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Washington fails to hammer out a deal on US budget

AMERICAS ticking time bomb grew evenlouder last night, after bickering politiciansfailed to deliver a plan to cut the countrysannual deficit and raise the legal debt ceiling.

The White House had targeted the openingof Asian markets this morning as a deadline toannounce progress in the talks, yet escalatingfeuds between top officials thwarted any hopeof a market-calming resolution.

Japans Nikkei index lost 0.7 per cent to10,064.1 in early trading this morning as mar-kets reacted to the deadlock. The greenbackalso eased amid the uncertainty, with theeuro hitting $1.4396 from $1.4353 in late tradeon Friday. And gold futures for August hit arecord high last night as talks stalled, risingmore than one per cent to hit $1,621 an ounce.

Lawmakers are running out of time to raisethe ceiling before the government becomesunable to service its debt on 2 August next Tuesday. Both the House of Representativesand the Senate require several days to tablelegislation before voting, analysts have said.

Commenting on problems across the pond,British business secretary Vince Cable yester-day blamed a few right-wing nutters for cre-ating the biggest threat to the globalfinancial system.

Some Republicans are holding out forstronger spending cuts in lieu of tax rises, innegotiations to reduce the mammoth $1.5 tril-

lion (919bn) annual government deficit.Diminishing time has created another

point of contention between Republicans andDemocrats. With the clock ticking down,Republicans are pushing a two-step agree-ment that would see a short-term agreementput in place to meet the 2 August deadline,with talks resuming on a longer-term plan. A

Republican aide said top level party memberswill meet this evening to thrash out their next

move. President Barack Obama opposes ashort-term plan, insisting that a deal must pro-vide the US government with enough finan-cial leeway to allow it to continue servicingdebts beyond the next Presidential election inNovember 2012.

After over six months of conversationswith the President about doing a big deal, its

pretty clear to me that theyre not willing todo it that the next election matters morethan doing whats right for the country, saidRepublican House Speaker John Boehner.

Obamas treasury secretary Geithnerremained upbeat despite the ongoing prob-

lems last night, insisting a default would nothappen and that the economy was on the up.

www.cityam.comIssue 1,431 Monday 25 July 2011 FREE

UK NEEDSMORE EASING

CABLE SAYS ANEW APPROACH TOQE IS REQUIRED P2

A FREE COCKTAILFOR EVERY READER

AT THE DRIFT BAR P13

BUSINESS WITH PERSONALITY

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30/05/11 till 03/07/11 is 102,636

BY JULIAN HARRISUS ECONOMY

l Obama continues to insist on along term deal over deficit cutsand the debt ceiling Pic: Reuters

DEBT DEADLOCK

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News2 CITYA.M. 25 JULY 2011

Cable in callfor more QE VINCE Cable yesterday floated theidea of a more imaginative form ofquantitative easing to kickstartBritains economy should it continueto grow at an anaemic rate.

In an unusual intervention for abusiness secretary, Cable favourablyquoted former members of the Bankof Englands Monetary PolicyCommittee, who argued that quanti-tative easing should be expanded sothe Bank can purchase paper otherthan government securities such ascorporate bonds.

Although Cable was careful topoint out that a new round of quanti-tative easing was a matter for theBank, which is independent of gov-ernment, his comments could raiseeyebrows at Threadneedle Street.

Cable said: If there is a sustainedperiod of weakness, the rightapproach is not for the governmentto relax its fiscal discipline, but it isabout the Bank of England... usingexpansion of quantitative easing perhaps in more imaginative ways,not just acquiring government securi-ties.

Members of the Monetary PolicyCommittee have floated different ideasabout how you do quantitative easing.I think that if we have a problem, acontinuing problem of weak demand,thats the way to deal with it.

BYDAVIDCROW

UK ECONOMY

The tide is turning on public spending

IT has taken over a year but the coali-tion is finally getting to grips withpublic spending. It is still going up incash terms, of course (there werenever any plans to cut the sterlingvalue of public spending) but for thefirst time it appears to have started todrop in real terms. George Osbornehas therefore finally started to deliverthe first part of his strategy but he isnow facing a fresh problem whichcould yet derail him.

Growth remains far too weak forcomfort, for a variety of domestic andglobal reasons; this will make it tough

to keep his deficit reduction plans ontrack for the next four years, evenbefore what is bound to be immensepolitical pressure to turn the tapsback on, Gordon-Brown style.

Last year, the government borroweda terrifyingly large 142.1bn (9.6 percent of GDP); this year Osborne washoping to borrow an almost as spooky122bn. It is this 20bn reduction inannual borrowing that critics havelaughably described as extreme andreckless even though it is clearlyextremely dangerous to maintain bor-rowing as such elevated levels, as debtcrises from Europe to America havedemonstrated all too well. But thosewho believe that the best way out ofexcessively high deficits and spirallingdebt is to borrow even more ought tocelebrate: Osborne now looks as if hewill miss his target.

Consider the facts. Central govern-ment current spending and net publicinvestment rose 2 per cent in cashterms compared with the same periodlast year in April-June, still a little

higher than the 1.5 per cent expectedfor the year as a whole. It is hard toknow what the special measure ofpublic sector inflation will turn out tobe (it will be lower than the consumer

price index) but public spending isprobably falling at close to the 0.7 percent predicted for the year as a whole.Citigroups excellent analysis of theofficial figures shows that benefit pay-ments have risen 4.6 per cent year onyear so far; debt service payments areup 14.3 per cent; net public invest-ment is down 9.4 per cent.

So much for spending. What aboutrevenues? The picture here is far fromdisastrous, especially when one con-trols for the proceeds from the one-off bonus tax, which raised 3.5bn inApril 2010 and has since been replaced by a different bank tax that raisesmoney throughout the year. If the fig-ures are adjusted to reflect this,receipts are up 7.8 per cent. The deficittotaled 39.2bn, only slightly downfrom 39.5bn in the same period ayear earlier, which looks terrible. But

adjusting again for the bonus tax, thedeficit in April-June fell by 3.9bn, bet-ter but still suggesting Osborne willmiss his target for 2011-12. He desper-ately needs more GDP growth.

The Chancellors bid to graduallycut the deficit remains essential to sal-vaging the economy. Osbornes mis-take has been to rely too much on taxhikes, especially Aprils job-destroyingnational insurance increase inheritedfrom Labour, as well as Januarys VATincrease, to protect spending. He has-nt benefited politically from thischoice everybody thinks he is slash-ing spending by far more than thereality and the taxes are damaginggrowth. Osborne is right on austerity(though not always on how to achieveit) but wrong not to be deregulatingthe economy, cutting the most dam-aging taxes and truly making the UKopen for business again. He needssome supply-side medicine to boostgrowth and revenues and fast.

allister.heath@cityam.comFollow me on Twitter: @allisterheath

GEORGE Osborne faced a barrage ofattacks from Labour yesterday, withshadow chancellor Ed Balls accusinghim of plunging Britain into a Greek-style trap.

With second quarter GDP figuresexpected to reflect badly on the UKeconomy tomorrow, Balls criticisedthe chancellors reckless deficitreduction for hampering the recovery.

Unless youve got more people in

work paying taxes [and] the economygrowing, it is very hard to get thesedeficits down, Balls said.

Labour announced that it wouldreverse the VAT rise as part of a fourpoint plan to save our high streets.Other plans included a tax on City bonuses and more planning regula-tions against big name retailers.

Tory deputy chairman MichaeFallon hit back at Balls call for a VATreduction: Balls is so deep in denialhe is ignoring the biggest economicchallenge facing the developed world.

BY JULIAN HARRIS

UK ECONOMY

Balls: UK faces Greek trapLabours Ed Balls attacked the deficit reduction plans Picture: Micha Theiner/City AM

NEWS | IN BRIEF

DSK maid to start charm offensiveThe New York hotel maid who accusedformer IMF chief Dominique Strauss-Kahn of attempting to rape her willtoday start a charm offensive, which willinclude interviews on some of the mostwatched shows in the US. The woman,Nafissatou Diallo, also gave permission

for news outlets to identify her by name.In an interview yesterday she saidStrauss-Kahn looked like a "crazy man"and attacked her when she entered hisroom. I want justice. I want him to goto jail," she said in an interview withABC News.

EU may force banks to disclose payEuropean banks could be forced to dis-close details of all staff earning morethan 1m (880,000) under tough newproposals from the EuropeanCommission. Brussels would like everynation to collect information whichwould also break out how much is paidin basic salary, bonuses and other incen-tives and publish aggregate informa-tion for each country in the EU. Themeasures are just one of the proposalsbeing considered by the EU to shake upbanking regulation.

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

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Vince Cable said hethought the best wayto deal with weakdemand would bemore QE

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EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

CHINA EYES BARTER PLAN TO BYPASSUS SANCTIONS ON IRAN PAYMENTSTehran and Beijing are in talks aboutusing a barter system to exchangeIranian oil for Chinese goods andservices, as US financial sanctionshave blocked China from paying atleast $20bn for oil exports. The USsanctions against Iran, which make itdifficult to conduct dollar-denomi-nated business, mean China mightowe the oil-rich nation as much as$30bn, according to people familiarwith the problem.

OVER THE MOONMoonpig.com, the online retailer ofpersonalised greetings cards, hasbeen bought by PhotoBox, the digitalphoto service, in a 120m deal thatthe companies hope will build scalein a rapidly expanding market. The

deal will seal a multimillion-poundpayday for founder Nick Jenkins.

FIAT AND CHRYSLER CLOSER TO FULLTIE-UP

Fiat and Chrysler will step closertowards a full merger this week when the carmakers report com-bined financial results for the firsttime and outline a joint manage-ment structure. Fiats second-quarterresults, due out tomorrow, willinclude one months figures fromChrysler. Sergio Marchionne, thechief executive of the two compa-nies, is also expected to outline plansfor a unified 25-member executiveteam.

TESCO TO OFFER FREE IN-STORE WI-FITesco is poised to offer customers afree WiFi internet service in its storesin what is thought to be a first for aBritish supermarket. The move comesas Britains biggest retailer seeks toreinvigorate its domestic business,under Philip Clarke, the new chiefexecutive. Customers will be able to

compare prices and read reviews asthey shop.

GREEN ENERGY ATTRACTS FORMERJARVIS BOSS BACK INTO SPOTLIGHTThe fallen boss of the Jarvis rail main-tenance company is planning whatcould be a remarkable stock marketreturn with a company that turnsrubbish into power. Advanced PlasmaPower is in the vanguard of energy-from-waste technologies and itsshareholders have signalled that onceit wins what it expects to be a seriesof contracts nationwide, they willwant to crystalise their investment.

BIG SHOPS GET IN THE CHRISTMASSPIRIT, WITH ONLY 150 DAYS TO GOThe sun is shining at last, the countryis packing for summer holidays andthe big retailers thoughts are turn-ing to . . . Christmas. Harrods andSelfridges open their Christmas shopsthis Thursday, a week earlier than

usual, allowing millions of tourists inLondon to buy baubles for the tree.

THOMAS COOK TO SEE 1,100 GHOSTFLIGHTS TO BOOST PROFITEmbattled airline company ThomasCook will see more than 1,100 flightstake off from British airports thissummer with no passengers to helpincrease profits. Thomas Cook, whichhas 42 planes and flies to 201 loca-tions, plans to run 1,133 empty air-craft from British airports in the sixmonths from April to October usual-ly a peak time for holiday companies.

SAVOY LOSSES HIT 31M AFTERREVAMP The Savoy hotel racked up 31m ofoperating losses in 2010 but is expect-ing to move back into the black thisyear. Losses increased nearly six-foldin the year to December 2010, from5.5m in 2009 as renovation work atthe landmark London hotel ran 18

months over schedule. In all the Savoyowes its backers 241m in loans.

COPYCAT APPLE STORE PROMPTSCHINA INVESTIGATIONChinese authorities in the southwest-ern city of Kunming have launched asweeping investigation of electronicsstores after media reports said oneretail outlet seemed to be copyingApples store format. The inspectionwill cover business licences, author-ized permits of brand use, and thepurchasing channels of each store,said Chinas state-run Xinhua newsagency.

FRANCE TLCOM TO SHUTTER ITSMINITELNext year, Minitel France's precur-sor to the Internet will finally meetits maker. For 30 years the toaster-sized screen weathered the Internetrevolution. Despite a text-only service, basic graphics and snail-like speed,

the terminal generated 30m in rev-enue in 2010,

WHAT THE OTHER PAPERS SAY THIS MORNING

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ECONOMISTS still believe that theEurozone will break up in the nextfour years despite a groundbreakingdeal struck by policymakers forGreeces second rescue last week.

Capital Economics chief Europeaneconomist Jonathan Loynes says: Wemaintain our position that there is asmaller than evens chance that theEurozone will survive the next four

years in its current form. And Lombard Odier Investment

Managers Stphane Monier said: Wecontinue to worry about the peripher-al countries capacity to deliver ontheir adjustment programme.

Despite the show of unity on Thursday, markets are still anxiousthat the deal could unravel.Chancellor Angela Merkel has saidthat Germanys parliament will notdebate the necessary changes toEuropes main bailout fund untilSeptember, leaving two months ofuncertainty.

Economists concerns were

expressed in a quick end to Thursdaysrally. Markets rose on Friday morning

but sank back towards their openingprices by the close of play. Bond yieldsfor Italian and Spanish debt also rose:the yield on Romes ten-year bondsrose from 5.3 to 5.4 per cent and theequivalent rate on Madrids debt creptup seven basis points to 5.77 per cent.

The euro also lost steam, falling 0.4per cent against the dollar yesterday,and three-month Euribor theEurozones benchmark interbanklending rate rose to 1.61 per cent onFriday, its highest level since March2009.

Euro break-up

still likely, sayeconomists

UK dividends jump by 27pcDIVIDEND payments by UK companiessoared to 19.1bn in the second quar-

ter of 2011, the largest amount paidout since the same period in 2008.UK mining companies were the

biggest contributors to the 27 per centjump in payouts compared to last year,quadrupling their dividends to a totalof 1.85bn from just 451m in the sec-ond quarter of 2010, according to thelatest Capita Registrars DividendMonitor report.

South America-focused copperminer Antofagasta led the comebackin the sector with a special dividend of540m, while Anglo American madeits first final dividend payment in four

years, distributing 360m to share-holders.But the recovery in payouts was

spread across a broad variety of sec-tors, with life insurance companiesand British American Tobacco uppingtheir contributions to the 4.1bn over-all increase in cash. Of the 247 compa-nies that paid a dividend in the secondquarter, 210 increased, reinstated or

started paying dividends, while just 32cut or cancelled them.

BY JULIET SAMUEL

EUROZONE

BY ELIZABETH FOURNIER

COMPANIES

News 3CITYA.M. 25 JULY 2011

ECB president Jean-Claude Trichet thought any form of default would hail a market meltdown Picture: REUTERS

Default is welcome, but not enough

THE European Central Bank (ECB)lost an important battle last

week. It was only a short time before Thursdays decision to

embrace a transitory, selectivedefault for Greece that ECB presi-dent Jean-Claude Trichet had begunto sound like a broken record at theBanks press conference.

Our message is no credit event, noselective default, no default, herepeated to an incredulous press pack.

A fortnight later, Europes leadershailed a deal to get private sector

bondholders to write-down theirholdings to the tune of 135bn by2020 that is, to let Athens default.

This default, even if partial, is a sub-stantial dent in Greeces 350bn debtpile though less substantial than itlooks, given that a chunk of the pro-ceeds will not go to Athens but will beused to buy up triple-A rated bonds ascollateral to cut private creditors risk.

So why has the rally following thisEuropean Marshall Plan been soshort-lived?

Because the Eurozone is stillfraught with risks: even if the target-

ed 90 per cent of private creditors playtheir part, it seems unlikely thatGreece can do its part to get control ofspending. And, most importantly, areEuropes paymasters prepared tothrow enough money down the

Athenian plughole to convince mar-kets in the years to come?

The truth is that the fate of theeuro is yet be decided, not in Brussels,

but in the German polling booth.

BOTTOMLINEAnalysis by Juliet Samuel

110BNCost of Greeces

first bailout

109BNSlated cost of

Greeces new

bailout 350BNGreeces current

national debt

ANALYSIS l EUR/USD

USD1.44

1.43

1.42

1.41

18 Jul 19 Jul 20 Jul 21 Jul 22 Jul

1.436222 Jul

TOP FIVE DIVIDENDS, FIRST HALF 2011

1) Royal Dutch Shell 3.2bn

2) HSBC 2.4bn

3) GlaxoSmithKline 2bn

4) BP 1.8bn

5) British American Tobacco 1.8bn

Total 11.2bn

ANALYSIS l UK dividends

bn

Source:Capita/ExchangeDataInternational

2007 2008 2009 2010 2011e

70

65

60

55

50

45

40

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LLOYDS is in talks with six interestedparties over the sale of its 632 branch-es, City A.M. understands, despite onlytwo of them having submitted formal

bids so far.However, some of those involved are

only interested in chunks of the 68bnin assets on sale, which could prove aheadache for regulators who want tosee the bank sell off more, not less.

The six parties include NBNKInvestments and the Co-operativeGroup, both of which have tabledindicative offers, as well as VirginMoney, National Australia Bank andResolution founder Clive Cowdery. It isthought that Nationwide BuildingSociety could be the sixth.

But it is still not clear if Lloyds will beable to sell off the whole package at

once: both NBNK and the Co-op couldalter their offers once they gain accessto the branches books.

Virgin Money was thought to havetabled a bid by last Mondays informaldeadline, but in fact did not attach anumber to its expression of interest. AsCity A.M. revealed last week, Virgin isleaning towards a bid for NorthernRock instead in part due the Rocksfunding surplus.

It is understood that in contrast tothe Lloyds package, the Rock brancheson offer have a 72 per cent loan-to-deposit ratio 17bn of deposits on a12bn mortgage book.

That translates to a 5bn fundingsurplus for the Northern Rock branch-es on sale, versus a 25bn gap in theLloyds branches.

Lloyds claims this gap will morethan halve organically during the timeit takes to complete the sale, and hasarranged a conditional loan from itsadvisers, Citi and JP Morgan, to poten-tial cover the shortfall. Alternatively, a

cash-rich buyer could bid for both inthe hope of part-plugging the Lloydshole with Rock deposits.

Six parties inLloyds talksfor branchesBY JULIET SAMUEL

BANKING

NEW capital requirements will dam-age Britains growth prospects morethan previously thought because ofour economys high reliance onsmall businesses, analysts haveclaimed.

A paper released by Tim Ambler atthe Adam Smith Institute says that

the losers from higher capitalrequirements will be small and

medium-sized businesses (SMEs).It is not the banks that we should

worry about, Ambler writes. Theywill find ways to minimise the harmto themselves... The losers will beSMEs, the businesses that grow GDP.

That really is something to worryabout.

He says that this is particularly thecase should the UK adopt harsher

capital surcharges than others in anattempt to counter economic cycles.

New capital requirements willhit UK small businesses hardest

News 5CITYA.M. 25 JULY 2011

Lloyds chief Antonio Horta-Osorio accelerated the sale Picture: Micha Theiner/City AM

ANALYSIS l Lloyds

p50

46

42

18 Jul 19 Jul 20 Jul 21 Jul 22 Jul

47.1322 Jul

THE Co-operative Group, one

of two potential buyers tohave submitted a bid, wouldsee its branch numbersshoot from some 340 toover 1,000 if it won the auc-tion. It would be the groupsbiggest ever purchase, evenlarger than its 1.5bn acqui-sition of Somerfield last year,and would most likely befinanced by debt.

LLOYDS SALE: WHO ARE THE SERIOUS CONTENDERS?

THE CO-OP

BUYING Lloyds 632 branch-

es would catapult Virgin intothe big banking league, a farcry from its 12m purchaseof Church House Trust lastyear. But the firm is playinghard to get, at first signallingits interest and then refusingto table a formal offer. Virginis understood to be dubiousabout the quality and com-plexity of the assets on sale.

VIRGINMONEY

THE investment firm headed

up by Lloyds of Londons LordLevene raised 50m floatingon AIM last year and is keento get its hands on some seri-ous UK banking assets toenter the retail and wealthmanagement market. It willneed more cash to back up itsoffer for the Lloyds branches,however, even though its bidis one of only two so far.

NBNKINVESTMENTS

NAB, which operates in the

UK as Yorkshire Bank andClydesdale Bank, was talkedup as the front-runner beforefailing to table a bid lastweek. It is still in the loopthough and, like Virgin, could

just be playing hard to get.But NAB has also never fullyquashed talk that it could bekeen to quit the UK altogeth-er if it finds a suitable exit.

NATIONALAUSTRALIABANK (NAB)

ECONOMICS

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US private equity firm Carlyle Group islooking to sell part of its equity in RAC,the roadside rescue business it boughtfrom Aviva for 1bn a month ago.

The firm is looking to sell up to200m of equity in RAC. GIC, theSingaporean sovereign wealth fund, isunderstood to be one of the potentialinvestors. Carlyle beat off private equi-ty rivals BC Partners and Clayton,Dublier & Rice to win the bid. While it

was able to agree that Aviva wouldkeep RACs pension fund, it had toincrease its equity bid to 525m,

which means RAC represents almost10 per cent of its Europe III fund.

NEO-NAZI sympathiser AndersBehring Breivik yesterday admittedcarrying out both the shooting spreeon a Norwegian island youth campand the Oslo bombing, which have so-far claimed 93 lives.

At least four more people are miss-ing, with police still recovering bodiesfrom the icy water surrounding theisland of Utya and offices around the

bomb site.Breivik told police the atrocities

were gruesome but necessary anddenied criminal responsibility for hisactions. It is understood he will pleadnot guilty to two counts of terrorismlater today.

Norwegian police have been criti-cised for taking nearly 50 minutes torespond to the calls for help fromUtya. A nearby police boat wasdeemed too leaky for the operationand no helicopters were in the vicinity,meaning victims had to wait for a spe-cial marine unit to be dispatched fromOslo.

On arrival police apprehendedBreivik within minutes. Police say theyare not immediately looking for any

other suspects. Six people arrested dur-ing a raid on a property in Oslo werelater released without charge.

A memorial service took place inOslo yesterday and Prime Minister

Jens Stoltenberg called for a minutessilence today at 11am UK-time.

Breiviks targets may have beenpolitically motivated, with the Oslo

bomb detonating on a street contain-ing offices of the governing LabourParty. The youth camp was also run bythe party.

It is understood Breivik posted a1,500 page document online in thehours before the attack, in which theauthor claims to follow the Knights

Templar and rails against multi-cultur-alism.

Norway death

toll continuesto climb to 93

TRIBUTES have flooded in for singerAmy Winehouse after she was founddead at her London home on Saturday.

Flowers from fans piled up in thestreet outside her north London homeand her records saw a remarkablespike in sales, with her acclaimed Backto Black album seeing sales rise by 37times.

Mark Ronson, who pro-duced Back to Black calledher death one of the sad-dest days of my life.

Police say the incident isnot yet explained, witha post mortem slated forlater this week.

The 27-year-old hadrecently spent time inrehab for drug and alcoholaddiction and had been

jeered during her come-back tour afterappearing too drunk to perform inSerbia.

Her family said yesterday: Sheleaves a gaping hole in our lives.

She will be a major loss for herrecord label Universal, whichcalled her a gifted musician,artist and performer.

Back to Black won fiveGrammy awards in 2006, includ-ing record of the year.

Winehouse tributes flood inas Back to Black sales soar

Carlyle looks tosell stake in RAC

BY STEVE DINNEEN

WORLD NEWS

PRIVATE EQUITY

Mourners gathered at a service in Oslo yesterday Picture: REUTERS

BY STEVE DINNEENUK NEWS

News 7CITYA.M. 25 JULY 2011

BANK of China has emerged as a lead-ing contender in the race to snap upthe aircraft leasing business beingsold off by Royal Bank of Scotland.

The bank said its aircraft leasingdivision RBS Aviation Capital was onthe block again, a year after it shelveda previous sale attempt.

Bank of China, General Electric andprivate equity firm Terra Firma areamong eight parties interested in theDublin-based business.

An RBS spokesman said: The saleprocess for RBS Aviation Capital is

underway following significantexpressions of interest.

RBS Aviationsale underwayAVIATION

NORWAY TERROR ATTACKS

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THE directors of BSkyB will discuss James Murdochs position as chair-man of the satellite broadcaster at aboard meeting on Thursday.

City A.M. understands that a num- ber of independent directors wantMurdoch (pictured below) to stepdown, at least until the police investi-

gation into phone hacking at theNews of the World has been complet-ed.

However, sources close toMurdoch said the most likely out-come was that a majority of theboards 14 directors, some of whomwork for News Corp, would continueto back him as chairman, althoughthey said he was taking nothing for

granted.Several of BSkyBs biggest investors,including Crispin Odey of Odey AssetManagement, have given their publicbacking to Murdoch.

However, Odey told the Sunday Telegraph he believes News Corpsgrip on the Sky boardroom is toostrong and that it should relinquishone of its appointees.

Cable calls for an end toinfluential media moguls

VINCE Cable, the business secretary,yesterday vowed to stop firms or indi-viduals from owning a similar shareof the media as Rupert Murdoch.

You know there are other bigmedia companies who could have thesame influence in future [asMurdoch] and weve got to stop thathappening, he said.

Cable was stripped of his power to

decide whether News Corp should beallowed to buy the shares in BSkyB it

does not already own, after he wasrecorded by undercover reporters say-ing he had declared war on MrMurdoch.

Meanwhile, he said NewsInternational had engaged in heavylobbying of Liberal Democrats afterits parent company made a bid forSky, although he said the efforts wereperfectly legal.

Directors to discuss future ofJames Murdoch chairmanshipMEDIA

MEDIA

News8 CITYA.M. 25 JULY 2011

NEWS Corp is not a fit and properowner of a UK television broadcast-er following the phone hackingscandal, according to the CityA.M./PoliticsHome Voice of the Citypanel.

Under the Broadcasting Act 1990,media watchdog Ofcom mustensure that owners or shareholdersof broadcasting companies are fitand proper to hold a licence.

There have been suggestions thatthe watchdog could force NewsCorp to sell down its 39 per centstake in BSkyB should a policeinvestigation prove its UK newspa-per subsidiary News Internationalhas knowingly engaged in criminalactivity such as phone hacking.

Fifty-six per cent of Voice of theCity panellists, who have beenrecruited to represent a cross-sec-tion of Londons business andfinancial community, said NewsCorp was not a fit and properowner, against 36 per cent who saidit was.

Over half of panellists (56 percent) thought it would take NewsCorp at least two years to recoverfrom the phone hacking scandal. Thirty-five per cent thought it would recover within two to five years; five per cent thought it would take five to ten years; andtwo per cent thought it would takeover a decade. A further 14 per centsaid the News Corp brand was per-manently damaged and wouldnever recover.

One panellist said: It defies

belief that an organisation whoseraison d'tre is news should have sobadly handled their own media andreputation.

Despite this, the majority ofpanellists said News Corp would own and continue tooperate all of its UK newspa-pers for at least a year. Seventyper cent thought it wouldcontinue to own andoperate the Times andSunday Times, while75 per cent thoughtit would keep theSun open.

The vast majorityof panellists (63 percent) thoughtNews Corps UKsubsidiary NewsI n t e r n a t i o n a l

would launch a Sun on Sunday toreplace the now-closed News of the World, and that it would still beoperating in a years time.

However, the panel felt thephone hacking scandal hadreceived too much news cover-age, especially in light of other

world events such as theEurozone crisis.

Sixty-five per centthought the media hadpaid too much atten-tion to the story,against just four percent who thought ithad received too littleattention. Just under athird (31 per cent)thought the story hadreceived the rightamount of attention.

PoliticsHome.comPoliticsHome.comDo you believe News Corp constitutes a 'fit andproper' owner of a UK television broadcaster?

No

Dont know

Yes

9%

56%

36%

%

How long do you believe the News Corp brand willtake to recover from the phone hacking scandal?

Less than a year

More than

ten years

One year

Two to five years

Five to ten years

The News Corp brand

will never recover

Don't know

Their brand is

undamaged

21%

14%35%

2%2%

2%%3%%

5%

19%

%

Do you believe the phone hacking scandal has

received too much or too little news coverage?

About the right amount

Somewhat too much

Far too much

Somewhat too little

Far too little

2%2%%2%2%

31%

32%

33%

%

Apply to join today at www.cityam.com/panel

In association with PoliticsHome.com

News Corp is not a fit or proper ownerof a British broadcaster, says our panelBYDAVID CROW

POLITICS

In partnershipwith

JamesMurdoch,deputyCOO ofNews Corp

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News10 CITYA.M. 25 JULY 2011

DEUTSCHE Bank chief executive JosefAckermann will replace Clemens Boersigto become the banks supervisory boardchairman when he steps down from hisrole as chief executive, a German newspa-per has reported.

Boersig is ready to vacate the role for Ackermann and will likely step down atthe next annual general meeting (AGM) inMay 2012 to ensure that Ackermann stays

within the bank, Die Welt am Sonntag saidin an advance version of its Sunday edition,citing sources.

The banks supervisory board will meettomorrow to discuss a successor for

Ackermann and will also what role hemight play in the future.

Ackermann had been due to retire in2009, but Boersigs inability to find aninternal replacement forced the chief exec-

utive to extend his contract until 2013.Anshu Jain, head of the UK investment

bank, is understood to be on the cusp ofbeing appointed co-head of the group, end-ing a lengthy search for a new chief execu-tive.

He is likely to be joined by veteranDeutsche man Jrgen Fitschen head ofthe banks German division.

But no decision has been made and anyannouncement can only be expected todayat the earliest.

The mooted appointment of formerBundesbank governor Axel Weber wasscuppered recently by Swiss rival UBS,

which moved quickly to secure Weber as itsnew chairman.

Elevating Ackermann to the position ofchairman will prove difficult becauseGerman corporate governance rules forcemembers of the management board to

wait two years before moving on to thesupervisory board.

Ackermann lined up to beDeutsche Bank chairmanBYHARRY BANKS

BANKING

The City needs to think global

THE hacking scandal has dominated theheadlines in recent weeks, but unfortu-nately that does not mean the chal-lenges facing the global economy have

disappeared far from it.Concerns continue over the UK recovery,

the Eurozone crisis, and the protracted dis-cussions on raising the US debt ceilingremain, even if the media spotlight has shift-ed elsewhere.

These issues all have potentially hugeimplications for the economic recovery.

London is the most international financialcentre in the world and will inevitably beaffected by the problems affecting ourmajor trading partners in an interconnect-

ed world.But the global nature of markets todayalso presents considerable opportunities forCity firms in emerging economies.

As I approach the final three months ofmy mayoralty, I have visited 16 countries,given over 700 speeches, and welcomedthousands of foreign guests to MansionHouse. I have been struck by the scale of busi-ness opportunities available to UK plc incountries from South America to Asia.

We are at the beginning of a worldwideshift of wealth and power. In 2009, morethan 70 per cent (277bn) of the UKs totalexports went to the European Union, North

America, Japan and Australasia, and thesemarkets generated 77 per cent of our newinvestment projects.

But over the next five years, emergingeconomies are expected to account for over50 per cent of global growth but only 13 per

cent of the increase in net global public debt.Exports and investment are key drivers for

generating sustainable economic growthand much needed jobs. There is a real

appetite for the skills and products that theUK financial, professional and business serv-ices industry has to offer.

In China, between 2008 and 2015, 75mhouseholds are joining the ranks of the mid-dle class. By 2020, African consumers areprojected to spend more on goods and servic-es than Russia, and just slightly less thanIndia. That is why I will reinforce the mes-sage that we want to be the internationalpartner of choice, when I visit four Africannations next month followed by Egypt andIndia in October.

In order to achieve this objective we mustthink outside of the box and not take our eyeoff the ball. So even as other issues monopo-lise the media spotlight, it is imperative thatgovernment and the City work together to

build the relationships that will determineour future economic prosperity.

Michael Bear is Lord Mayor of the City of London

CITY COMMENT

MICHAEL BEAR

Josef Ackermann is currently chief executive

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News 11CITYA.M. 25 JULY 2011

A NEW round of funding is set to valuemicroblogging site Twitter at a staggering$8bn (4.9bn).

It is understood Russian investment firmDigital Sky Technologies (DST) will take astake of around $400m, with another$400m being split between other investors.

US fund manager T Rowe Price willinvest up to $90m in the company, accord-ing to Sky News, consolidating its currentholding. JP Morgans Digital Growth Fundcould also take part in the investmentround. In February it emerged Google andFacebook were involved in very specula-tive talks to buy Twitter for between $8-10bn. A round of financing just weeksbefore had valued it at $3.7bn.

The fundraising makes it increasinglyunlikely that Twitter will seek to float in

the short term, bucking the trend for bumper dotcom initial public offeringsfrom the likes of LinkedIn.

DST has invested heavily in sought-afterinternet firms. In February it invested$100m in Spotify, valuing it at $1bn.

It also has a stake of more than $1bn inFacebook, a sizeable chunk in online gam-ing site Zynga and a holding in voucher-buying site Groupon.

Twitter has become the most talked-about site on the internet, playing animportant role in the closure of the Newsof the World. It was also at the heart of thesuper-injunction debate, with its usersusing it as a platform to break court orderstaken out by celebrities including RyanGiggs. There are now in excess of 100mTweets of up to 140 characters postedeach day and Twitter is reported to haveadvertising revenues of well over $100m.

Both Twitter and T Rowe Price wereunavailable for comment last night.

Twitter fundraising givesit valuation of over $8bnBY STEVE DINNEEN

TECHNOLOGY

Why glasses must be half full

ITS a gloomy business being gloomy andit gets me down. Markets may have risensubstantially since the market low inMarch 2009 but theres still no shortage

of doomsayers out there.They soberly point out that we have just

spent two years shuffling debt around theglobal economy, point to inherent weakness-es in a fractional reserve banking system andevoke metaphors involving deck chairs andlarge ocean liners.

Take the response to the Eurozones

bailout plans last Friday morning. The initialmarket reaction was a sigh of relief withmodest gains for risk assets but there werenegative voices aplenty.

As one CNBC viewer put it last week, theproblem with the world today is that every-one is so negative. I have never been a natu-ral pessimist so here are some snippets ofpositive reaction to keep your half full glass-es topped up.

Holger Schmieding at Berenberg Bankextols the virtues of the plan, calling it amajor deal. He likes the fact that the privatesectors role has been settled, the peripherywill benefit from longer debt maturities andlower rates, the plan reduces contagion risk by allowing preventative interventions bythe EFSF and the fiscal outlook for Greecewill be cushioned. He does acknowledge thathyper-sceptical markets may not be con-vinced though.

Charles Diebel at Lloyds Bank CapitalMarkets describes the plan as a good startwith no obvious large gaps. Of course hesensibly cautions that the devil lies in the

detail but he likes the increased scope andflexibility of the EFSF saying in terms ofproviding a firebreak in the context of widereuro area contagion, this factor is consid-

ered highly significant.Now I dont suggest that we should greetthe plan with a renewed taste for irrationalexuberance, but whats wrong with a bit ofpositivity? A maybe it will actually be okaykind of outlook. An outlook that acknowl-edges its not the creation of a fully fledgedEuro Bond, but it IS a plan, and one for morethan just Greece.

If we dont like glasses half full or empty we could call it a glass with water halfway? I suppose the danger with this atti-tude is that it leaves markets free to focus onthe real economy.

And, unfortunately, talking about a mid-cycle slowdown over the last couple of weeksseems to have become a mainstream ratherthan a niche view. But thats a half emptyglass for another day.Anna Edwards co-anchors Capital Connection andSquawk Box on CNBC http://europe.cnbc.com

Twitter boss Dick Costolo Picture: REUTERS

CNBC COMMENT

ANNA EDWARDS

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COST pressures and weakdomestic demand are prevent-ing small businesses frominvesting in future growth, asurvey by Lloyds TSB unveiledtoday.

Fewer than one in five firmsexpect to boost their level ofinvestment over the next sixmonths, while slightly more (21per cent) are planning cuts.

The negative balance (minustwo per cent) in Lloyds survey isslightly worse than the minusone per cent recording at the

beginning of the year.The news is a worrying sign

for the economy, with manyanalysts hoping that rising busi-ness investment would morethan offset any real-terms slow-

down in government spending.If businesses do not invest it

could damage an already fragilerecovery, and result in evenslower growth, commentedLloyds TSB Commercial director

John Maltby (pictured).Investment levels could be

aided by a pick-up in economicconditions, according to the sur-

veys business confidence index. The sub-index

showed an upturn inthe proportion ofcompanies expect-ing higher salesorder and profitsover the coming sixmonths, rising to apositive balance of 15per cent (from 12 percent in the previous sur-

vey).Yet even this section

of the survey remains

below its historicalaverage of 21 per cent,

and below its level one year ear-lier (18 per cent).Nearly half (46 per cent) of the

surveyed firms said they expectto increase exports in the nextsix months. Yet sluggish domes-tic demand was listed as the

biggest threat to 56 per cent offirms.

The gloomy news was com-pounded by a separate sur- vey which reported a 12per cent rise in the num-

ber of companies facingcritical financial difficul-ties.

Sectors dependent onconsumer demand,

such as tourism,hotels and retail-ing, have beenmost severely hit,Begbies Traynors

latest red flagalert states.

UK ECONOMY

BRILLIANT!BRILLIANT!

BRILLIANT!Chris Tarrant, BBC Radio 2

NOL COWARD THEATRE

0844 482 5141

News12 CITYA.M. 25 JULY 2011

BRITONS incomes faced their tightestsqueeze in two and a half years in July,as the rising cost of living and highpersonal debt weighed down onhousehold budgets.

Over a third (38 per cent) of peoplereported a deterioration in theirhouseholds finances compared to justa month earlier, according to a poll byMarkit and Ipsos Mori released thismorning.

Only six per cent reported animprovement in their finances, as theMarkit household finance indexdropped from 35.1 to 34.4 signallingthe harshest decline in finances sinceMarch 2009.

The mood among British house-holds has been as gloomy as the

weather this summer, said Markitssenior economist Tim Moore. The cur-rent household finance index is now

just as low as the survey record seen inearly 2009.

Yet respondents were less downbeatabout future prospects, believing thatthe decline in economic wellbeingcould be about to slow.

The sub-index measuring the out-look for the next 12 months rose to38.8, up from 34.6.

Yet the forward-looking index stillremains below 50, indicating moretightening of finances to come.

Nearly half (49 per cent) of house-holds expect their finances to deterio-rate in 12 months time. A little over aquarter (27 per cent) are upbeat, fore-casting an improvement in theirfinancial situation.

People are more hopeful of theskies brightening in the monthsahead, although fragile economic con-ditions and the prospect of risinghousehold bills are headwinds thatcould easily knock conf idence again,Moore added.

Inflation expectations relaxed inthe July survey, yet remain higherthan seen throughout 2009 and 2010.

Around four in five respondentsreported higher prices than a monthearlier, while 88 per cent anticipate ris-ing prices over the coming 12 months.

There was some sign of a turn-around in the employment data, with

job security hitting its highest indexscore since May 2010, while the fall inincome from employment slowed.

Tightest squeeze on

income since 2009BY JULIAN HARRIS

UK ECONOMY

CONSTANT tinkering with employ-ment regulation is hindering flexible working practices in the UKs facto-ries, a leading industry body willargue today.

As the coalition launches the man-ufacturing stage of its Red TapeChallenge which invites companiesto nominate harmful regulationsthat should be scrapped the EEF hascalled on the government to avoidcomplex and prescriptive regulations

that get in the way of increasinglyproductive relationships between

employers and employees.Flexibility is increasingly a two- way street in manufacturing, saidthe EEFs Steve Radley.Manufacturers need to respond rap-idly to changes in markets and cus-tomer needs. And more employeesare looking for greater flexibility inhow they work ... but the constantchurn of new regulation and thecomplexity of new laws are puttingthese positive relationships at risk.

Red tape hinders flexibleworking in UKs factories

EMPLOYMENT THE number of retail companies

which plunged into administration

in the second quarter of this yearincreased by eight per cent comparedwith same period last year, accordingto figures from Deloitte.

A total of 43 were affected, withhousehold names like Oddbins andFocus being hit by the downturn inconsumer spending.

Moben, Habitat and Jane Norman were also among the casualties asretailers struggled to make ends meetand keep up their rent payments.

Expensive overheads have takentheir toll while in contrast onlineretailers like clothing firm Asos havegone from strength to strength.

Lee Manning, restructuring part-

ner at Deloitte said: The retail sectoris going through a significant periodof change with many companies

buckling under the pressure of weak-ened consumer confidence and asluggish economy.

Whilst the overall increase in thenumber of retail failures this quarteris relatively small, we have seen a sig-nificant number of household namesfalling into administration, includingOddbins, Moben, Dolphin, Focus DIY,

Habitat and Jane Norman.This signifies that the severity of

retail distress is far greater than theabsolute figures suggest.

Manning warned that consumer

spending was likely to slide even fur-ther in the rest of the year, piling thepressure on retailers. Oddbins,Habitat and Jane Norman saw someof their branches bought but otherslike Focus folded completely.

Home Retail Group, owner of Argosand Homebase, bought the Habitat

brand and three central Londonstores for 24.5m in cash. However,the 30 other outlets were not part ofthe deal.

More shop chains winding upBY JOHN DUNNE

RETAIL

ANALYSIS l Finances vs one month ago

index score42

40

38

36

34

32an JanJul Oct Apr J ul Oct Apr JulJan

OLYMPIC SURGE FOR EAST LONDON HOMES

HOUSES in east London have seen their value rise by an average of 192 per week or 28per cent since London won its bid for the Olympic Games in 2005, Lloyds TSB announcedtoday. Yet the main price spikes were in Homerton, Dalston and Bethnal Green, whileprice increases around the Stratford site have been more modest. Picture: PA

Small companies holdingback on new investment

RISING sales are preventinghouse prices from sinking sig-nificantly further, the latestHometrack survey reveals thismorning.

A 20 per cent upturn in salesover the last two months haskept prices from dropping at asharper rate, the group said,reporting only another slight(0.1 per cent) decline in pricesfor July.

Prices are likely to fall fur-ther over the coming months,

warned Hometracks RichardDonnell, yet with sales vol-umes holding up there is noimpetus for any materialchange in prices.

London continues to pro- vide a strong support to thenational trends with prices up

by 0.3 per cent over the

month, Donnell added.Yet elsewhere in the south,

prices have been hit harder,falling by 0.2 per cent in the

rest of the south east, and by awhopping 0.6 per cent in thesouth west.

Some prices fell from ahigh base in the face of slow-ing demand and above averagegrowth in supply, the reportsaid. Throughout the country,however, supply and demandhave begun to level out, withan increasing number of sales

being agreed between morerealistic sellers and a growingpool of buyers.

The average sale price acrossthe UK is 92.7 per cent of theoriginal asking price, accord-ing to the survey. In the capi-tal, however, prices tend tohold up stronger, with thefinal price averaging 93.6 percent of the asking price.

Properties are taking an

average of 9.4 weeks to sell, thereport also revealed.

HOUSING

Higher sales preventhouse price plummet

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ACCOUNTANTS have a reputation forbeing somewhat straight-laced, but thistale suggests it isn't entirely deserved.

When two employees turned up for theirfirst day at one of the Citys biggestaccountancy firms, their new colleaguesput them through an initiation ceremonythat had more in common with the waysof an American university fraternity thanbean-counting traditions.

They weren't marched through thestreets of the Square Mile in a state ofundress or made to drink so much theywere physically sick, but this was aprocess of ritual humiliation that somewould find just as painful. The chal-lenge? To eat a kilo of steak at theChancery Lane outpost of Gaucho. Forthe imperially-minded, that's 2.2lbs or35 ounces. Whatever way you look at it,its an awful lot of beef.

Their colleagues splashed out 100-a-piece for the two cuts of Bife de Lomo,essentially Argentina's version of filetmignon, but went for much smaller cutsthemselves. Perhaps fearful they were

giving the newbies an easy ride, theyinsisted that the recruits have a sausageplatter each to start, which came with aselection of six large Argentinianbangers, including chorizo, morcilla, pin-chos and romero pepper. Again, thelonger-serving Deloitte staffers optedfor something a little lighter: Fishcakesand King Scallops.

The side-splitting endurance test did-n't stop there. Apparently, the rules ofthis initiation ceremony state that thecontestants must also have a side dish

each; share a cheese plate after; andthen finish the meal with a dessert (inthis case Mocha Tart or PassionfruitTocino). All their plates had to be clean.

Maybe the fact that the four dinersstarted with cocktails and a round ofRocio Gold beers helped whet their

appetite, although we don't know howthey found room for the three bottles ofwine, including a 230 Malbec and an80 Chardonnay.

Before rolling back to work, the suc-cess of the new conscripts was toastedwith four large cognacs at 27.50 each,bringing the bill to 1,159 (including a130 tip). We're not sure whether themen (at least we hope they're men)managed to work an entire afternoonafter that, but we just hope they weren'tfound asleep at their desks.

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The CapitalistCITYA.M. 25 JULY 2011

CYCLISTS AND SUITSNEED NOT BE AT WAR

WITH EACH OTHER TENSIONS between the Citys suitsand its many cyclists from couriersto tourists have reached boilingpoint, The Capitalisthears.

One disgruntled cyclist pulledover recently on Bishopsgate hasbeen in touch to relay exactly why itis that City of London cops are out inforce, lurking under trees and behind lamp-posts, to catch errantcyclists running red lights and thelike.

Why do you waste your time withthis? our cyclist inquired of thebobby who stopped him.

Its the suits, our copper repliedwith a shrug. They hate cyclists.

Or, in the more gentile languageof his press office, its community

policing on behalf of the suits.More precisely: Ninety-five per

cent of the people in the City wearsuits, so if youre responding to peo-ple wearing suits, youre respondingto the people in your community, aspokesperson for City of Londonpolice explained.

Not to mention that the suits tendto go to more City ward meetingsthan do the cyclists.

Of course, in the interests of fulldisclosure, The Capitalist ought to

Suits and bikes need not be at war, asLondonMayor Boris Johnson could tellyou.

BILL OF THE WEEK

confess that she is often to be foundcruising through the City on a bike but just as often in a suit jacket aswell. Perhaps theres the beginningsof an entente cordiale in that.

HarrietDennys is away

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CHARTER International, the engineer-ing firm that has twice rebuffed bidsfrom the industrial investor Melrose,

will this week pitch a set of proposalsto investors on how it will improve itsperformance, as the company fights toretain its independence.

In its interim results this Friday,Charter will outline an operationalstrategy to improve the record of itstwo engineering firms ESAB andHowden as well as 30m cost savingplans announced at the groups profits

warning last month. The proposals come after Charter

rejected a revised bid from Melrose lastweek at 840p-a-share, dismissing it asopportunistic.

The tool and equipment makinggroup, which said it was exploringstrategic alternatives is rumoured to

be looking at a sale of one of its firmsto fend off a takeover approach.

Charter to setout its survivalstrategy afterrebuffing bid

ENGINEERING

News14 CITYA.M. 25 JULY 2011

MORE than 12m customers, includ-ing households and small business-es, will next month see their gasand electricity bills increase by upto 200 a year.

While half of the UKs Big Sixutility companies have now raisedtheir fuel prices, the remainingthree Npower, EDF and E.ON areexpected to follow suit in the nextfortnight following steep rises in

wholesale costs and a higher globaldemand for oil and gas.

Last week, SSE became the thirdenergy supplier to increase itsprices, with electricity tariffsincreasing by 11 per cent and gas

by 18 per cent. The move will mean

that customers on the duel fueloption will see their average annu-al bill rise 171 to 1,265.

Centrica and Scottish Power alsoannounced similar price hikesfrom August.

Npower, a subsidiary of Germanutility RWE and the UKs fourthlargest energy company said thatno decision on tariffs had beentaken yet but said it was facing sim-ilar pressures from the rise in

whole gas and electricity prices.The company made losses on its

retail business last year, accordingto the regulator Ofgem.

Consumer Focus, the consumer watchdog, said there was a packmentality amongst the energysuppliers towards price hikes andexpected others to follow in the

next two or three months at most.Energy secretary Chris Huhne

said last week his plans for powermarket reform will deliver the

best deal for reducing dependenceon expensive fossil fuels. The plan,however, will cost 200bn by 2020,or 8,000 for every household.

More firms poisedto raise fuel pricesBYKASMIRA JEFFORD

ENERGY

BRITAINs three biggest oil compa-nies are set to reveal a big jump inprofits this week, driven by high oilprices.

Royal Dutch Shell (RDS), BP andBG Group are expected to post prof-its totalling $15bn (9.2bn) for lastfinancial quarter, helped by oilprices that rose to an average $117a barrel throughout the quarter.

Shell is anticipated to report on Thursday that it has more than

doubled profits in its second quar-ter to $6.7bn.

Its focus will be on the deliveryof its key growth projects thatcould see the group add 1m barrelsof oil per day (boe/d) of new produc-tion by the end of 2012.

Given where the oil price is cur-rently and market expectations forit to stay above US$100/bbl RDScould see a surge in cash flow if itsnew projects deliver and justify apremium rating to BP and Total,according to Evolution Securities.

BP is expected to lag slightlybehind when it reports tomorrow,

with profits of about $5.8bn, upfrom a $17bn loss in the same quar-

ter last year following the Gulf ofMexico oil spill.

Bob Dudley, who earlier this yearreplaced Tony Hayward as chiefexecutive, is under growing pres-sure to clear up a confused strategyand revive the oil giants shareprice. Its second-quarter earnings

will reflect a drop in productionafter it sold more than $25bn ofproducing assets to pay for the costof the US spill.

Meanwhile, BG, it smaller rival, isexpected to report a 50 per cent

increase in its profits to $2bn in thequarter, compared with last year.

Oil companies set to announce hugeincrease in second-quarter profitsENERGY

The area around Shell Tower is set to be transformed by developers Picture: REX

THE property developer Canary WharfGroup is set to be selected by RoyalDutch Shell to transform the areaaround the oil firms London head-quarters, near Waterloo station.

The developer, which is majorityowned by Songbird Estates, hasteamed up with Qatari Diar, the prop-erty investment arm of Qatars sover-eign wealth fund, to offer up to 350mfor the redevelopment deal, theSunday Times reported this weekend.

The deal will see houses, offices andshops built on the five acres of landsurrounding the well-known 1950s

tower in central London. The firstphase is expected to be completed by2016.

Shell first announced plans to reju-venate the Shell Centre on the south

bank of the Thames in 1997 but thescheme was put on hold. Last year, theoil company revived its search for adevelopment partner.

Other bidders included Chelsfield,led by Sir Stuart Lipton in partnership

with London & Regional, the propertycompany of entrepreneurs Ian andRichard Livingstone.

Development Securities, in a consor-tium with Carlyle, was considered sec-ond favourite to develop the scheme

but the group backed out last weekafter Canary Wharf Group, with back-ing from Qatari Diar, became the clearfrontrunners.

Last year Shell signed a 15-year dealwith Songbird Estates to relocate its

staff to 40 Bank Street in Canary Wharf while it redevelops thWaterloo site.

Canary Wharf Group declined tocomment yesterday.

Canary Wharf setto win Shell Centre

redevelopment bidBYKASMIRA JEFFORD

PROPERTY

ANALYSIS l Rwe AG

18 Jul 19 Jul 20 Jul 21 Jul 22 Jul

38.00

37.00

36.00

37.6922 Jul

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News 15CITYA.M. 25 JULY 2011

WALL STREET WEEK AHEAD

Heat is on for a US debt deal

DESPITE the lifeline thrown toGreece by Eurozone leaders last

week, there seems to be a wide-spread view that this was merely a

band-aid fix, even a hastily cobbledtogether deal, which still does not drawa definitive line under the European

public finances crisis. Furthermore, anyrelief rally which it may have spurred onis in any case likely to be overshadowedthis week by the US debt talks.

GFT quotes two-way prices on stockindices around the clock, even when theunderlying markets are closed. The FTSE100 index is called to open down 18points at 5,917. The German DAX is fore-cast to open down 20 points at 7,306, andthe French CAC 40 is quoted to down 13points at 3,829. But we should be bracedfor a volatile day and week ahead.

The failure of last-ditch debt talks in

the US this past weekend could prove a watershed moment for the markets. With just days to go now before theAugust 2nd deadline, investors who hadpreviously written the impasse off aspolitical games are now going to serious-ly consider the possibility of a default.

The chance that the US of all nationscould run out of cash in a week is diffi-cult for traders to comprehend.

With no deal on the table, GFT is fore-

casting global stock markets to openlower by one to two per cent this morn-ing, as risk aversion kicks in. No doubtthere will be some midnight oil burnt,

but even were a deal to be cobbledtogether, the risk-reward of staying longat this late stage is evaporating. The

Treasury is due to run out of cash on 2August, yet Geithners latest comments,and additional reports that White HouseSpeaker John Boehner has also insistedthat his team needs to provide a posi-tive signal on a plan to avert as USdefault by today rather than 2 August,

will add to the confusion and could tipmarkets over the edge. President Obamaalso warned that wed better have someanswers before Wall Street opens.

This past weekend is set to become a watershed moment for the marketswith regards the long-running debt talksdrama; previously to many this was alldiscounted as mere political posturing

which would play itself out in the end. The latest breakdown in negotiations,

coming at this late stage, has the poten-tial to trigger a sell-off in stocks globally,as the possibility of a US default is nowthat much more real.

Martin Slaney is director of global dealingoperations at GFT.

MARTINONTHE MARKETS

NEW York City may be frying innear record temperatures but

Wall Street has been feeling theheat for months. Wrangling

over the US debt ceiling and ques-tions marks over corporate earnings

mean markets are unlikely to get abreak any time soon.

Wall Street is set to close its worstthree months in a year as July drawsto a close this week after a rollercoaster ride for markets. Whackedout fund managers hitting the beachin August may find themselves fid-dling with their BlackBerrys more

than the little cocktail umbrellas. With Eurozone leaders having

reached a deal for yet another bailoutfor debt-laden Greece, investors will

be free to chew over Washingtonsrancour with even more attention.

Negotiations between PresidentBarack Obama and the topRepublican in the House of

Representatives, John Boehner, stilllooked far from a deal to avert a loom-

ing US default, lawmakers said onFriday, raising the likelihood of more

volatility this week if no solution wasreached over the weekend.

Its likely an agreement in anyform will cause a relief rally for equi-ties, said Glenn Starkman, global

head of sales trading at DahlmanRose in New York.

But on the other side of the coin,the prolonged and partisan disputeover solving the countrys debt crisismeans there is still a downside risk.

Who knows where that is going togo, said Nick Kalivas, an analyst atMF Global in Chicago. Were vulnera-

ble to a buyers strike if we dont getany news.

MARTIN SLANEY

7,600

7,400

7,500

7,200

7,000

7,100

7,300

9 Jun11 May 20 May 31 May 20 Jun 29 Jun 8 Jul 19 Jul2 May

ANALYSIS l DAX7,326.39

22 Jul

6,100

5,900

6,000

5,700

5,600

5,800

17 Jun18 May 27 May 8 Jun 28 Jun 7 Jul 18 Jul9 May

ANALYSIS l FTSE

5,935.0222 Jul

ANALYSIS lBritish American Tobacco

2,850

2,750

2,650

9 May 27 May 17 Jun 7 Jul

p

2,847.5022 July

BRITISH AMERICAN TOBACCOAhead of first-half results on 27 July, Citi rates the tobacco group as ahold, and lifts its target price from 2800p to 2890p. The broker alsolifts its forecasts three per cent above consensus having upped its esti-mates for Asia to take into account a boost in the Japanese market, fol-lowing rival Philip Morriss better-than-expected results. Citi predicts anoperating profit of 2.7bn and earnings per share of 97p.

50

46

42

38

2 May 16 May 30 May 13 Jun 27 Jun 11 Jul 22 Jul

ANALYSIS lMetro AG

38.5922 July

METRO AGNomura reiterates its buy rating on the German cash and carry group,but lowers its target price from 53 (46.70) to 49. The broker expectssecond quarter sales to grow by a modest 0.9 per cent to 15bn, and like-for-like sales at Media Merkt/Saturn in Germany to drop around one percent because of weak electrical sales and challenging comparatives fromlast years World Cup.

340

320

300

280

9 May 27 May 17 Jun 7 Jul

p

289.0022 July

ANALYSIS lMitchells & Butlers

MITCHELLS & BUTLERSUBS rates the pub group as neutral and reduces its price target from325p to 310p as a result of changes to operating margin estimates. Thebroker had been forecasting an operating margin of around 16.8 per centthis year, but the group has indicated that opening costs, kitchen modifica-tions, food inflation and increased promotions mean it is more likely to bearound 16.5 per cent.

Barclays CorporateBarclays Corporate has hired TomAddyman as a relationship director for

its specialist retail & wholesale team.Addyman joins Barclays Corporate fromGulf Finance Corporation in the UAE.

Game GroupEuropes largest specialist retailer of PCand video games has appointed RussShaw as a non-executive director. Shaw,48, was vice president and general man-ager of Skype Europe, Middle East andAfrica and Mobile from 2009 to 2011.

Prior to this, Mr Shaw spent four yearsat Telefonica SA, initially as marketingdirector of O2, and latterly as the globaldirector of innovation, following itsacquisition by Telefonica.

Post Office LimitedAlice Perkins has joined the board ofPost Office Limited, the subsidiary ofRoyal Mail Group. She will take the chair

following its next meeting in September2011. Perkins will succeed DonaldBrydon who will continue as chairmanof the Royal Mail Group. Perkins previ-ously had a civil service career culminat-ing in senior roles in the Treasury andCabinet Office.

Strategic Natural ResourcesThe AIM-listed South African CoalCompany has appointed PhumeleleStone Sizani as a non-executive director.Sizani has committed most of his life tofighting apartheid in South Africa andwas imprisoned on Robben Island withNelson Mandela for five years. He com-pleted his schooling in prison and subse-

quently obtained an MA from theUniversity of East Anglia in the UK.From the 1980s, Sizani was politicallyactive and since the end of theapartheid he has been a member of theANC. He is currently Member ofParliament in the National Assembly.

Norman Broadbent UKThe executive search firm has confirmedthat Cathy Bain, the former investmentbanker, has joined the firm fromStonehaven Search. Bains remitincludes both investment banking andprivate equity and she works closelywith managing directors Adam Turnerand Paul Cook, in these sectors.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVES please email your careerupdates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

BEST OF THE BROKERS To appear in Best of the Brokers email your research to notes@cityam.com

ASHCOURT ROWANThe wealth management group has appointedJeremy Rance, its chief operating officer, as anexecutive director. Rance, 48, joined AshcourtRowan as director of planning in June last year.He led the negotiations on the acquisition of the

Co-op Independent Financial Adviser businessin October 2010. Rance was appointed as chiefoperating officer in January, to focus on strate-gy and planning, operations, IT, HR, mergersand acquisitions and joint ventures.

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Wealth Management | Spread BettingCITYA.M. 25 JULY 2011

DOMINOS Pizza has been one of

the success stories of the last cou-ple of years as more and morepeople have opted to stay in

rather than go out for dinner due torestricted finances and economic uncer-tainty.CMC Markets spread on Dominos Pizzais 463.74p-464.97p

Sainsburys dipped to a very signifi-cant long term support last weekaround 308p, a level that was the lowof 2010 and strong support also in2009. Traders were keen to snap upsome for the long term with tight, andthey hope, relatively safe stop lossesbelow 300p despite the ongoing retailwoes. Spread Co offers Sainsburys at315.3p-316.0p

Interims from Rolls Royce, one ofthe last bastions of British engineering,are due for release towards the end ofthe week. Given the resolution at leasttemporarily of the Eurozone debt cri-sis, combined with rampant growth inthe emerging economies, the outlookremains upbeat for the firm and bro-kers seem confident theres more in thetank. IG Index current price in RollsRoyce is 648.4p-650.1p

After announcing revenues jumped23 per cent to 935m last Friday,shares in the budget airline EasyJetleapt some 18 per cent to 369p andclosed right on the resistance whichheld its advances in May and early July.With such a jump and strong resistancehere, look to sell EasyJet shares thisweek around this level unless it gapssharply above 370p again on Monday.Spread Co quotes 368.4p-369.7p

Shares in Reckitt Benckiser havebeen performing fairly well in recentweeks ahead of the company interimreport which is due to be releasedtoday. Speculation that the company

may increase its dividend has alsohelped boost the share priceCMC Markets spread on Reckitt

Benckiser is 3,480.35p-3,487.63pCraig Drake

THETIPSTER

DOMINOS HOPING TO

DELIVER THE GOODS

COMPANY NEWS

l Dominos Pizza releases its interim resultstoday. The popular take-away pizza chainwill be hoping that its results will be sizzlinghot rather than a soggy disappointment.

l ARM Holdings is set to release its secondquarter results tomorrow. After a successfulyear when its chips have been used to supplythe brains of the iPad 2 tablet, theCambridge-based microprocessor intellectu-

al property developer will be hoping to clockstrong results.

COMPANY NEWS

l On Wednesday, British American Tobaccowill be releasing its interim report and willbe crossing its fingers for smoking figures.

lWednesday will also see results frombudget airline EasyJet. Will its results haveits share price taking off, or will its stocks beleft grounded on the runway?

l On Thursday BT will be announcing its

first quarter results, and will be looking todial up some good numbers.

POLITICS NEWS

lOn Monday, the Office of National Statisticswill be releasing the euphemistically titled:Measuring What Matters: The NationalStatistician's reflections on the national debateon measuring national well-being.

lTuesday will see the release by the Office ofNational Statistics of its preliminary estimatefor GDP for the second quarter. The consensusis that it will be a surprise if the UK saw a

growth rate in excess of 0.3 per cent in the sec-ond quarter of this year.Dominos will be delivering its results on Monday

I

MAKE close to 100 per cent ofmy trading and investing deci-sions using technical analysis,

which is the study of priceaction itself through charts orquantitative techniques in prefer-ence to the study of underlying eco-nomic and financial factors, whichultimately drive prices in the longer-term.

VITAL SIGNSA technical analyst is in some wayslike a doctor, taking the pulse ofthe financial instrument, conduct-ing other tests, comparing the datato data obtained at different timesfrom that or other financial instru-ments and drawing conclusionsabout the health of the financialinstrument. Technical analysis is

based on a series of assumptionsabout market behaviour whichinclude the following:

1) Price action discounts funda-mental data in other words priceaction should reflect the shifts insupply and demand for an instru-ment which are based on fundamen-tals.

2) Prices move in trends despitesome academic debate suggestingmost price movement is random.

3) History repeating itself this ispartly because human reactions toprice movement tend to be constant.

KEEPING COOLInvestors and traders are prone tomaking incorrect decisions due tothe impact of emotions such as fearand greed. They tend to cycle fromeuphoria to capitulation and backon all timeframes. Their buying andselling behaviour while riding thisemotional roller coaster leaves trackson the price charts. Technical analy-sis, as well as identifying which of

those tracks have predictive value,can also help define simple guide-lines and algorithms to avoid fallingprey to the impact of such emotions.

Various published research docu-

ments looking at trading off dailycharts suggest that there is an edgein respecting the location of price

versus the 200 day exponential mov-ing average: not going long if price is

below it, not going short if price isabove it. A simple algorithm such asthat can prevent panic selling after apullback in a bull market or greedy

buying in the middle of a bear mar-ket.

TOOLS OF THE TRADEThe tools available to the technicalanalyst are many and varied, and anexperienced analyst will tend tofocus on quite a small number that

match their trading objectives andstyle. For instance, for trades heldmore than one day a strategy I like ismomentum based, which means Iuse various technical analysis filters

to help identify instruments whichare trending and outperforming (forlongs) or underperforming (forshorts) a benchmark index. For daytrading I like approaches which havea proven statistical edge, for instancethe tendency for US indices to come

back to touch yesterdays close afteropening away from it.

ITS ALL ABOUT TIMINGTraders and investors have a choiceas to how much they use technicalanalysis, from a lot to a little. ClearlyI am at one extreme of the scale. Buteven long only fund managers whohave their own bespoke methods of

searching for value using fundamen-tal analysis are quite likely to consulta chart these days before embarkingon a buy programme. Why buy nowif the instrument is in a powerful

downtrend? Yes, you can time themarket!

EXPLORE MOREFor those who are interested inexploring these areas more, here aresome routes in. For the investor, agreat introductory book is The VisualInvestor by John Murphy. For themore active trader, excellent startpoints are Trading for a Living by

Alexander Elder, and How MarketsReally Work by Larry Connors, ConorSen and Connors Research Group.For those interested in obtaining aprofessional qualification in techni-cal analysis visit www.sta-uk.org.

Malcolm Pryor is a qualified technicalanalyst, a trading coach and an author.Visit www.sparkdales.co.uk andwww.spreadbettingcentral.co.uk. FollowMalcolm on Twitter: @pryormalcolm

For healthy profits, take the pulseof markets with technical analysis

TRADER COMMENT

MALCOLM PRYOR

THE WEEK AHEAD in association with

A vital financialhealth check

Picture:PHOTOSHOT

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THE plane descends over thesouthern Spanish countrysideand the perfect rows of olivetrees almost resemble a Roy

Lichtenstein cartoon from above,neatly formed into different sections

by hill slope and field. The dramatic

mountains give way to bold bluewaters and there are whisps of whiteas the waves collide with the land. Itseems like minutes since we took offfrom London and already with rainydrizzle behind me in the capital theanticipation of warmth causes me topractically shout out: Sangria! Sun!Hurrah! as I squirrel away my maga-zines and sweets.

Two-and-three-quarter hours is apretty decent turnaround by anyonesstandards, which is precisely whyBritish Airways new year-round sun-shine route from City Airport toMalaga looks set to be popular withexpats and City moguls in search of ahot weekender. The service launchedin June with four-times-weekly flightsfrom London City Airport to Malagaon brand spanking new Embraer 170and 190 aircraft. Its part of anexpanding offer of leisure flights

being offered from the airport and isalready popular.

Malaga is pretty much the ideal quickfix weekend destination. For those

without a holiday home in the region,one of the best places you could pickfor a couple of days of R&R is the leg-endary Marbella Club. The award-win-ning historic hotel, founded by Prince

Alfonso Hohenlohe in 1946, hasplayed host to just about every iconiccelebrity and royal in its time and this

year is experiencing a refreshed tidalwave of affection after the launch ofthe Global Party an internationalfundraising event for the worlds

wealthiest social elites was heldthere.

In April it also re-launched its annu-al Spring Games, originally startedin the 1960s by the Prince as a one-dayextravaganza of extreme sports. Thisupped its romance factor among trav-elling socialites and garnered reamsof coverage in the luxury press.Unnecessarily, perhaps, for theMarbella Club already has a loyal fol-lowing and fan base.

LUSH, OLD SCHOOL GRANDEURStep in to the resort grounds andtheres still something uniquely and

charmingly old school about theMarbella Club. With the dramatic

pools, one by main hotel complex,another by the sea front (there arealso serviced Marbella Club beach

beds). The club has two restaurants.One, the Grill, is a traditional affair

with spectacular seafood and up-mar-ket European cuisine (the restaurantsCointreau souffl, which needs a 20-minute preparation time, is not to be

missed). Fairytale candles are mount-ed all over the tree branches to won-derful effect. The second restaurant isa groovier option serving Asianfusion food, burgers andCaesar salads.

The rooms are gener-ous. Mine is a classicdouble, which has asmall terrace over-looking the pool, a

beautiful, suitably-grand bathroom andall the techno bits

youd expect (TV, inter-net, CD and DVD player).

There are also 38 suites and14 serviced villas for families.Magically, due to clever landscaping,

you are never aware of the size of theplace. It feels like a peaceful village.

By the beach, the resorts Thalassospa offers a range of algae bath andmassage treatments along with a sea-

water pool, which makes for a fabu-lous afternoon of lazing around. Itsthe perfect way to unwind from a

week. In fact, between this, the pool,and the pina coladas you could quitehappily spend an entire weekend inthe resort without feeling guilty.

EXPLORING THE REGIONBut it is worth exploring. If you dont

want to hire a car, a twenty-minutetaxi ride one way will take you to thehistoric Marbella old town and shops(bikes can be hired from the hotel ifthat seems too much.) In the otherdirection is Puerto Banus, with moregreat shopping and sites. Sportsenthusiasts can take part in profes-sional tennis lessons at the local pro-fessional Puento Romano tennis club.

This summer for tennis fans the club

will play host to the Marbella Masterstournament (25-27 August) with gueststars Bjorn Borg, Pat Cash and

Yevgeny Kafelnikov playing.Further afield, if you can stomach

the perilous winding hill roads, thestunning town of Ronda, home of thefamous 168th century bullring, is

well worth an excursion. Here I checkout the incredible Pedro Romerorestaurant, which has been there evident from the crammed walls ofmemorabilia for aeons. PedroRomero is the kind of place that localseat in on Sundays and we dine likeSpanish kings on hearty local fare

before waddling around town to take

in the jaw-dropping gorge and thebull-fighting ring. Bull fighting is lesscommon in Spain now, partly due to

the expense of hosting events, butRonda does host an annual

fight in September forthose who want to wit-

ness the real deal. Inany case, the ringitself is great to lookaround. Its archesand seating are soatmospheric in the

scorching mid-after-noon sun that you

can practically feel thecrowds cheering from

past festivities.Spain is known for its nightlife and

near to the Marbella club is therecently opened Suite Del Mar on the

beachfront, just a stones throw from The Marbella Club. The beachhut/club has become quite a hotspoton Saturday evenings thanks to itslive Cirque du Soleil-style gymnastsand performing flame-throwers.

Theres something Ibiza-like aboutthe club, which is completely deckedout in white and offers drinks by the

bottle on table service (at suitablyblingy prices). As such, its a magnetfor beautiful young women and er slightly older, but nonetheless enthu-siastic dancing gentlemen clad in

white linen trousers. Its terrific funand again, just paces away from your

bed, terrace, and peaceful pool, forsleeping off the dancing before ahighly civilized flight home.

All I can say is: enjoy. Youreunlikely to find a mecca of southernEuropean pleasure-seeking withmore to offer, whether youre a cul-ture vulture or a hedonist.

Double Classic Rooms start from

375 pernight based on two people sharing. Forreservations, call: 0034 95 282 2211, emailreservas@marbellaclub.com or go towww.marbellaclub.com. British Airwaysflights to Malaga start at 75 one way. Goto www.ba.com For more on the MarbellaMasters, see www.marbellamasters.es.

Genteel, smart...meet the old Marbella

Not a bad place tosip a margarita andwatch the sunset.Below: a bedroom.

ROMAN SAVINGSRome in high summer is no fun if youarent doing it properly. You dontwant to slog miles across the citythrough the crowds; no, you want theForum on your doorstep. The luxePalazzo Manfredi, a 17th centurypalazzo in the heart of the historicalcentre of Rome, offers a rather envi-able solution, with savings of 167 per

person in July and 134 pp in August.

Kirker Holidays is offering 811 perperson for four nights, includingflights, in July and 579 pp in August.www.kirkerholidays.com

LUXURY ON THE BLACK SEAKempinski is expanding its Russianoffering with the Grand HotelGelen