,000other people looking after thatside of things.

Ruia bullishon potential

from India

INDIA-FOCUSED power generator andrefiner Essar Energy posted a forecast-beating 28 per cent rise in pre-tax prof-it to $365.5m (224m) yesterday, in itsfirst full-year results since raising1.1bn in a London float last May.

Its FTSE 100-listed shares fell 7.3 percent, however, as it admitted thatthree power plants in India have beendelayed by around three months

thanks to heavy rains in the countryduring monsoon season.Essar Energy aims to bring 2,910

megawatts of power capacity from thethree plants online during 2011, andcontinue work on 8,000 megawatts-worth of new projects to cash in onsurging energy demands in India.

Revenues rose 42 per cent to $10bnon higher refining margins and newenergy tariffs in its main market.

The firm shelled out $2.56bn in cap-

ital spending in 2010, in one of thebiggest infrastructure investment pro-grammes in the country.

Vice chairman Prashant Ruia toldCity A.M. yesterday the firm will focuson completing new projects ratherthan big buys this year. The firm is notlooking to snap up any more RoyalDutch Shell assets after its 215mStanlow plant acquisition closes laterthis year nor will Essar get involvedin BPs $30bn asset sale, he said.

Essar Energy beats forecastsbut project delays hit sharesENERGY

Essar Energy vice chairman Prashant Ruia Picture: Micha Theiner

Focus on Essar Energy12 CITYA.M. 22 MARCH 2011

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The Capitalist14

LAUNCH OFSTUDY INTOCITY FIRMDIVERSITYA LUCKY few got a sneak preview ofNomuras brand new Angel Lane offices

yesterday, as the bank played host to thelaunch of executive search firm OdgersBerndtsons diversity study of 100 seniorwomen in financial services.

The women that Odgers recruited totake part represent 54 organisations witha combined turnover of over 500bn, andthe guestlist for the evening reflected thehigh-profile contributors to the study.

The study was introduced by Odgerschair Virginia Bottomley, with StandardBank chief executive Jenny Knott alsospeaking in Nomuras new Thames Suite,

enough. It could make even the best inten-tioned person drift off, but ears prick upwhen the amount raised by the last bigspectrum auction is mentioned: 22.5bn.

It exceeded everybodys expectationsand gave the government a vast war-chest. But the adviser on that deal,

Rothschild, was understood to havewalked away with a relatively modestsum. Rather than negotiating a percent-age cut of the final figure, the investmentbank agreed to accept a flat fee, thoughtto be low single digit millions. Rothschildrather diplomatically declined to com-ment yesterday.

In the Parthenon of losers in the dot-com bubble, Rothschild is not a namethat will be remembered. But wed imag-ine that whoever is the adviser this timearound will not agree to a flat fee.

offering impressive views from the 11thfloor of the new building.

Charlotte Sweeney, Nomuras head ofdiversity programme, told The Capitalistthat the report should provide a usefulreference for City firms reviewing theirdiversity strategies particularly as it over-laps on several points with the LordDavies report released last month.

Banks in particular have been focusedon this for over a decade, said Sweeney.They need input for their continuousfocus on development.

One thing is for certain, any machotypes planning to ignore the Citys cur-

rent drive for diversity risk being leftbehind if they dont get on board.

As Bottomley said: Women will control60 per cent of the UKs private wealth by2025, globally they are responsible for 13trillion in consumer spending.Organisations will suffer unless they fullyexploit the female talent in their midst.

A POOR CONNECTIONOFCOM often talks about the demand formobile spectrum (the waves your mobilephone uses to send data), telling us whoshould have it and why there isnt

1. L-R Mary Martinezof Mercer with SusanneThoring-Lund, Odgers,and ChristinaIoannidis, CEO ofAquitude2. Odgers chair

Virginia Bottomleywith Ann Stock of StateStreet Global Advisors,and Odgers AnneMurphy3. L-R Ida Levine, TheCapital GroupCompanies, EmmaSlatter and CarolineStratton, both fromDeutsche BankPictures:Micha Theiner

1

2

3

EDITED BY

ELIZABETH FOURNIERGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

CITYA.M. 22 MARCH 2011

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THE founder of high street fashionchain New Look will take back thereins after the chief executive andchairman announced plans to quityesterday.

Tom Singh, who owns a 22.4 percent stake in the firm, will becomeinterim executive chairman follow-ing the resignation of its chief execu-tive Carl McPhail and non-executivechairman John Gildersleeve.

The shake-up comes after the com-pany ruled out a float in the nearfuture after tough market conditionstook their toll on the budget clothesretailer.

McPhail, who became chief execu-tive in 2008, was promoted to the toprole largely to oversee an initial pub-lic offering.

It is not clear if he is taking upanother business role elsewhere.Meanwhile, New Look saidGildersleeve had recently indicated

his intention to retire to pursue otherbusiness interests, which includeCarphone Warehouse where he isnon executive deputy chairman atthe retailer.

He was also hired to help steer afloat through to completion.

Like-for-like sales fell 9.1 per cent inthe 15 weeks ended 8 January.

McPhail said after those figures:Trading conditions in the UK havecontinued to be challenging andadverse weather in December signifi-cantly affected footfall and spending

patterns.He added that the business outlook

was uncertain for the year.The following month it was

revealed that SVG Capital, one of theprivate equity backers of New Look,had nearly halved the value of itsholding in the fashion chain.

With Singh at the helm the compa-ny hopes to keep the ship steady, buthe is not expected to return to therole as head of the company for thelong term.

New Look inshake-up aschiefs resignBY JOHN DUNNE

RETAIL

Consumer NewsCITYA.M. 22 MARCH 2011 15

NEWS | IN BRIEF

Campari in Russia moveItalian drinks group Campari isstrengthening its presence in the fast-growing Russian market as it expectsthe Japan crisis to impact trading inAsia this year. Campari, which hasacquired 16 brands in the past 15 years,said it would complete the acquisition of

Moscow-based distributor Vasco CIS in2012 for a total investment of8.2m(7.1m). Campari said it expects Russiato double its proportion of the group'ssales to four per cent in 2012. The grouphas a portfolio of over 40 spirit, wineand soft drink brands.

Heineken ups share buybackBrewer Heineken announced yesterdaythat in connection with its acquisition ofFEMSA Cerveza, it has increased themaximum value of the third phase of itsexisting share buyback programme from150m (130m) to 300m. This thirdphase of the programme, by the Dutch-based business, covers the period 18November 2010 up to and including 16June 2011, and was originallyannounced on 17 November 2010.

Liberty wins race to buy Kabel BWMedia mogul John Malone's Liberty

Global will buy Kabel BW after privateequity firm CVC declined to raise itsoffer in a fierce battle for the Germancable operator. The deal values KabelBaden Wuerttemberg at 3.16bn(2.75bn), its parent, Swedish buyoutfirm EQT, said yesterday. Over the week-end, Liberty edged ahead in the auction,in which CVC had previously looked alikely winner with its 2.95bn bid.However, CVC declined to raise its bidany further, according to sources closeto the talks.

NEW Look founder Tom Singh isback in the hotseat at the retailerafter the exit of the chairman andchief executive.

The chain aimed at providingdesigner fashions at affordableprices was established by Singh inthe West country in 1969.

He, with his wife Kuljit, borrowed5,000 from his parents to open his firststore. In 1996, Singhs family earned morethan 90m by selling a 75 per cent stake inthe retailer to PPM, the venture capitalcompany.

New Look f loated on the London StockExchange in June 1998.

However, Singh later took the com-pany private again in associationwith Apax Partners and PermiraAdvisers. In September 2005, NewLook acquired 34 Littlewoods

stores from Associated BritishFoods. Singh, 60, is a graduateof the University of Wales,Aberystwyth where he studiedinternational politics andgeography.

He is known as courteousin business and his dedica-tion to New Look has seenhim with little time forinterests outside thefirm.

BY JOHN DUNNERETAIL

Founder called back to

the frontline

TOM SINGH

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HOUSEHOLD incomes have droppedby an average of 360 a year since2008 -- after accounting for inflation --the influential Institute for FiscalStudies (IFS) revealed yesterday.

This is the largest decline in livingstandards since 1980 to 1983, the IFSsaid. Usually household incomes riseabove the level of inflation, by aroundfive per cent every three years.

Those on high incomes are beinghit hardest, due to tax hikes.

Someone in the middle of the richesttenth in society in 2011 will be about2,200 less well-off than someone inthat position in 2008, the report said.

Overall, low interest on savings andsub-inflation wage growth are themain reasons behind the recentsqueeze on living standards, it said.

Inflation hit four per cent inJanuary and is expected to have risen

further in February. The latest figureson price pressures are released today.

Inflation has become the leadingconcern for investors and the generalpublic, according to research from theAssociation of Investment Companies(AIC) released yesterday.

Escalating prices have becomemore of a concern to people than wor-ries about job loss or rising interestrates, AICs survey showed.

Today the Adam Smith Institutethinktank will accuse the governmentof cashing in on spiralling inflationthrough the tax system.

Capital gains tax which rose from18 per cent to 28 per cent in last Junesbudget will claim an extra 1.6bndue to inflation, the institute argues.

And rising prices have knocked therecovery in construction, according tothe Federation of Master Builders.Nine out of ten surveyed building com-panies expect material prices to riseeven further in the next six months.

Britons hit by360 a yearfall in incomeBY JULIAN HARRIS

UK ECONOMY

Economics16 CITYA.M. 22 MARCH 2011

NEWS | IN BRIEF

US existing home sales slumpSales of previously owned US homesplunged in February and prices hit theirlowest level in nearly nine years. Sales fell9.6 per cent month-on-month to an annu-al rate of 4.88m units, reversing threestraight months of gains. The percentagedecline was the largest since July, theNational Association of Realtors said yes-terday.

UK firms optimistic over growthAlmost three quarters (72 per cent) offirms report that they can grow despitethe governments austerity measures, asurvey for consultants KPMG revealedyesterday. However, over half (52 percent) said that complex regulations were

the greatest obstacle to their expansion.Businesses need assurance that relief

will be coming their way to minimise redtape, said KPMGs Malcolm Edge, speak-ing ahead of the chancellors budget thisweek.

Research says cuts could aid UKThe UKs deficit cuts are unlikely to stallthe recovery, and could even be economi-cally expansionary, an academic papershowed yesterday. Relaxing spendingcuts would not necessarily improve theprospect for short-term growth, theOxford University Centre for BusinessTaxation report said. Fiscal cuts are morelikely to be expansionary if there is an ini-tially high level of government debt, thedeficit reduction is large, and morereliance is placed on spending cuts than

tax hikes. All of these are true in theUK, the report said.

TRICHETS COLLEAGUES ECHO HAWKISH TONES OVER EURO RATES

EXPECTATIONS ofa hike in Eurozoneinterest ratesspiked again yes-terday, as Jean-Claude Trichetagain warnedagainst second

round effects ofprice pressures.European centralbank colleaguesYves Mersch andGertrude Tumpel-Gugerell bothechoed his mes-sage of verystrong vigilancetowards inflation.

CITYVIEWS: AREYOU NOTICINGASQUEEZE INLIVING STANDARDS?Interviews by Phoebe Torrance

www.RateSetter.com Customer Phoneline: 08442490115

Save or Borrow peer to peer at RateSetter.com

IN ASSOCIATION WITH

Yes, fuel prices are going up, which has a major impact ondisposable income -- and there are few signs of salaryincreases coming any time soon.

KEVIN HARPER | ALLIANZ

Yes indeed, I work for a bank so I see that, and see peopleexperiencing it. The squeeze is caused by rising inflation,tax increases, and salaries not increasing as much.

Yes, everyday costs are increasing and I cant see anyimprovement in the near future -- especially if there aremore tax hikes.

SUSHANT KAPUR | HSBC

WILLIAM MACLACHLAN | HOLMAN FENWICK WILLAN

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SECURITY services firm G4S said ithad signed a contract, estimated tobe worth 100m, to be the officialsecurity services provider for theLondon 2012 Olympic Games.

G4S, which provides services rang-ing from cash transportation andfacilities management to securityand protection, said it will recruit,

train and manage the 10,000 guardsneeded for the Games.Shares in G4S closed up one per

cent at 258p.We believe that the contract will

have sales of 100m, with perhaps anextra 30m of additional sales com-ing from security deals with corpo-rate sponsors of the Games, JPMorgan analyst Robert Plant wrote ina note.

The FTSE 100 company, which

employs 50,000 people in the UK, hadalready been providing security atthe Olympic Park site and has runsecurity operations for other sport-ing events including Wimbledon andthe Grand National.

Paul Deighton, chief executive ofthe Games organising committee,said: G4S will help us ensure thatthe security provisions in place arerobust and of the highest profession-alism.

G4S wins 100m contract toprovide security for OlympicsBYHARRY BANKS

SECURITY

BRITISH oil explorer Rockhopper saidit expected its Sea Lion well in theFalkland Islands to be commerciallyviable, raising hopes that the remoteterritory will become a new oilprovince.

Following this positive result webelieve Sea Lion is highly likely toprove commercially viable,Rockhopper chief executive SamMoody said.

The well has confirmed our abilityto identify good reservoir units on theseismic in our acreage with the sandscoming in very close to prognosis, headded.

Rockhopper said it would continueto appraise the Sea Lion discovery andto explore additional opportunities inthe region.

The Sea Lion well is the first oil find

in the British-governed FalklandIslands.

The drilling has sparked protestsfrom Argentina, which claims sover-eignty over the Islands it calls theMalvinas and which lie 300 miles fromits shore.

In December, Aim-listed oil explorerDesire Petroleum said it had failed tofind oil in a prospective well off theFalkland Islands, admitting insteadthe well was full of water.

Shares in Rockhopper closed up37.33 per cent at 298p. DesirePetroleum was up 8.84 per cent at 40p.

Rockhopperupbeat on itsFalklands findBYHARRY BANKS

OIL & GAS

SEARCH engine Google weatheredtwo international spats yesterday, asFrance fined the online giant forbreaching privacy rules and the firmblamed the Chinese government forinterfering with its email service.

Frances online privacy watchdogCNIL slapped Google with a 100,000

(87,146) fine, CNILs biggest to date,for collecting data unfairly through

its Street View mapping cameras lastMay. We are profoundly sorry forhaving mistakenly collected payloaddata from unencrypted WiFi net-works, said Peter Fleischer, Googlesglobal privacy counsel.

Meanwhile, Google said yesterdaythat Beijing authorities were behindinterruptions to its Gmail service inChina, after users complained of sev-

eral weeks of slow or non-existentaccess.

Google gets record privacy fine inFrance and email trouble in China

TECHNOLOGY

TWO HALVES

PUNCH, the highly-indebted pubs group headed up by Ian Dyson, is today expectedto announce the demerger of its Spirit unit when it unveils a long-awaited strategicreview. The Spirit Group which is made up of better-performing managed pubs would be spun off, leaving Punch to sell off underperforming pubs in its leasedestate to help pay off its 3bn debt pile.

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WORKSPACE rental company Regusreported a 67 per cent drop in earn-ings after it saw little benefit from anyeconomic upturn, but its sharesjumped after it hiked its dividend andsaid expansion and cost-cutting willreturn it to growth in 2011.

The group, which offers ready-to-use offices for rentals as short as half aday, yesterday said 2010 earningsbefore interest and tax after growthcosts were 23.8m, compared with

72.m in 2009.The results, however, were towards

the higher end of analysts expecta-tions, which had ranged between16m and 26.4m, with the consensus21.99m. Revenues were down to1.04bn compared to 1.05bn in 2009.

Shares in Regus, which said it wasincreasing its full-year dividend byeight per cent to 2.6p, closed up 15.8per cent at 116.4p.

But analysts at Peel Hunt soundeda note of scepticism: A more upbeattrading statement is encouraging, butwe continue to believe that the roadto recovery will be bumpy.

Regus sharesjump on rosy2011 outlookBY HARRY BANKS

SUPPORT SERVICES


NEWS | IN BRIEF

BNP Paribas chief gets1.67 bonusBNP Paribas, Frances biggest listedbank, awarded chief executive BaudouinProt a 1.67m (1.5m) bonus for 2010.Prot, one of the few bank chiefs to havekept his position throughout the crisis,will receive 60 per cent of the bonus, or1m, as a deferred payment over 2012,

2013 and 2014, BNP said on its websiteyesterday. The bonus takes Prots totalcompensation for 2010 to 2.7m, includ-ing salary and other payments disclosedin regulatory filings. Although this is 10per cent more than Prot received overallfor 2009, it was still well below sumsearned by bosses of British bankBarclays or German lender DeutscheBank.

Hapag-Lloyd owner delays IPOOwners of Hapag-Lloyd have postponeda decision on floating the container ship-ping group, its majority owner said yes-terday. There will be no decision on anIPO (initial public offering) today, aspokesman for the Albert Ballin consor-tium, which owns 50.2 per cent ofHapag-Lloyd, said citing an uncertaincapital market environment. The super-visory board of TUI, which owns almosthalf of Hapag-Lloyd, gave the go-ahead

on 3 March for a possible IPO and a per-son close to Hapag-Lloyds owners saidat the time the company would list on15 April. A listing of Hapag-Lloyd couldbe the biggest in Germany in more thanthree years and a first step in the strate-gic reshuffle of parent company TUI.

ThreadneedleThe asset manager has appointedAndrew Chan as head of product and

business development for its AsiaPacific business. He will oversee thedevelopment of client-focused services

to meet demand in Asian markets. Hewill report to Raymundo Yu.

Virgin MediaJamie Heywood has joined the firm asdirector of mobile. He comes to thecompany with a decades experience inthe mobile industry, including timespent working for Virgin Mobile inIndia and China, and for Orange in theUK and Thailand.

Heywood was involved in the launchof Virgin Mobile in India and workedfor Orange for five years. He replacesJonathan Kini, who moved to take on asenior role in the customer and opera-tions division.

Bank of America-Merrill LynchCharlotte Burkeman is to join the com-pany as a managing director and co-head of prime brokerage for Europe,the Middle East and Africa (EMEA).Burkeman comes to the company fromUBS, where she was in a similar role.She has also worked in New York andbegan her career with Goldman Sachs.

In addition, Sean Capstick is to takeon further responsibility for EMEAequity research sales. Capstick hasbeen with the firm since August of lastyear, when he left Deutsche Bankwhere he was co-head of Europeanglobal prime financial sales. Previously,he has worked at Morgan Stanley and

Goldman Sachs in New York andLondon.

Marsh & ParsonsMichael Baulk has become non-execu-tive chairman of the estate agent, hav-ing previously led ad agency AMV.

MercerThe consulting firm has hired RichardFuller and Ryan Pollice to its globalresponsible investment consulting busi-ness. Fuller will be based in Melbourne,Australia and will report to HelgaBirgden. Pollice will be based inToronto and will report to ElisabethBourqui.

CITY MOVES | WHOS SWITCHING JOBS Edited by Juliet Samuel

Alvarez & MarsalThe independent professional services firm hasexpanded its European private equity advisorybusiness with the appointment of David Sage(pictured) as a managing director. Sage bringsover 20 years experience in restructuring andfinancial advisory, having worked at Ernst &Young, where he completed assignments forApax, Blackstone, CVC, Goldman Sachs andKKR. He has also worked at Lonmin. He is also afellow of the Institute of CharteredAccountants in England and Wales (ICAEW).

+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

CLOSE to a dozen private equity firmshave approached brokerage DanielStewart over a potential partnershipwith Jimmy Choo to spent 500m buy-

ing back part of the company Choofounded,City A.M. has learned.

Daniel Stewart is advising Choo onthe bid to buy his company back fromprivate equity firm, TowerbrookCapital, which has announced itsintention to sell the business.

Daniel Stewart chief executive toldCity A.M.: Theres a lot of private equi-ty interest in the bid. Were goingthrough the detail and decidingwhich the best one to carry forwards isin the next two or three weeks. Headded it is unlikely Choo will partner

with more than two firms.Winning the Choo mandate was a

coup for Daniel Stewart, which yester-day announced it expects revenues of8m for 2011, up from 3.5m last year.It expects a profit of 1m versus a2.6m loss last year.

BY JULIET SAMUELM&A

Queue forms for Choo bidA dozen private equity firms are vying to partner with Jimmy Choo Picture: GETTY

ANALYSIS l Regus

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9 Mar17 Feb28 Jan10 Jan

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116.4021 Mar

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MINERS, banks and engineersdrove gains in Britains topshare index by the close yes-terday as hope grew that the

nuclear crisis in Japan is easing, whileheavyweight Vodafone was boostedby M&A activity.

The FTSE 100 closed up 67.96points, or 1.2 per cent, at 5,786.09, itsthird straight session of gains. Theindex is still down around four percent in March.

The action by coalition forces inLibya over the weekend has helpedmarket uncertainty in the short-termbut it would be dangerous to assumeit will be plain sailing for shares fromhere, said David Jones, chief marketstrategist at IG Index.

Mobile operator Vodafone gained3.6 per cent after US group AT&T saidit was planning to pay $39bn (23.9m)for Deutsche Telekoms T-Mobile USA.

Deutsche Bank said the deal waspositive for the long-term value of theUS market and Vodafones 45 per centstake in Verizon Wireless. BT was up

2.4 per cent.Engineers, among those hit hard-

est last week by the flight to safetyprompted by a nuclear crisis causedby a massive quake in Japan, were thestrongest gainers and were also liftedby positive broker comment.

Enginemaker Rolls Royce rose 3.5per cent, supported by an upgrade byEvolution Securities to buy.Weir Group, a supplier of industri-al pumps and valves, gained 4.5 percent after Credit Suisse upped its rat-ing to outperform on valuationgrounds. The positive broker com-ment lifted sentiment elsewhere inthe engineering sector, with Invensysthe top FTSE gainer, up 5.1 per cent.

Investors were waiting for moreclarity on the situation in Japan andin Libya over the weekend, andtheres been no more bad news, saidLothar Mentel, chief investment offi-cer at Octopus Investments, thoughhe said gains were vulnerable.

Its not a solid situation andanother bad explosion at theFukushima plant would see anothersharp sell-off, he said, adding thatthis poses more risk than the situa-tion in Libya.

Banks, which tend to gain stronglywhen equities are positive, werefirmer with Standard Chartered up

1.7 per cent and Barclays adding 2.6per cent. JP Morgan said the four tosix per cent markdown in global equi-ties after the Japanese quake shouldonly be short term given that loss ofactivity due to the [Japan] earthquakeis likely to be temporary.

It saw value in the insurance andautomotive sectors, and said minersand capital goods firms were goodplays on emerging markets outperfor-mance and higher commodity prices.

Oil prices, which rose over one percent, were also seen as a potentialbrake on equity strength. Westernpowers continued air strikes in Libya,threatening Middle East supplies.India-focused refiner and power gen-erator Essar Energy fell 7.3 per centafter saying a number of key powerprojects would be delayed.

Upbeat engineers and banks

drive FTSE 100 to 1.2pc gainTHELONDONREPORT

p

20 Dec 12 Jan 1 Feb 21 Feb 11 Mar

6,100

5,800

5,700

5,600

5,500

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6,000

ANALYSIS l FTSE 5,786.0921 Mar

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

ANALYSIS lComputacenter

440

450

430

400

410

420

21 Feb 28 Feb 7 Mar 14 Mar 21 Mar

420.0021 Mar

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COMPUTACENTERJP Morgan Cazenove rates the IT infrastructure provider overweightand has raised its target price from 345p to 480p following results lastweek. The broker has raised its revenue forecast by 13 per cent for 2011to 2.97bn for the year, giving a pre-tax profit of 77m. It expects asteady growth trajectory for IT investment in the UK, Germany andFrance as confidence continues to grow.

ANALYSIS lStandard Chartered1,800

1,700

1,600

1,50010 Jan 28 Jan 17 Feb 18 Mar

p 1,622.0021 Mar

STANDARD CHARTEREDCitigroup rates the bank buy / medium risk with a lower target price of22, down from 22.50, to reflect the UK bank levy. The broker has cutits targets in line with lower trading multiples among StandardChartereds peers, but thinks its recent sell-off creates an opportunity tobuy a growth stock at a lower multiple. The broker notes the banksrecent pledge to deliver double-digit growth in 2011.

ANALYSIS lMan Group320


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280

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245.5021 Mar

MAN GROUPCredit Suisse rates the asset manager neutral but has cut its targetprice from 290p to 250p. The broker has also reduced its forecast forassets under management by $100m to $69.8bn for the end of March,based on a decline in the AHL division during the last quarter and thebroader impact of subdued markets on long investment positions along-side poor hedge fund returns in recent weeks.

US markets end up

as Japan fears ease

BUYERS emerged in US stocksyesterday, enticed by the biggestproposed merger of the year,though crises in Japan, the

Middle East and North Africa meantmarket volatility would continue.

The bulls have held the upperhand for three days, as the S&P 500has put together its best three-dayrun since early December.

The Dow Jones industrial averagegained 178.01 points, or 1.5 per cent,to 12,036.53. The Standard & Poors500 Index climbed 19.18 points, or 1.5per cent, to 1,298.38. The NasdaqComposite Index added 48.42 points,or 1.83 per cent, to 2,692.09.

Dow component AT&T rose 1.1 percent after the company announcedplans to buy Deutsche Telekom's T-Mobile USA and refocused investorattention on attractive company valu-ations.

The AT&T deal is just a piece of it.The other piece of it is there is a senseof some better news out of Japan andthings havent gotten any worse in

Africa, said Gail Dudack, chief invest-ment strategist at Dudack ResearchGroup.

The $39bn (23.9bn) AT&T dealwould create the largest wirelessphone operator in the United States.

Shares of Verizon gained 1.7 per-cent to $36.46, while Sprint Nextelshares plummeted 13.5 per cent to$4.37. Leap Wireless Internationalshot up 15.7 per cent to $14.05 andMetroPCS Communications gained4.8 per cent to $15.64.

While the outlook for Japanremains a worry, glimmers of hopeabout the nuclear crisis and investorWarren Buffetts comments aboutJapanese stocks also helped investorsentiment on Monday.

The iShares MSCI Japan IndexFund was up 2.7 per cent.

The market volatility index fell16.2 per cent, its biggest daily percent-age drop since May, and was tradingbelow its 14- and 200-day moving aver-ages for the first time since the earth-quake in Japan.

Dudack said of Japan and the tur-moil in the oil-producing region thatneither situation is resolved, so it'shard to know what the effects are.The market has been really volatileand it will continue to be reallyvolatile.

THENEW YORKREPORT

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News 21CITYA.M. 22 MARCH 2011 WORDS BY ROGER BAIRD

The man whowants to getthe SFO readyfor businessRichard Alderman talks candidly to City A.M.

The countrys top fraudbusterRichard Alderman may be retiringnext year but after arresting Robertand Vincent Tchenguiz he has very

publicly taken on the fight of his life.Earlier this month, the Serious Fraud

Office (SFO), of which the 58-year-oldAlderman is the director, briefly arrestedand questioned the billionaire brothersalong with seven others and seized com-puters from their central London officesunder the glare of the worlds press. Allnine were subsequently released withoutcharge.

The raid is part of the SFOs investiga-tion into the collapse of the Icelandic bankKaupthing in 2008, to which the brotherswere connected. The raid led to Bank ofAmerica Merrill Lynch pulling a 125mloan to the brothers, which in turn led tothe collapse of part of their empire, theproperty management unit Peverel.

The Tchenguizes complain they havebeen used as scapegoats for the troubledinvestigator to try and rebuild its reputa-tion. Robert has hired lawyers to see if theSFO acted within the law. Vincent has alsothreatened to sue the SFO. The SFO main-tains it has acted properly.

The 23-year-old public body desperatelyneeds to win a high-profile case because ithas gained notoriety as an investigatorthat embarks on lengthy cases that all toooften fail to get prosecutions.

Observers often look at the US and pointto the way its prosecutors are regularlyable to win meaningful convictions.Bernard Madoff is currently serving 150years for running a 50bn ponzi scheme.

Last year, chancellor George Osbornedammed the whole of the countrys fraudinvestigators the SFO, the FinancialServices Authority, the Office of FairTrading and the fraud section in theCrown Prosecution Service which aretasked with battling the 38bn a year thegovernment estimates is lost to fraud.Osborne said: We are very, very bad atprosecuting white-collar crime.

Alderman leans forward in his seat in ameeting room in the SFOs grey buildingon the edge of the City and says:Considering what we do we have pro-duced very good results. But can we do bet-ter? Yes, we can.

But the truth is that the SFO, whichemploys 300 people, is running out oftime. The coalition says it plans to mergethis body, along with a number of otherfraud units into the Economic CrimeAgency (ECA) once a consultation has beenconcluded. Alderman would like to seeMargaret Cole, head of enforcement at theFinancial Services Authority, head the newagency.

It also seems that governments havebeen losing faith in the SFO for some timenow. When Alderman took over from theprevious director Robert Wardle in April2008, his budget was 55m. It is currently35m, and Alderman says in a few yearsit will fall again to 28m.

But this has not stopped Alderman fight-ing hard for new powers for the ECA whenit opens up for business. I want to see itstart life with the right tools, he says.

The first item on his wishlist is thepower to handle deferred prosecutions.This is when a firm admits a charge, pays afine, changes its practices, and as long asthe same offence is not committed againwithin a certain period of time, the offenceno longer counts against the business.

This will need legislation, says a court-ly and candid Alderman. But my col-leagues in the US say this is one of themost effective methods they have in theirarmoury.

He would also like to see the introduc-tion of plea negotiations which is a betterway of handling big cases, particularlywhen they cover a number of jurisdic-tions.

The SFO director would also like to seejudges getting involved in cases earlier. Hesays: They would not sit in on negotia-tions, but they would be kept informed ofwhat is being proposed. The SFO wouldneed the approval of a judge before reach-ing a plea agreement.

Often in the past the agency has spentyears preparing a case only to have thejudge criticise the settlement, or throw thecase out after only a few days in court.

Reliance on whistleblowers is key forevery investigator. In late 2008, at theheight of the financial crisis, the SFO setup a whistleblowers hotline hoping tocatch frauds that a shrinking market wasexpected to expose.

But he says: I was expecting far more, itwas a little disappointing. Part of the rea-son for this is that Robert Dougall, thewhistleblower in the DePuy Internationalcase, which involved executives payingGreek officials 4.5m to use its medicalproducts, was sentenced to 12 months injail last April. This was later suspended onappeal but the damage was done.

Alderman says: This sent out a message.It led to fewer whistleblowers coming for-ward as well as a dip in the quality of infor-mation. Although some good stuff is

beginning to come forward again.He adds that a whistleblower coming

forward with good information and noinvolvement in the case is a perfect sce-nario, but not a common one. Often thewhistleblower will have played some partin the fraud.

The SFO director welcomes the BriberyAct, which is currently in consultation andhas proved to be extremely controversial,triggering widespread opposition. But hesays corporate worries are misplaced andthe bill will not criminalise corporate hos-pitality. He adds: This is good for the SFO.Honest companies should not be put at acompetitive disadvantage because a rivalpays an official a bribe to win a contract.

Since Alderman arrived almost threeyears ago he has tried to streamline theway the body works as well as boost itscaseload. He says cases were too complexand covered too many issues. He adds thatits prosecutions are now much sharperand as a result under his tenure the aver-age time it takes to bring a case to courthas dropped from five years to 13 months.In the year before Alderman took over, thebody handled 63 cases. It currently has 103cases on its books.

As part of Aldermans new broom, he setup a challenge panel, where the seniordirectors judge the cases the SFOs teamsprepare on a monthly, or weekly basis ifnecessary. The panel has the power tochange the direction of an investigation orclose it down altogether.

As a result, under his watch he says thebodys conviction rate has risen from 62per cent to 92 per cent. But critics com-plain that many of these convictions areagainst individual conmen rather thanlarge corporations.

They point to the 14 defendants in theOperation Holbein NHS drugs price-fixing

case who walked free in 2008 after thejudge threw out the SFOs case before itreached a jury. The case had taken eightyears to assemble at a cost of 40m.

The two cases that frame Aldermanstime at the SFO both concern UK defencecontractor BAE Systems. The first was theSaudi Arabian Al-Yamamah arms dealbribery case, which was stopped by the UKgovernment in 2006 after the Saudisthreatened to withhold security informa-tion. This came before Alderman tookoffice, but the body was badly wounded.He was brought in to help restore its confi-dence.

He decided to go after BAE again, thistime for corruption involving a number ofcontracts in countries including Tanzania,the Czech Republic and South Africa.

The SFO settled this case last February,with BAE pleading guilty to accountingtechnicalities but not to bribery. The con-tractor paid the SFO a 30m fine, and the

US Department of Justice (DoJ) 255.7m.The SFO had originally said it would pur-

sue a 1bn fine.Alderman says: The BAE settlement

was as good as I could get. A lot of the finesrelated to central and Eastern Europe andthe DoJ had jurisdiction there. I wouldhave liked more cash.

The SFO boss says that because many ofthe corporate cases his body investigatesinvolve multinationals, a lot of the settle-ments involve the US or other regulators.However, the problem with working withUS regulators is that the SFO too oftencomes out of it looking second best.

Alderman admits: We are four to fiveyears behind where the Americans are inprosecuting corporate crime. Part of it isthat we have to demonstrate a board has adirecting mind to win a corporate prose-cution. The US doesnt have such a highstandard. If anyone in a US firm commits acrime where the intention is the firmshould benefit, the corporation is responsi-ble.

Alderman has also worked hard tochange the problematic working cultureof the SFO. After the collapse of the firstBAE case five years ago, former New Yorkprosecutor Jessica de Grazia was broughtin by the UK government to report on thebody. She found it was a demoralised andunderperforming agency with a strongdrinking culture where competent staffwere blocked by inadequate managementand leadership.

Alderman accepted many of de Graziasfindings and five of the bodys top 15 lead-ers left the organisation within six monthsof him joining the agency.

He also appointed accountants to headcase teams, where before they had alwaysbeen led by lawyers, to demonstrate thatthere is no glass ceiling on talent under his

leadership.He says: The place did have a reputationas a lawyers club run from the pub. WhenI came here I made it clear I did not drink.And I made it clear that a booze culturewas not acceptable.

He says that although morale hasimproved, the impact of the agencyslooming merger cannot be overlooked.

If you talk to people now about thecases, their faces light up. It is uniquelysatisfying doing this type of work, hesays. But when they think about theECA, people here think: have I got afuture? Should I look for another job? AllI can tell people is that they are doing ajob that society needs, and they shoulddo it to the best of their ability. But eventhen there are no guarantees.

Richard Alderman has worked hard toimprove the UKs approach to corporatecrime. Until he succeeds in a high-profileprosecution, however, the jury will

remain out on how succesful he hasbeen.

Age: 58Work: Before joining the Serious FraudOffice Alderman worked as the director ofnational teams and special civil investiga-tions at HM Revenue & Customs, oversee-ing tax investigations; from 2003 to 2005,he was the director of the InlandRevenues special compliance office; in2002, he was invited by the Attorney-General and Treasury Solicitor to workwith the Home Office in setting up thenow-merged Assets Recovery Agency.

Education: University College, London;read law; studied for the bar at Grays Inn

Family: Married, one daughter.Lives: North London

CV |RICHARD ALDERMAN

Serious Fraud Officedirector RichardAlderman in the tenthfloor canteen of theinvestigatorsheadquarters, just offGrays Inn Road

Picture:Micha Theiner

/City A.M.

We are fourto fiveyears behindwhere theAmericansare inprosecutingcorporate

crime.

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The tragic consequences of the earthquake andtsunami that hit Japan over a week ago continue toreverberate, with the terrible human cost nowbecoming apparent. The situation has been made

much worse by the uncertainty that surrounds the severi-ty of the damage to the Fukushima nuclear facility. The ini-tial panic saw the Nikkei drop around 20 per cent in lessthan 48 hours. Prices have recovered somewhat, andmany analysts have been quick to declare that the sell-offwas overdone.

As things stand, we just dont know how bad thingsare, let alone how bad they could become. Most expertopinion has insisted that any contamination from thedamaged plant would be limited to a 30 kilometre zone

around the site. However, increased levels of radiationhave been detected in food and water outside this area.While not high enough to be a risk to humans, it is still aconcern. Any resulting loss of confidence will furtherdampen economic activity in the area. Meanwhile, rescueworkers continue to risk their lives each day as they fightto regain control of the six reactors.

On top of the escalating hostilities across north Africaand the Middle East, the European debt crisis continuesto rumble on. The problems in the worlds largest eco-nomic bloc have fallen under the radar in recent weeksdespite a constant drip of negative news. Yet the eurohas rallied strongly, helped by the ECB after it gave itsstrongest possible hint that a rate rise is on its way at itsnext meeting in April. Of course, this will do nothing tohelp the heavily-indebted peripheral countries which haveall seen their bond yields push higher. In the last ten days,ratings agency Moodys downgraded the sovereign debtof Greece, Spain and Portugal.

Equities are showing the strain. After hitting multi-year highs just a few weeks ago, most of the major globalindices had begun to pull back. Investors were reducingtheir exposure as unrest across north Africa and theMiddle East pushed oil prices above $100 per barrel. Butthe events in Japan led to a sell-off that saw stock indicescrashing through significant technical support levels.Equities have bounced back over the last few days. Butthey now need to consolidate and build on these gains ora much deeper correction is on the cards.

WE CANT TELL

HOW BAD IT IS

GOING TO GETDAVID MORRISONCFD MARKET STRATEGIST, GFT

already leaked, and th

cityam 2011-03-22

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