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Last-minute deal to avert the US fiscal cliff sparks a global rally but analysts urge caution

BUSINESS WITH PERSONALITY

FTSE rallyeludes UKgrocery giaSUPERMARKET chains Morrisonsand Sainsburys failed to make themost of UK investors New Yearoptimism yesterday after analystsraised fears that their performancehad been less than stellar over thecrucial Christmas trading period.

Morrisons was one of just threefallers in the FTSE closing downtwo per cent after house broker

Jefferies predicted that the grocer will next week reveal a 2.8 per centdrop in like-for-like sales for thesix weeks to 30 December.

Analyst James Grzinic said: Weexpect Morrisons to kick off the

January trading season in a weakmanner, with recent market shareupdates revealing a weakeningmomentum despite a softcomparable base.

The slowdown in sales reflectsconsumers trading down todiscounters and continued onlineshare shift, Grzinic added.

The Bradford-based grocer haslagged rivals in moving online andlaunching convenience stores.

Panmure Gordon analyst PhilipDorgan told City A.M there was a

good chance of the company issuing a profit warning shouldsales continue to deteriorate.

Larger rival Sainsburys alsosuffered a blow to its share price

yesterday, falling 2.6 per cent, afterOriel Securities cut its target priceand predicted a tougher tradingperiod for the group since its

glowing interims in November.The broker said the decision to

offer 10p a litre off petrol for 60spenders from 27 December to 2

January was a response to an

uninspiring Christmas.British American Tobacco, wasthe only other FTSE 100 faller,closing down 0.6 per cent.

www.cityam.com FREE

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BY KASMIRA JEFFORD

FTSE 100 6,027.37 +129.56DOW 13,412.55 +308.41NASDAQ 3,112.26 +92.75/$ 1.63 +0.01/ 1.23 unc /$ 1.32 unc

MARKETS FLY BUTHANGOVERFEARED

ISSUE 1,789 THURSDAY 3 JANUARY 2013

QPR HUMBLCHELSEA See Sport, Page 22See Page 4

THE F ORUM: Page 16-17, MORE: Page 13 DAVID HELLIER: Page 2

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01/10/12 til 28/10/12 is 129,297

MARKETS around the world rallied yesterday after the US agreed aneleventh-hour deal to limit fiscal cliff tax increases and spending cuts, giv-ing equities a much needed boost. The deal averted sharp rises in

income-tax for a majority of Americans, but failed to reach any con-clusion over cutting the budgetdeficit, leading analysts to warn theeuphoria could be short-lived.

On its first day of trading in 2013, theFTSE 100 leapt 2.2 per cent to hit6,207.37 rising above the key 6,000level for the first time since July 2011,

and up 15 per cent from its June 2012lows.In the US, the Dow Jones industrial

average soared 2.4 per cent to hit

13,412.55 while the S&P 500 shot up2.5 per cent to 1,462.42. And in Asia, the Hang Seng, buoyed

by upbeat Chinese manufacturingdata, rose 2.9 per cent. The deal, approved by the

Republican-controlled House of Representatives in the early hours of

yesterday morning, was also a shot inthe arm for markets in the belea-guered Eurozone Euro Stoxx was up2.86 per cent, Frances CAC40 was up2.55 per cent, while in Germany theDAX rose some 2.19 per cent.

In the UK mining stocks led the FTSE100, with Evraz, Glencore and Xstrataall gaining more than seven per cent

in the strongest days trading formonths.UK banks which PwC estimates

have around $600bn (369.5bn) of

assets held in the US also did well.Barclays soared more than five percent, while Lloyds gained 3.7 per centand HSBC added 2.9 per cent to closeat 664.2p. The confidence generated by avoiding the bulk of spending cutsand tax hikes also boosted the dollaragainst the euro. A euro could buy only $1.3180 by midnight last night,compared to the $1.3204 it garnered atthe start of the day.

However, credit rating agencies S&Pand Moodys both last night empha-sised the deal did not change theirnegative view of the US credit outlook.It is an important step, but it is thefirst step, said Steven Hess, lead US

sovereign credit analyst at Moodys The US has already hit its legal bor-rowing limit of $16.4 trillion, but viaso-called extraordinary measures, is

able to service the national debt for afurther two months, after whichanother clash is expected. Also buoying US markets was a raft

of positive data releases from thecountrys manufacturing industry.ISMs manufacturing purchasing man-agers index (PMI) business survey forDecember rose to 50.7, back above thecrucial 50 no-change level, after a read-ing of 49.5 in November. The upbeat start to the year came

despite a glitch in London Stock Exchange announcements thatdelayed around 100 company updatesthat should have gone out between7am and 8.30am. Companies affected

included Lamprell and Babcock.

BY BEN SOUTHWOOD

FTSE

Jan 2013Mar 2011 Sep 2011 Jan 2012 May 2012 Sep 20124,800

5,800

6,000

5,400

5,600

5,000

5,200

DIGITAL SALES TOP 1BN

4 July 2011FTSE brokethrough 6,000barrier to closeat 6,017.54

23 September 2011Dips below 5,000 afterEurozone contagion fears spread

1 June 2012Drops to 2012low of 5,260.19

7 November 2012Stocks creephigher as Obamais re-elected,

bringing thefiscal cliff intothe spotlight

6,027.37

9 March 2012Hits 2012 high of5,965.58 afterGreek debt deal

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WHAT DOES THIS M

THE WORLD ECONO?UK banks willbreathe a sigh of

relief today as the threat obiggest economy slippininto a recession diminish

KEVIN BURROWESPWC

2013 GDP growtnow likely to be

per cent, and the chances[second half] growth excethree per cent are signic

KIT JUCKESSOCIT GNRALE

The tax increasesalone will not res

the countrys decit probWe anticipate further, if mgains in US equities this

DAN MORRISJPMORGAN

With little prospemeaningful actio

address medium-term buproblems, we suspect the[be downgraded] this yea

PAUL ASHWORTHCAPITAL ECONOMICS

US REPUBLICANS have threatened touse the debt ceiling as a political toolonce again in March, after yester-days budget deal included huge taxhikes with little spending reform. The US has once again hit the legal

limit for the total it can borrow setat $16.4 trillion (10.1 trillion) andgovernment could grind to a halt

without Congressional approval of an increased cap.

But many Republicans in theRepublican-controlled House of Representatives have suggested they

will not vote for a higher limit with-out significant reform to entitle-ments, putting the US budget on along-term sustainable path.

Our opportunity here is on thedebt ceiling, Senator Pat Toomey of Pennsylvania said on MSNBC. WeRepublicans need to be willing to tol-erate a temporary, partial govern-ment shutdown, which is what thatcould mean. This brinkmanship would hark

back to the fractured budget talks of 2011, when many of the measuresthat became the fiscal cliff were setin place, in an attempt to rein in bal-looning government spending onhealthcare and pensions.

It comes after a deal on the fiscalcliff that passed through the House257 to 167 late on Tuesday, US time,

BofA raises lending after years of cutsBank of America is ramping up mortgageand corporate lending after two years offocusing on capital levels and cost-cutting. Chief executive Brian Moynihansaid the company should overtakeJPMorgan Chase in direct-to-consumermortgage lending in the next six monthsand he had directed bankers to be moreaggressive in lending to companies.

French car slowdown drags into 2013New car sales in France slowed to their

lowest level for 15 years in 2012 withlittle, if any, improvement expected thisyear underscoring the tough outlook forthe countrys two big producers, PSAPeugeot Citron and Renault. Figuresfrom CCFA, the French constructorsassociation, showed that new carregistrations fell 14 per cent over the year.

Macau casinos end year on a highChinas gambling mecca hit a lucky streakin December with Macau casino revenues jumping 19.6 per cent year-on-year, to arecord $3.5bn for the month, marking apositive end to a year of slowing growthin the industry.

Cameron boosts entrepreneur planDavid Cameron will today expand ascheme to help young entrepreneursamid criticism that it was slow to get offthe ground. An extra 30m will go intothe start-up loans scheme.

St John Hotel bought by SingaporeanA Singaporean tycoon has rescued the StJohn boutique hotel in the West End thatcollapsed in October just days after therestaurant earned its first Michelin star.Loh Lik Peng bought the 15-room hotelfrom administrators for undisclosed sum.

Tax chaos as child benefit cuts loomAlmost a third of families affected byGeorge Osbornes raid on child benefithave not been formally warned that theywill no longer be eligible for the handout,which will be means-tested from nextMonday.

Emirates to be second largest airlineDubai-based Emirates will move withintouching distance of becoming the worldsbiggest airline this year. It is set toovertake US giant Delta within the next 12months to claim the number two spot.

Goldman paid out to beat fiscal cAs 2012 wound down, Goldman Sachsawarded ten of its top executives acombined 508,104 shares one monthearlier than normal and ahead of highertax rates that kick in this year. AtMondays $127.56 closing price, the shareswere valued at $64.8m.

Shell send salvage crew to AlaskRoyal Dutch Shell are preparing to send asalvage crew to an oil rig that ran agroundoff the coast of Alaska, 300 milessouthwest of Anchorage.

The President achieved a key goal of raising taxes only on the top earners in the US

2 NEWS

BY BEN SOUTHWOOD

To contact the newsdesk email news@citya

For those hardy souls returning to work yesterday after theChristmas break the financialmarkets provided some welcome

and slightly unexpected cheer. Talks in the US aimed at averting a

stalemate on the so-called fiscal cliff succeeded (just) and a bill that many

Republicans dislike because it con-tains too few spending cuts passedthrough the House of Representatives. The avoidance of a deeply destabilis-

ing stalemate was more than enoughto give financial equities a healthy kick-start to the New Year.

In Asia, the Hang Seng index, alsostrengthened by stronger than expect-ed manufacturing data out of China,rose 2.9 per cent to reach its highestlevel since 2011 and in London theFTSE 100 rose above 6,000 for the firsttime in seventeen months. In the US,the Dow surged 2.35 per cent.

The optimists come out to play for the firTHURSDAY 3 JANUARY 2013

Some investors argued, almost cer-tainly prematurely, that the resolu-tion to the budget talks in the US

would once again lead to stocks being judged on their own investment mer-its rather than simply trading in line

with perceived political risk, be itfrom the endangered Eurozone orfrom warring US politicians.

Yesterday London witnessed somestrong share price rises for EurasianNatural Resources Corporation, up 6.5per cent, and Evraz, the miner con-

trolled by Roman Abramovich. There were also strong rises for selected banking stocks, including Barclaysand Lloyds Banking Group. Analysts from Socit Gnrale are

especially keen on investment banks with large US operations, such asBarclays, Deutsche or Credit Suisse.

They argue we could begin to seepent-up demand for merger and equi-ty capital markets activity that has

been held back for the past five years because of political uncertainty andexcessive market volatility.

Not everybody, of course, has beenquite so bullish, with many caution-ing against excessive optimism basedon the flimsy evidence of an accordthat in the end is both short-term inits nature there will soon be frac-tious talks in the US over the coun-trys debt mountain and was only arrived at after angry Republicans

of the last-minute decision makingand very partisan nature of recent

budget talks will only add to business-es misgivings about investing in themedium term.

Clearly, there are many obstaclesthat need to be faced, both in the US,the Eurozone and in the UK, where

the chancellors cherished triple A rat-ing is under threat. Yesterdays market reaction may not

signify much for the longer-term.Markets were thin, with fewer peopleat their desks than normally, and willhave reacted more in relief than any-thing else. But it wasnt an unwel-come way for markets to start the

year and few will mind if the rally continues a tad longer.

were cowed by the fear of what mighthappen if they voted the Senate dealdown.

One would have to be rhinoceros-skinned to wish to stand accused of provoking the equivalent of financialarmageddon, with an inability to passa bill ahead of yesterdays financial

markets opening almost certainly being followed by steep falls in shareprices across the world.

Coutts Gary Dugan, chief invest-ment officer for the firm in Asia andthe Middle East, was pretty sanguineabout the deal yesterday. Even withthe fiscal cliff averted, there are fur-ther major challenges in the comingmonths, he said. The US has had atwo-month reprieve after hitting the$16.4 trillion debt ceiling; politicians

will again have to argue over raisingthe ceiling by the end of February.

The worry for the markets is that all

ANALYSTVIEW

after passing through the Senate 89 to8 at 2am on the morning of 1 January. The deal permanently resolved tax

measures, with marginal rates on cou-ples earning above $450,000 rising to39.6 per cent, from 35 per cent, andthe payroll tax rising from 4.2 per centto 6.2 per cent on the first $100,000 of an individuals earnings.

But spending issues have not beenresolved, with Congress actually agree-ing on $24bn of extra spending to tidethem over until a decision is made onthe so-called sequester of $109bn of automatic cuts now delayed an extra

two months to March.Since the deal saw very little in

spending cuts going against the rec-ommendations of the bipartisanBowles-Simpson commission Obamacommissioned, Republicans feel they

will need to fight for healthcare andpension reform.

This is going to be much uglier tome than the tax issue...this is going to

be about entitlement reform, saidRepublican Senator Bob Corker onCNBC. But Obama called for a littleless drama when talks on spending

n The fiscal cliff was a package ofspending cuts and tax hikes thattechnically came into force at the verybeginning of 2013 but have now beenpartially rolled back.n The measures hit the US economywith a fiscal consolidation originallyestimated at $607bn (373.7bn) andthen revised to $503bn, according to theCongressional Budget Office (CBO) Congresss fiscal watchdog. Thediscrepancy is dependent on whichmeasures one includes.n The deal reduced the consolidation toaround $173bn, if we use the $503bnmeasure of the fiscal cliff. On the$607bn measure the total consolidationis $277bn after the deal.n The warring groups will also have toagree on another deal in March, as the$109bn of automatic spending cutsknown as the sequester have only beenpostponed for two months.

n The cost of paying for this delay estimated at $24bn will be paid forwith $12bn in extra revenue and $12bn inextra spending cuts.n The US budget deficit will total $1.1trillion for 2012, the fourth successiveyear with a deficit above $1 trillion, theCBO estimated.n The fiscal cliff would have takenaround half of that away, but the dealwhich passed the Senate and the Houseof Representatives yesterday will onlyreduce the deficit by around $173bn in2013.n Compared to a baseline of sustainingall the tax rises and spending cutscontained in the fiscal cliff, the deal willadd around $3.64 trillion to the USnational debt over ten years.

THE FISCAL CLIFF DEAL

The new jobs website for London profeCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

EDITORSLETTER

DAVID HELLIER

david.hellier@cityam.com follow me on twitter: @hellierd

n Allister Heath is back tomorrow

THE FORUM: Page 16 to Page 17

Republican deal sets upa new US budget battle

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The sub-index for outputenjoyed an even healthier 20-month high.

Analysts said this data woulddrive hopes that theeconomy could turn overa new leaf after the

gloomy times seen overthe last year.Manufacturers willhope that the solidupturn in production

volumes is the firstsign of a more stable

IN BRIEFCVC buys Italian firm for 1.1n Funds advised by CVC CapitalPartners said yesterday they hadagreed to buy Italian data providerCerved from private equity firms BainCapital and Clessidra for 1.13bn(0.9bn) to tap the growing creditmarket. Cerved provides creditrecords to 90 per cent of Italian banks.

Buffetts $2.5bn solar gamblen A company controlled by WarrenBuffetts Berkshire Hathawayyesterday agreed to buy two largesolar power projects in California fromSunPower Corp for up to $2.5bn(1.5bn) in proceeds and relatedcontracts. The projects are expectedto be finished during 2015.

KitKats four fingers trademarkn Chocolate maker Nestle yesterdaywon a trademark case over the shapeof its iconic KitKat product, meaning itnow has exclusive rights to make four-fingered chocolate bars. The KitKatwas invented in York in 1935 byRowntrees and more than a billion aresold every year in the UK.

Gigs at Olympic Stadium this yn The Olympic Stadium is set toreopen this July to host a series of rockconcerts after promoters were forcedto cut down the number of large-scaleconcerts held in Hyde Park. The news,revealed by BBC London, will be aboost to the capitals live musicpromoters following a series of noisecomplaints at Hyde Park.

CAR-SHARING company Zipcar was yesterday bought by rental giant AvisBudget for $500m (307m), handingthe established company the leadingposition in the fast-growing car club

business.Zipcar offers an alternative to car

ownership by allowing its membersto use thousands of vehicles in citiesacross the world, with usage chargedon an hourly basis. But despite enor-mous user growth since its launch in2000, the company has struggled toturn a regular profit.

We see car sharing as highly com-plementary to traditional car rental, with rapid growth potential, saidRonald L. Nelson, Avis Budget Groupchairman and chief executive.

Nelson said the Zipcar brand wouldretain its separate identity butaround $50-70m of annual costscould be cut by utilising AvisBudgets experience of buying largefleets of vehicles. Yesterdays offer of $12.25 a share

Zipcar makesgetaway with$500m in boot

BY JAMES WATERSON in cash represents a 49 per cent pre-mium over US-listed Zipcars last clos-ing price. A third of Zipcarshareholders have already said they

will back the deal, despite it being well below 2011s IPO price of $18.

Scott Griffith, chairman and chief executive of Zipcar, will continue torun the business and if the dealreceives shareholder approval itcould be completed by the spring. AOL founder Steve Case, whose

Revolution fund took an early stakein Zipcar, could walk away with $96mas a result of the purchase.

Zipcar Inc

2Jan26 Dec 27 Dec 28 Dec 31 Dec

8

10

9

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$ 12.182 Jan

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THURSDAY 3 JANUARY 20133NEWScityam.com

Zipcar bought its smaller UK rival Streetcar for $50m in November 2010

ECONOMISTS registered hope forthe UK economy after factory dataout yesterday put December asthe best month since mid-2011.

The UKs manufacturingpurchasing managers index (PMI)climbed to 51.4 in December,Markit said, a 15-month high, andup from 49.1 in November. Thispushed the sector back above thecrucial no-change level of 50 andtherefore back into expansion.

BY BEN SOUTHWOOD footing going into 2013, saidDavid Noble, chief executive of the Chartered Institute of

Purchasing & Supply, who co-authored the data.

And this recovery could takehold even more firmly if theUS and Asia enjoy moresubstantial expansion in thecoming year.

EUROZONE manufacturing woes went on in December, as Germanfactory activity declined further.

The purchasing managers index(PMI) for manufacturing in theEurozone edged down to 46.1 inDecember, from 46.2 a monthearlier, Markit said yesterday.

The German PMI was 46.0, downfrom 46.8 in November, as theformerly resilient economy founditself unable to shrug off the effectsof the debt crisis on demand.

PMIs in France and Italy were alsosub-50.

Germany lefresh declin

BY BEN SOUTHWOOD

PORTUGALS austerity budget faces alegal challenge after the countrysPresident yesterday referred theplans to the nations supreme court.

Anbal Cavaco Silva wants toensure cuts to pensions and publicsector pay are constitutional becausethey do not affect all citizens.

If the legal challenge is successfulthe Portuguese government could beforced to redraft the legislation,potentially threatening the toughdeficit-reduction targets setfollowing its 78bn (63bn) bailoutfrom the EU and IMF.

Legal threat toPortugal cuts

BY JAMES WATERSON

The data will be a boost tochancellor George Osborne

Hope of bright 2013 in UK liftedby 15-month factory activity hig

QHow do customers hire a car usingZipcar?AUsers book a vehicle online for any period from one hour upwards.

They unlock it using a phone app ormembership card and return it to theparking space before their time is up.

QHow much does it cost to drive one ofthe companys vehicles?AMembership is 59.50 a year andthe hourly rate which includesfuel, insurance and the congestioncharge starts at 6. You also pay 25p/mile after the first 40 miles.

QWhat vehicles are available? How manyare there?AZipcar has over 1,500 London vehicles, mainly VWs and vans.

QWhat sort of people usethe service?AZipcars targetaudience are peopleliving in the inner city whoonly need a car occasionally.

QIs Zipcar going to make car ownership athing of the past?

AFewer young people in developedcountries are learning to drive

and the cost of motoring can bepunitive. But the revolution has nothappened yet: Zipcar still only has731,000 members worldwide.

QHow much could the car sharingbusiness be worth?A Avis Budget say the industry couldhit $10bn in the next few years.

Q A andWhats the secret of Zipcars success?

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MICROSOFTS flagship new

software, Windows 8, has seen weak sales in its opening weeks on sale,and is now installed on less than twoper cent of computers worldwide,data released yesterday claimed.

Market share research fromstatistics firm Net Applicationsshowed that the redesignedoperating system, released at theend of October, is installed on just1.77 per cent of computers

worldwide. The figures highlight the

difficulty Microsoft has experiencedin encouraging its users to pay toupgrade their software. WindowsXP, released 11 years ago, is installedon 39 per cent of computers.

Windows 8, which was released togreat fanfare by Microsoft, is themost radical redesign of the

Windows software in years, with aninterface designed to moveMicrosoft into the tablet andsmartphone age.

Recent months have seen it loseground in the computer operatingsystem space, where it has beendominant for decades, as Applesimproving profile has led to morepeople buying Mac computers.

However, sales of the new software did mean Windows gainedmarket share for the first time in sixmonths, rising by 0.29 per cent to91.74 per cent of desktop computers.

Microsofts Windows 8 making wav

BY JAMES TITCOMB

BRITISH consumers spent more than1bn on downloads of films, musicand games in 2012, as sales of CDsand DVDs declined.

Industry data released yesterday showed that digital entertainmentspending rose by 11.4 per cent last

year to reach a record 1.033bn.However, this growth did not make

up for a decline in CD and DVD sales. Total entertainment sales fell from

4.8bn to 4.2bn in 2012 as physicalsales fell by 17.6 per cent, figuresfrom the Entertainment Retailers

Association (ERA) showed. The ERA attributed the overall dropin sales to a relatively weak release

calendar for films and videogames in2012. However, the figures did notinclude spending on music and filmstreaming services such as Spotify and Netflix, which have grown evenmore rapidly than downloads overthe last year.

Record industry body the BPI said yesterday that UK listeners hadstreamed more than 3.7bn tracks in2012 140 in each household.

Digital sales hit1bn as CDs andDVDs in decline

BY JAMES TITCOMB Despite digitals inexorable growthand the high streets struggles, physi-cal sales still make up for aroundthree-quarters of spending. DVD andBlu-Ray still dominate film sales themost lucrative of the three sectors

with 94 per cent of spending, whilephysical music sales still account for62 per cent. Just over half of digital spending

was on videogames, with many con-sumers downloading games straightto their consoles or playing onlinetitles such as the wildly popular

World of Warcraft. Video is the least mature of the dig-

ital markets but grew by more than afifth, a trend that could be explained by the increased use of tablet comput-ers and internet connected televi-sions to watch films.

Breaching the 1bn barrier is anincredible achievement for the UK'sdigital entertainment retailers, ERA director general Kim Bayley said. The BPI revealed that British artists

dominated the charts last year. Thethree bestselling albums were fromBrits, with Emeli Sands Our VersionOf Events taking the top spot.

THURSDAY 3 JANUARY 20134 NEWS cityam.com

DOWNLOADING ON THE UP AND UP

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of entertainment salesnow digital

24.5%songs streamed in 20123.7bn

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Album sales

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APPLE is testing a new version of itsiPhone, as well as new iOS softwarefor the device, heightening specula-tion that it will release its next hand-set earlier than expected. App developers have noticed that

usage logs records to track whatdevices are using their apps include references to aniPhone 6.1 identifier. Theidentifiers, seen by technol-ogy website The Next Web,appear to have originatedfrom Apples Silicon Valley headquarters. The news that Apple istesting the new device and

software, just a few monthsafter the release of theiPhone 5 and iOS6, follows

Apple tests newphone amid talkof early launch

BY JAMES TITCOMB speculation that the next iPhone will be released in the summer, breakingthe cycle of autumn launches Applehas followed in recent years. The iPhone 5 has seen record sales

figures since its September launch. A summer release of the next

iPhone would cut the time betweenits release and the launch of

Samsungs flagship Galaxy Sphones, which go on sale earlierin the year. Samsung, which became the worlds bestsellingphone company last year, hasproved Apples stiffest competi-tion in recent months. Its nextflagship model, the Galaxy S4, isslated for release in April. Apple did not comment.

The iPhone 5 was released just a few months ago

CRISTIANO Ronaldo, the Real Madridand former Manchester Unitedfootballer, has signed up to be thepublic face of a new project from

Aim-listed Sports Stars Media.

The company is launchinga crowdsourcedfootball tournament inan effort to increaseexposure of its sports

cartoon business, whichis currently producing ashow featuring Portuguese

manager Jose Mourinho.

Ronaldo signfor new role

BY JAMES TITCOMB

THURSDAY 3 JANUARY 20135NEWScityam.com

The new jobs websitefor Londonprofessionals

C I T Y A M C A R E E R S

. c o m

Tech titans deemed unlikelyto spend on film and music TECHNOLOGY giants are likely todefy market speculation that they

will spend their vast reserves on buying up media rights, accordingto specialists at professional

services firm Deloitte. The likes of Apple and Google, which have plenty of cash at theirdisposal, have long been expectedto use it to snap up content ormedia companies for their ownplatforms.

This could mean certain films ormusic appearing exclusively iniTunes, for example. However,Deloitte predicts that relatively little money will be spent in this

BY JAMES TITCOMB way, with less than 10 per cent of an estimated $250bn (153bn) of technology M&A spending goingon content assets.

The companys influential Technology, Media, and Telecommunications predictions

report for 2013 highlights thedifficulties tech companies wouldface in trying to buy up mediarights. These problems include thetax payments that would come

with buying content in many countries, and the fact that moretechnology giants are having topay dividends for the first time in

years. Another reason is that theprocess would be considered toodifficult or distracting.

Ronaldo moved toReal Madrid for 80m

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BRITAIN should follow the lead of

the US and designate a day toencourage shopping in localindependent retailers, shadow

business secretary Chuka Umunnasaid yesterday.

The Labour MP wants 7 December2013 to be the inaugural SmallBusiness Saturday in the hope it willfocus consumer attention on localhigh streets. We must do more tocelebrate the contribution localsmall independent businesses maketo our economy and encouragepeople to buy from them, he said.

Umunna has asked AmericanExpress, who set up and run the USprogramme, to extend the initiativeacross the Atlantic.

However the government insistedthey were already working hard tohelp small shop owners. Localgrowth minister Mark Prisk said:Were determined to offer practicalsupport to our HighStreets, which is

why wevedoubled theamount of small

business raterelief to new and smallershops.

Labour callSmall BusinSaturday in

BY JAMES WATERSON

SUN EUROPEAN Partners hassnapped up two packaging compa-nies including Lincolnshire-basedParagon Print & Packaging in a400m spending spree.

Sun European, an arm of US pri- vate equity f irm Sun Capital, yes-terday said it had bought a 49 percent stake in Paragon fromEquistone and LDC for an undis-closed sum.

Sun European also completed itspurchase of London-listed Rexamscosmetics division yesterday.

Paragon makes packaging andfood labels for the likes of Sainsburys, Boots and Tesco. Itsrevenues totalled 170m last year. The sale mark s t he end of more

than a decade of investment fromEquistone, which was until 2011part of Barclays.

Equistone used Rothschild as itsfinancial advisers on the deal, witha team led by Andrew Thomas and

Alistair Allen, while PinsentMasons provided legal advice.

PwC and Boston Consulting

Sun Europeantakes a shineto packaging

BY MARION DAKERS Group were also drafted in toadvise.

For Sun European, KPMG advisedon accounting and tax and DLA Piper worked on the legal aspects.

Equistone has exited severalinvestments in the packaging sectorin the last year, amid a period of consolidation in the industry.

Theres been a move towardshigher-quality consumer packagingespecially given the rise of discountretailers such as Aldi and Lidl whouse consumer-ready packaging not

just for transporting goods but forshelving and marketing, said Davy Stockbrokers analyst Barry Dixonsaid of the sector.FTSE 100 component Rexam put itsunderperforming personal care divi-sion up for sale last February in twoparts, and Sun European fought off rival private equity bidders to takethe cosmetics arm in an acquisitionthought to be worth close to 300min July. The purchase, which was conduct-

ed through Sun European affiliate Albea, has now been given therequired regulatory approvals.

THURSDAY 3 JANUARY 20137NEWScityam.com

THE EUROPEAN Commissionplans to re-examine the use of International Financial ReportingStandards after growing criticismfrom the investment industry.

A group of investors wrote toMichel Barnier, the Europeancommissioner for markets, tocomplain that the IFRS accountingrules obscure potential problemsat banks by keeping loan losses off the books until they occur, even if they can be predicted.

Barniers cabinet head OlivierGuersent has written back to theinvestors to say the Commission

Europe to review accountingrules after investor criticism

BY MARION DAKERS shared the concerns and wouldkick off a review early this year.

The Local Authority PensionFund Forum, which was one of theletters ten signatories, said it waspleased that the investor grouphas been listened to by theCommission.

The group has identifiedsystemically dangerous problems

with IFRS. Overstating assets,hence capital and profits at thesame time as leaving out liabilitiesas well. A double whammy, said aspokesperson.

IFRS is used around the world,and was adopted by Europe in2005.

Michel Barnier has been asked to look again at Europes accounting rules

Umunna says allcouncils can getbehind the plan

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4 years interest free credit withnothing to pay for the first yearno deposit, no interest ever

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THE HOUSING market saw anothermonth of steady improvement in

November, according to data fromthe Land Registry out yesterday.Prices edged up 0.3 per cent across

England and Wales in the secondlast month of the year, capping off an annual increase of 0.9 per cent,the government body said,highlighting the slow but steady upward trend in the market.

However, rising 2012 prices did notcome out of an overall more busy market, the Land Registry datasuggested. There were just 57,971house sales between June andSeptember last year, compared to62,006 sales per month in that sameperiod in 2011.

Meanwhile, London continued tooutperform the rest of England and

Wales. Prices were up 5.9 per cent onthe year, dwarfing growth across therest of the country, even thoughLondon prices crept up just 0.5 percent in November.

House pricedge highein Novemb

BY BEN SOUTHWOOD

DELAYS and cancellations as well asabove-inflation fare hikes greetedcommuters returning to work afterthe festive break yesterday. As the price of a season ticket rose

4.2 per cent and the average fareincreased by 3.9 per cent, some railfirms struggled to stay on track.

First Great Western passengersendured the ongoing effects of flood-ing in the south west and a brokendown train blocking routes.

Signal failure caused delays at Victoria station, while overrunningengineering work meant some trainscould not stop at Cannon Street orLondon Bridge. A freight train hit a car inOxfordshire, killing one man andcausing widespread disruption duringthe evening rush. The cost of taking the train to work

took up eight per cent of the mediansalary of 26,082 in 2012, consultancy Hay Group claimed yesterday.

London workers are the worst hit, with season tickets for commutes last-ing more than 50 minutes costing a

whopping 21 per cent of salaries for

Delays hit keyrail routes asfares balloonBY MARION DAKERS those on the lowest pay (see graph). The figures do not include local

London travel under the auspices of TfL, which hiked prices by an averageof 4.2 per cent yesterday. The TUC said average train fares have

risen nearly three times faster thanaverage wages since the beginning of the recession in 2008. Transport minister Norman Baker

defended the soaring costs, telling theBBC that train travel is not nearly asexpensive as has been presented if customers seek out the best deal. The Liberal Democrat conceded that

after a decade of above-inflation fareincreases, the practice would be endedas soon as we possibly can.

THE London property market got off to a busy start yesterday after two City office sitesexchanged hands. US group Hines said it has acquired Atlas House in the City (picturedleft) from UBS Global Asset Management for 35m. Meanwhile Taylor Wimpey has boughtSt Dunstans House on Fetter Lane. The site has consent for a scheme to build 76 flats.

CITY OFFICE BUILDINGS GO UNDER THE HAMMER

THURSDAY 3 JANUARY 20139NEWScityam.com

Price of season tickets as percentage of salary22%20%18%16%14%12%10%8%6%4%2%0%

S o u r c e :

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London still outpacing rest of England

2007 2008 2009 2010 2011 2012

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England and Wales

London

S o u r c e :

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THE NUMBER of retailers falling intoadministration rose by six per centlast year as the squeeze on consumerspending and the shift of spendingtowards the internet saw names suchas JJB and Comet disappear from thehigh street.

Figures published yesterday by Deloitte, the accountancy firm, show that 194 retailers fell into adminis-tration in 2012, compared with 183in 2011 and 165 in 2010. The number of insolvencies fell

slightly to 37 in the last threemonths of the year compared with42 retail failures in the third quarter.

However, Deloitte said the contin-ued strain on household budgets andother challenges facing the sectorsuch as costly store estates are likely to cause more grief this year.

Christmas trading appears to have been reasonable, though not spectac-ular and not enough to prevent insol-

vencies in the first quarter of 2013,

BY KASMIRA JEFFORD Lee Manning, restructuring servicespartner at Deloitte, said. While lower inflation has provided

some relief, Manning said this hadnot translated into increased spend-ing as consumers opt to save ratherthan spend.

Strong consumer spending growthis not likely to return any time soon

which makes it essential that retail-ers address the fundamental issuesaffecting the industry store portfo-lios and multichannel, he said.

Other retailers that collapsed intoadministration last year includedhousehold names such as ClintonCards, Game and Peacocks.

Despite the increase in retail insol- vencies, the total number of business-es that went into administration in2012 fell nine per cent to 1,833 com-pared with 2,010 last year. There were 21 per cent fewer admin-

istrations in the hospitality andleisure sector, nine per cent less inmanufacturing and seven per centfewer in property and construction.

I would say I am cautiously optimistic. Forsome reason the markets seem to be lled

with renewed optimism right now. As a headhunter,you know it is tough times when people move jobs con-stantly, and at the moment that is not happening.

These views are those of the individuals above and not necessarily those of their company

CHRISTIAN MAHOODDEFINITIVE CONSULTING

It is looking a lot better now than a year ago. Ideliver IT services to investment banks and

stock exchanges, and at this point last year Iwas employed on a week-to-week basis because ofuncertainty, whereas now I get phone calls everyday.

BARRY CLARKEHCCI

A bit more optimistic. I work as an IT specialistand our customers are banks and nancialinstitutions, and I sense that a lot of the budget

caps on IT spending have been removed. That is denitelya good sign, and I am a lot more upbeat than last year.

STEVEN WRIGHTSAPPHIRE SYSTEMS

L AST year we waved goodbye toComet and JJB Sports as 2012saw the shutters pulled down onthe high-street stalwarts for the

last time. Those two along with Game did-

nt even make it to the crucialChristmas sales period before calling ita day, but as January rolls round againand store managers start totting up

their December till rolls, retail ana-lysts will have one question on theirminds whos next? As last-minute shoppers plunder the

high street for presents on ChristmasEve, retail bosses are facing just asstressful a deadline the quarterly rent deadline that just so happens tofall on 25 December. Add the fact thatmany shops make the bulk of theirrevenues over Christmas on whichtheyve bet large chunks of advertising

spend and pre-orders, and youve got a

perfect storm of money worries wait-ing with the inevitability of a New Years hangover.

At risk as has been the theme forseveral years now are the classic mid-market retailers. Not cheap enough to

be a bargain option nor exclusiveenough to jump on the luxury band-

wagon, these stores are being shuntedoff the British high street faster than

you can say squeezed middle.But bucking the trend, as ever, is

BOTTOMLINE

ELIZABETH FOURNIER

CITYVIEWS

THURSDAY 3 JANUARY 201310 NEWS cityam.com

Never knowingly in line with the re

Retail failures

on the up amiweak demand

JOHN Lewis yesterday reported bumper sales over the festiveperiod boosted by online orders,

which now account for a quarter of the companys total sales.

The department store groupreported 684.8m of sales for thefive weeks to 29 December,including a record take of 31.7m for the first day of its sales in stores on 27December. Like-for-likesales, which strip outthe impact of newstores, rose 13 per centin the period.

The employee-owned group said online salesfor the five weeks

rose 44.3 per centon a year ago, and

John Lewis boasts recoin the Christmas trading

BY KASMIRA JEFFORD johnlewis.com now accounted for aquarter of the total John Lewis

business, which has 39 storesacross the UK. Tech sales were up30.9 per cent, while fashion and

beauty rose 10.4 per cent.Managing director Andy Street

said: I am delighted that JohnLewis has delivered record

breaking sales figures over theChristmas period and the first five

days of clearance.In an economic climate

which continues to be volatile, to have achievedthese results is testimony tothe strength of the JohnLewis brand and thecommitment of all ourpartners to giveoutstanding service.

ARE YOU FEELING MORE OPTIMISTICABOUT THIS YEAR THAN LAST YEAR?

Interviews by Jakob Villumsen John Lewis, with sales in the week to22 December topping 150m for thefirst time ever and thats not evenincluding the brands high-end super-market chain Waitrose.

Unlike many of its rivals, John Lewisheld off going into clearance until 27December though of course itsnever knowingly undersold guaran-tee means it was matching competi-

tors offers in the preceding days. The fact that footfall on Boxing Day rose 20 per cent year-on-year is indica-tive of the John Lewis sales customer scouting around for a big-ticket bar-gain and knows exactly where they

want to spend their cash. The really interesting figures will come next

week, when we find out whether theirinterest was held by final discounts onunwanted sale stock not to mentionthe crucial new season stock.

John Lewis Xmas advertfeatured a shopping snowman

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Left to right: CRUK treasurerSir James Crosby anddryathlete JohnnyHawkins

NOW that Movember has moved onand Stoptober has passed, CancerResearch UK is challenging thirsty City folk to go dry during January.

For those who cant quite stomachthe prospect of a whole month on the

wagon, a golden pass is a liquid life-line which grants the bearer 24 guilt-free hours on the sauce. The property sector has already put

its livers firmly on the line with dry-athletes from the SavillsSobriety Saints andKnight Franks Johnny Hawkins, who admit-ted to The Capitalist thattoo many hungoverDecember mornings

Spend a monthon the wagonas a dryathlete

had got the better of him. Other teamslooking strong on the fundraisingscoreboard are the boldly named We

will bankrupt Mahiki and Up JacobsCreek without a paddle surely a City entry if ever The Capitalist saw one?

One man from the charity is certain-ly facing sobering times, alcohol-freeor otherwise. CRUKs treasurer, andformer chief executive of HBOS, Sir

James Crosby was a regular fixture atthe Parliamentary BankingCommission in Decemberover the banks collapseand will no doubt belooking forward to amonth free from MPsquestions.

To sign up online or spon-sor a sober colleague go

to cruk.org/dry-athlon

PRIVATE bank Coutts finished 2012 by writing one very large cheque having raised over 50,000 for theLondon Air Ambulance charity inthe last 12 months.

Staff handed over 51,705 to thetrauma charity after fundraisingactivities including a comedy night,treasure hunt, abseil and auction.

But The Capitalist hears that onenew recruit got a bit of a shockduring the live auction. During the

lot for a private dinner cooked by Coutts executive chef Peter Fiori,an inadvertent scratch of the eageremployees head caused her someconcern as the hammer camecrashing down. The auctioneershouted 1,700, to the lady in thepink dress. The confusion was only resolved the next day, when ittranspired that there were twoladies in pink dresses. At least it wasall for a good cause.

THURSDAY 3 JANUARY 2013

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11cityam.com

Although technically business asusual, those in the Square Mile

have reported that many offices are stillin Winter hibernation, seizing theopportunity to extend the New Yearholiday by taking the end of the weekoff. The Capitalist couldnt help butwonder if City outposts such as EAT andPret a Mangers usual roaring trade hadbeen hampered by this workforce declineyesterday. However upon contacting theoffices of both of the popular chainsThe Capitalist was told nobody would be ableto comment as most of them were allstill on holiday.

cityam.com/the-capitalistTHECAPITALIST EDITED BY CALLY SQUIRESGot A Story? Em

thecapitalist@cityam.com

Accidental bidding at Couttsauction for ambulance charity

Those looking to start the annualNew Year diet may already befamiliar with Chef Michel Rouxs(pictured, with pigs) range of Scratchready meals which come with exactingredients pre-sliced and delivered byOcado. Although minimal assembly isrequired, time-poor cooks ought to keepan eye out for the truffle which is lurkinginside one package. However the finderwould be advised not to eat the bounty,as the truffle is worth a huge 30,000.

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IN BRIEFProduction begins at BPs Skan Oil major BP has kicked offproduction at the Skarv field in theNorwegian Sea. Skarv, which isoffshore the west coast of Norway, hasan estimated recovery of around 100mbarrels of oil and more than 1.5 trillioncubic feet of gas, according to BP. Thefield, which will ramp up output in thecoming months, is expected to reacharound 1250,000 barrels of oilequivalent a day within the first sixmonths of production.

Weir sells LGE to Babcock forn Engineer Babcock has acquired aliquid gas services company from theWeir Group for 23m, it saidyesterday. LGE Process, which designsand builds plants for the processing,storage and handling of liquid gases,will be combined with Babcocksdesign services business unit. In theyear to December LGE posted grossrevenue of 26.3m, Babcock said.The transaction was completed on 28December.

Kingfisher loses flying licencn Troubled airline Kingfisher hassuffered another blow, after the Indiangovernments aviation authoritiesrefused to renew the companys flyinglicence. Kingfisher Airlines was told topay employees their past-due salariesbefore a new permit will be granted.The carrier has not left the groundsince October, when its engineers andpilots went on strike. The debt-ladenairline, controlled by Vijay Mallya, hasalready axed its international flights.

SHARES in rig maker Lamprell jumped more than 20 per cent intrading yesterday, as the beleagueredengineering firm agreed waivers toits banking covenants. The London-listed company, which

issued five profit warnings last year, was due to have its debt facilities test-ed on 31 December.

Lamprell said yesterday that it hadfinished the year with net cash of $100m (61.3m), thanks to higher lev-els of revenue and tighter financialcontrols. Additionally, it said it ismoving forward with a wider re-financing of the business.

In November, the rig maker warnedthat its full-year losses wouldincrease significantly, raising its lossguidance to $105m from between$12 and $17m as a result of delays toprojects.

Lamprell shares lost almost two-thirds of their value last year, eventu-ally prompting the departure of itschief executive and two senior man-agers in October.

This year has been a difficult year

BY CATHY ADAMS for the company but these positivedevelopments are a clear indicationthat the business remains robust andis rapidly returning to normal opera-tions, chairman John Kennedy said

yesterday.Meanwhile, Lamprell added that it

had made progress on its Caspian Seaproject, and had launched a rig intothe water. The company previously said in November that the project

would result in a shortfall of $24.6mdue to low labour productivity andrestricted availability of equipment ata third-party facility.

Shares closed up 21.02 per cent yes-terday at 113.25p.

Neil Elliot and Chris Sim from Investec areworking with Afferro Mining.Elliot, the nominated adviser, joinedInvestec in January 2012 following thetakeover of Evolution Securities, and hasacted for a number of natural resourcescompanies including Kentz Corporation,Gulf Keystone, European Goldelds andSterling Energy. He was a key member ofthe team advising Firestone Diamonds on itstakeover of Kopane Diamonds in 2010 and

ENK on its acquisition by DMCI Holdings andD&A Income Limited in 2012. Elliot alsorecently advised on the takeover of NauticalPetroleum by Cairn Energy.Sim, acting as the corporate broker, joined

Investec in January 2012 from Evolution.While at Evolution he worked on a numberof transactions including fundraisings forCoal of Africa, Afferro Mining, UK Coal,Circle Oil and Nautical Petroleum and theIPO of Kentz Corporation. Since joiningInvestec, Sim advised on the takeover ofNautical Petroleum for 414m by CairnEnergy and the accelerated book build for65m in Kentz Corporation.RBC Capital Markets is working as Afferros joint corporate broker. Working with IMIC isBank of America Merrill Lynch and WHIreland.

ADVISERSINVESTECNEIL ELLIOT&CHRIS SIMINVESTECIMIC confirms Afferro approach

BIDDING for junior stockmarket-listed Afferro Mining hotted up

yesterday, as fellow AIM-listedInternational Mining &Infrastructure Corporation (IMIC)confirmed that it had approachedthe miner with regards to a possibletakeover offer.

IMIC has proposed an offer at between 115p and 140p for each Afferro share, which would valuethe iron ore miner at around140m.

Afferro, which owns three ironore projects in Cameroon, West

Africa, is currently in discussions

BY CATHY ADAMS with a number of other firmsregarding an offer, and is under anexclusivity agreement with one thatprevents any discussions with IMICuntil 13 January.

IMIC said yesterday that it was yetto receive a formal response from

Afferro regarding its approach, andstressed there was no certainty thatan offer would be made.

Analysts at RBC Capital Marketshighlighted that a competing bidcould emerge in the event of aformal offer from IMIC.

While no deal appears imminentat this stage, we believe thereremains upside potential for Afferroshares, as evidenced by the

potential IMIC offer price range,the analysts added in a note.

Afferro shares fell slightly on thenews, and closed down 0.74 per centat 100p yesterday.

A er ro MiningIn c

2Jan24 Dec 27 Dec 28 Dec 31 Dec

85

90

95

100

105

110 p 100.002 Jan

Lamprell P LC

2Jan24 Dec 27 Dec 28 Dec 31 Dec

90

95

100

105

110

115 p113.25

2 Jan

STEELMAKER ArcelorMittal said yesterday it would sell a 15 percent stake in a Canadian mineoperator to an Asian consortiumled by South Korean POSCO andTaiwan-listed China Steel in a deal

worth $1.1bn (674m).Through the stake in

ArcelorMittal Mines Canada, theconsortium will acquire theLabrador Trough iron ore miningand infrastructure assets.

This joint ventureincorporating a long-term off-takeagreement is consistent with our

BY CATHY ADAMSstrategy to forge strategicrelationships with key customersas we build our global mining

business, Peter Kukielski, chief executive of mining at

ArcelorMittal, said yesterday.The deal, expected to complete

in the first half of this year, is thelatest step from the company tohelp pay off debt at a time of slowing global steel demand.

Last month, the firm wrotedown the value of its European

business by $4.3bn as it battled a weak market, while in Novemberit slashed its dividend as ittumbled to a third quarter loss.

THURSDAY 3 JANUARY 201312 NEWS cityam.com

ArcelorMittal chairman and chief executive Lakshmi Mittal is Britains wealthiest man

ArcelorMittal disposes of $1.1bnstake in Canadian iron ore unit

Lamprell soarsas crucial debtwaiver agreed

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INDIAN and Chinese factoriesdialled their activity up a notch as2012 came to a close, but similarrises were not enjoyed across therest of Asia.

Indias manufacturingpurchasing managers index (PMI)climbed to 54.7 in December, from53.7 in November, Markit datarevealed yesterday. As this value isfurther above 50, it signals faster

expansion in the sector. And datareleased Monday showed factoriesin the continents biggesteconomy, China, stepped up theiractivity as well, registering a PMIof 51.5, up from 50.5 in November.

But some of the smallereconomies in the region had aharder time in the closing monthof 2012. Vietnam saw its PMI fall

back below 50, marking theeighth time the sector hasdeclined in nine months.

Indonesias expansion also slowed,and though manufacturersreported expansion in SouthKorea and Taiwan their figures

were only marginally above theall-important 50 level.

The results were worse south of Asia in Australia, wheremanufacturing activity slid for the10th consecutive month, posting afigure of 44.3 and failing to showany improvement on Novembersfigures.

Manufacturing picks up in IndiaBY BEN SOUTHWOOD

BUSINESS expects the UKs bumpy economic ride to stabilise into growthduring 2013, according to two surveysout this morning.

Company directors are far moreoptimistic than 12 months ago,according to a poll from the Instituteof Directors (IoD). The number of directors who thought 2013 would be

better than 2012 surged ahead of those with a pessimistic outlook by 31percentage points. The result reversesthe balance of minus 31 per cent inthe same poll last year.

Despite the optimism, businessleaders remain worried about thepossibility of the recession turninginto a triple-dip, with 65 per cent of respondents thinking there was amoderate or high risk of a renewedslump. And company directors confidence

in chancellor George Osborne,though still in positive territory, hasfallen from 54 per cent at the time of the April 2011 Budget to just 11 percent. Despite the drop, some 57 percent of directors said he should stick

with his deficit reduction policy. Just

BY BEN SOUTHWOOD 19 per cent thought he should easeoff, while only one per cent supportedreversing austerity.

The risk of a return to recession anda triple dip has not gone away, but it isreceding fast, and expectations of growth are rising, said chief IoD econ-omist Graeme Leach.

Separately, Lloyds TSBs business con-fidence index reported similar opti-mism. The index climbed to 19 percent looking forward into 2013, upfrom 12 per cent in 2012, indicatingthat most firms expect sales, ordersand profits to rise in the next sixmonths. London firms were the mostconfident, with a net balance of 22 percent giving positive responses, but allregions reported an overall positiveoutlook. Sectorally, even constructionfirms appeared upbeat, despite recentdifficulties, and a balance of nine percent of firms expected problems toease in the coming six months.

However, Lloyds managing directorDavid Oldfield warned that many firms were approaching hiring and

big capital projects with a cautiouseye, despite expected improvements,due to the perceived risks in the UK and world economy.

THURSDAY 3 JANUARY 201313NEWScityam.com

UK firms lookto more upbeat2013 economy

ASIAN GIANTS ENJOY UPTICK BUT MINNOWS FALT

SOURCE: MAR

CHINA51.5

INDIA54.7

JAPAN45

SOUTH KOREA50.1

INDONESIA50.7

RUSSIA50UK51.4

GERMANY46.0

VIETNAM49.3

EUROZONE46.1

ITALY46.7

GREECE41.4

FRANCE44.6

SPAIN44.6

* All gures refer to purchasing managersindex surveys for December, measuringactivity in the service sector.Numbers below 50 indicate contraction

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THURSDAY 3 JANUARY 201314 cityam.com

LONDONREPORT

ExCel LondonKevin Murphy, currently chiefexecutive of ExCel London, hasbeen appointed chairman of theevents and conferencesbusiness. David Pegler willreplace him as chief executive.In his new role, Murphy willconcentrate on developingpartnerships with governmentto gain greater recognition forLondon as a global centre for business tourism.

NumisThe stockbroker and investment bank has appointedMichael Dyson as managing director, head of fixedincome products. He was recently at Investec, where heworked in its retail bond team. Dyson has also heldsimilar roles at Evolution.

Clearwater Corporate FinanceThe mid-market advisory firm has appointed DavidBurton as a manager in its debt advisory team. He joinsfrom Clydesdale and Yorkshire Bank, where he was mostrecently a manager in its corporate banking division.Burton started at Clydesdale in 2007 as an associate inthe small to medium-sized enterprise market.

LPM OutsourcingIan Dennis has been appointed to the newly-created roleof business development director at the outsourcingservices provider. He joined the firm in 2008 fromBarclays Asset Finance, where he was a relationshipmanager. Dennis also previously spent ten years atLombard Asset Finance.

Aircraft MedicalThe medical devices company has appointed PhilippaMontgomerie as in-house legal counsel and a member of

its board. She joins from DLA Piper, where she was apartner in the law firms UK intellectual property group.Montgomerie also previously spent ten years working atLinklaters.

LV=Rachel Small has been appointed group companysecretary at the insurance, retirement and investmentsgroup. She joined LV= in 2007, and is currently groupgeneral counsel. Small was previously a partner at LesterAldridge, and has also held roles at Morgan Cole andCitibank.

Renaissance CapitalThe emerging markets investment bank has appointedAlexander Merzlenko president of Renaissance Capital inRussia. He joined the firm in 2000, and is currently headof Russian investment banking and financing, anddeputy chief executive.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

Fiscal cliff sparks a newyear rally inUS stocks kicked off the new year with their best day in over a year yesterday, sparked by relief

over a last-minute deal in Washington to avert the fiscal cliffof tax hikes and spending cuts thatthreatened to derail the economysgrowth.

In 2013s first trading session, theS&P 500 achieved its biggest one-day gain since 20 December 2011, pushingthe benchmark index to its highestclose since 14 September.

Concerns over Washingtons ability to sidestep the cliff had driven the S&P500 down for five straight sessions,

before signs that a resolution was nearsent the benchmark index higher onthe final trading session of 2012. The CBOE Volatility Index or the VIX,

a gauge of investor anxiety, dropped18.5 per cent to 14.68 at the close. The

VIX has fallen 35.4 percent over thepast two sessions. The Dow Jones industrial average

jumped 308.41 points, or 2.35 per cent,to 13,412.55 at the close. The Standard& Poors 500 Index gained 36.23 points,or 2.54 per cent, to 1,462.42. TheNasdaq Composite Index climbed92.75 points, or 3.07 per cent, to end at3,112.26.

Market breadth reflected the strongrally, with 10 stocks rising for every one that fell on the New York Stock Exchange. All 10 of the S&P 500 indus-try sector indexes gained at least 1 percent. The S&P financial index shot up2.9 per cent. The S&P Information Technology

index gained 3.2 per cent, includingHewlett-Packard , which climbed 5.4per cent to $15.02. HPs gain followed amiserable 2012 when the stock fellnearly 45 percent as one of the worstperformers on the S&P 500 for 2012.

On Tuesday, Congress passed a bill toprevent huge tax hikes and delay spending cuts that would have pushedthe worlds largest economy off a fis-cal cliff and possibly into recession. The vote avoided steep income-tax

increases for a majority of Americans, but failed to resolve a major show-down over cutting the budget deficit,

leaving investors and businesses withonly limited clarity about the outlook for the economy. Spending cuts of $109bn in military and domestic pro-grams were temporarily delayed, andanother fight over raising the U.S. debtlimit also looms.

We got through the fiscal cliff. Thenext big thing, and probably more con-tentious thing, is negotiating the debtceiling and possibly entitlementreform in early 2013, said Jim Russell,senior equity strategist for US Bank

Wealth Management in Cincinnati.Hard choices about budget cuts and

the critical need to raise the debt ceil-ing will confront Congress about thesame time in two months "so the fur

will be flying, Russell said.US stocks ended 2012 with the S&P

500 up 13.4 per cent for the year, asinvestors largely shrugged off worriesabout the fiscal cliff. For the year, the

Dow gained 7.3 per cent and theNasdaq jumped 15.9 per cent.

BRITAINS top share index racedthrough the 6,000 level for the firsttime in 17 months yesterday boosted by a last-minute budgetdeal in the United States and solid globalPMI data.

Londons blue chip index closed up129.56 points, or 2.2 per cent at 6,027.37,

bettering the average return on the firstday of trading after the new year over thelast 12 years of about 1.2 per cent, accord-ing to Thomson Reuters data. The fuel for the fire was provided in the

United States where the House of Representatives ratified a deal to stave off a series of growth-threatening tax hikesand spending cuts in the short term. Johan Jooste, chief market strategist,

Merrill Lynch Wealth Management EMEA,said in a note investors in Europe would

be satisfied with the deal for now, but asustained break above previous yearshighs required a positive outcome of thefiscal and budget negotiations that are setto continue through to March.

Miners were the biggest risers, up fiveper cent, having lagged broader marketgains in 2012, with the sector also aided

by solid global PMI data, particularly fromChina, which helped to allay fears overthe demand outlook. Anglo American , which lost more than

20 per cent in 2012, climbed 5.8 per centas some analysts tipped the firm for aturnaround in fortunes this year.

Heavyweight oils and banks rallied too,pushing the FTSE 100s performance upnearly 15 per cent since June 2012 lows. The US fiscal deal also helped to calm

investors with the VIX a crude gauge of investor fear back down aroundNovember lows after spiking to six-monthhighs before the US agreement wasannounced.

But some analysts warned the deal, which boosted markets and avertedimmediate threats to the economy, mere-ly papered over large cracks and did littleto resolve other political showdowns onthe budget in coming months.

This equity rally looks like a perfect

profit-taking opportunity to our minds,said Jeremy Batstone-Carr, head of private

client research at Charles Stanley.He said the agreement did not address

the US fiscal crisis and noted the debt ceil-ing has been reached with neither party in the US minded to give any furtherground.

Credit rating agencies are waiting inthe wings with a US downgrade on theirminds and the fourth quarter reportingseason will likely be dreadful. Take profitsnow ... beat the rush, Batstone-Carr said. A solid first day of the year does not

guarantee a strong January. Although theFTSE 100 has averaged a 0.4 per cent risein the first month of the year since 1984,since 2007 five out of six Januarys haveresulted in losses the exception being2012 when it rose two per cent.

IG Index said its data showed 68 per centof their clients who have an position openon the FTSE were currently short bet-ting the index was ripe for a pullback. Technical analysts said traders should

be aware of the support levels which willneed to be respected if the bulls are goingto remain in control.

The FTSE 100 will need to maintain the6,000 key level to then reach for 6,150

where we may then see a significant barri-er that could push the index back lower,Sandy Jadeja, chief technical analyst atCity Index said in a note. There were only three fallers on the

FTSE 100, among them supermarkets WM Morrison and Sainsbury which lost2.1 and 2.6 per cent respectively on con-cerns about festive trading and the sec-tors defensive make-up. November andDecember saw poor sales growth. Kantar

yesterday suggested festive trading wasdifficult.

BESTof theBROKERSDomino's Pizza Group PLC

24 Dec 27 Dec 28 Dec 31 Dec 2 Jan

p530520

510

500

490

525.102 Jan

DOMINOS PIZZANumis upgraded the takeaway pizza business to buy from add andkeeps its target of 625p, believing the company is likely to generatestrong growth in 2013. Numis expects to see new developments, such asa gluten free menu and higher ecommerce advertising, greaterexpansion with new stores in the UK a nd the rest of Europe and highermargins.

FTSE

2 Jan27 Dec 28 Dec 31 Dec

6,0506,0256,0005,975

5,9255,9005,875

5,950

6,027.372 Jan

DASHBOARDCITYCITY MOVES

To appear inCITYMOVESplease email your career updates and pictures to citymoves@cityam.com

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Serco Group PLC

24 Dec 27 Dec 28 Dec 31 Dec 2 Jan

p550548546544542540538536

541.502 Jan

SERCOLiberum Capital lowered the price target on the outsourcing companyby 50p to 600p, but reiterated its buy recommendation, labelling it

an expensive defensive with potential opportunities. The prisonmarket in particular has given Liberums analysts cause for optimism.However, a gloomy picture in the US has prompted Liberum to trim itsforecasts for 2012 and 2013 by two and five per cent respectively.

ASOS PLC

24 Dec 27 Dec 28 Dec 31 Dec 2 Jan

p2,8002,7502,7002,6502,6002,550

2,744.002 Jan

ASOSPanmure Gordon raised its price target for the online retailer by 175p to3,050p and reiterates a buy recommendation, in spite of downbeatconsumer confidence and a lacklustre Christmas performance in theretail sector. While Asos is expected to outperform the market again this

year, Panmure looks to todays trading update from Next for signs ofhow the rest of the high street has fared over the festive period.

FTSE hits highest level in 17 monthsas smashes through 6,000 barrier

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LONDON is emerging fromrecession as a beacon of hopefor future British growth. It hasthe right mix of talents intechnology, creative industries,

and finance to establish a new benchmark for the few world citiesthat will dominate the next half-century. But it can also learn frompast achievements to build on thispromise.

This month marks 150 years sincethe first Underground line was builtfrom Paddington to the City, beneath

what is now Euston Road. Back then, who could have foreseen how underground railways would makesuch a difference to congested cities?From Mexico City and Madrid to

Delhi and Moscow, this solution has

W HILE revellers in New York greeted 2013 withrenditions of Auld LangSyne, Washingtonreflected on a year of

fierce partisanship and brutalcampaigning. But as the country

welcomed in the New Year, so toocame hopes of a new era of bipartisanco-operation, after a cross-party agreement passed the House of Representatives and the Senate to stop$600bn (369bn) in automatic taxincreases and spending cuts the so-called fiscal cliff. To others, however,rather than a new era, it felt like

business as usual. Those looking to find a grand bar-

gain on revenues and entitlementspending, or at least a down-paymenton resolving Americas impending

budget crisis, were left disappointed.Prolonged negotiations betweenPresident Barack Obama and speakerof the House John Boehner failed, high-lighting the limited negotiation skillsof the former and the ability of the lat-ter to carry the Republican caucus. The deal was left to vice president Joe

cityam.com/foru

For every $41 in tax

rises, the agreementonly offers $1 in cuts togovernment spending

THEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com Agree? Disagree? Got a sharp comment?The Forum wants you to join the debate. Top responses will be reprinted in The F

16 THURSDAY 3 JANUARY 2013

EWAN WATT

Fiscal cliff deal is no grand bto save the US from growing

Biden and Senate minority leaderMitch McConnell. Both parties canhave their gripes about the agreement,

but the Republicans will definitely have a prolonged New Year hangover.For a country saddled with $16 tril-lion in debt, and approximately $60trillion in unfunded liabilities, theagreements $41 in tax increases forevery $1 in spending cuts raises morequestions than it provides answers. Aspart of the package, the so-calledBush tax cuts stay largely intact. Butrates for families and individuals earn-ing over $450,000 and $400,000 respec-tively will increase to Clinton-era levelsof 39.6 per cent. In addition, taxes oncapital gains and dividends for theseindividuals increases to 20 per cent aperplexing move given the need for

more investment in a country facinganaemic growth. But rather than put-ting the budget on a positive trajecto-ry, the deal will increase US debt by afurther $4 trillion, and will only raisean additional $600bn in revenues overa decade. Such are the limitations of tax increases. The White House has taken a victory

lap, boasting that it has broken twodecades of Republican intransigenceon raising taxes. This has some truth toit. And yet amid all the gloom, there isa brightside for Republicans. As high-lighted by anti-tax crusader GroverNorquist, in making 84 per cent of theBush tax cuts permanent, Obama may have removed the issue from the agen-da for the remainder of his term. Thiscould potentially shift the debatetowards the main driver of the coun-trys budgetary woes spending.

Whats more, despite being fresh fromhis re-election victory, the realities of divided government overwhelmed thePresidents mandate, preventing himfrom realising a desired tax hike onindividuals and families earning$200,000 and $250,000 respectively.

But for those Republicans who votedto oppose the measures, there is asense that, rather than bipartisanship,the agreement represents an ugly con-sensus between Republicans andDemocrats to sweep the countrysproblems under the rug. With spend-ing cuts delayed a further two months,this saga looks set to commence again.

The White House and Congress willnext debate steps to raise the countrysdebt ceiling, a move Republicans havestated must be joined by real reformsto programmes like Social Security,Medicare and Medicaid. Havingalready cajoled Republicans intoincreasing taxes, Democrats haveshown little intent to touch these

sacred cows. Few believe this to be arealistic option. Even the WashingtonPost, hardly a bastion of conservatism,recently chastised Democrats for fail-ing to meet an entitlementreform they like. Compared to thecoming fight over the debt ceiling andentitlements, the fiscal cliff saga may look rather tame.

Having seen a majority of hisRepublican colleagues rebel againstthe deal, rumours have circulated thatBoehner may now be the subject of acoup. If he went, the White House

would be losing a pragmatist it coulddo business with. Given Obamas ques-tionable handling of the talks, itsunclear whether doing business hasever been a priority of this administra-tion. However, with a new term on thehorizon, the President still has time to

work with Republicans in a new Congress and strike a grand bargain. It

just depends whether he wants to beremembered as a reformer willing toaddress the countrys fiscal peril. Ewan Watt is a Washington, D.C.-based

consultant. You can follow him on Twitter @ewancwatt

now become the answer to otherwiseinevitable gridlock.

Crossrail is the currentreinvention of that concept large,comfortable, air-conditioned trains

will run every two minutes throughthe heart of London, linking the City and Canary Wharf to Heathrow andthe outer boroughs. Now fully-funded and spending 100m a

month on jobs and infrastructure, it

is the future for cities like ours.But London can do more. It can

redouble its advantage by clusteringdense development around new transport hubs. Towers andskyscrapers are the ideal solution,situated both over, and next to,stations. Given that railway terminiare not usually attractiveenvironments, London should look to put bulky buildings there, whileallowing nearby historic areas toprovide character and charm. Bothcan happily co-exist. And as we comeout of recession, the downturn insome parts of the property market

will soon end, current space will fillup, and new space will continue to

be needed.

That is what has driven the last

two decades of planning in the City. There are numerous Undergroundand mainline stations servingLondon, and 95 per cent of City

workers come in each day by publictransport. Given the way thatcommuters travel and work, it is

both possible and sensible to havestriking tall buildings that enhancethe skyline, while still keeping thecharm of medieval streets, openspaces, livery halls and everythingelse that makes the Square Mileunique. And why be so defensiveabout the impact that tall buildingscan have on our horizon designed

by some of the best architects in the world and configured to suit theneeds of the occupier? They bring

style, variety and excitement to our

surroundings.Back in the late 1980s, if we had

not made the decisive shift to favourtall buildings, which of thenumerous global businesses thathave chosen to locate here wouldhave made that same choice? The tall

building solution is utterly sustainable for the future, because it

works for Londoners and their daily lives; great for the national economy,

because of the huge revenue that itdelivers; and an object lesson forother aspiring cities around the

world. This is our competitiveadvantage. Prime Minister, take note.

Michael Cassidy is chairman of the Cityof London Corporations Property Investment Board and asenior non-

executive director of Crossrail.

MICHAEL CASSIDY

Londons burgeoning skyline will complement expa

MORNING UPD A .M.

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17THURSDAY 3 JANUARY 2013

The Forum is open for you to take part. Got a sharp comment onone of todays columns? Do you have another subject you wantto share your opinion on? We want to hear your views.Email theforum@cityam.com or comment at cityam.com/forum

Groundhog year[Re: 2013 will prove the power of global events to shape our economic lives ,yesterday]Mark Malloch Browns concerns about theAsia Pacific in 2013 are essential reading. Ashe correctly points out, problems in theEurozone and the continuation of politicalimpasse in the US have been priced into themarkets. But many still assume Asia willretain its position as the strongest engine offuture world growth. Unfortunately,geopolitical tension (notably between Chinaand Japan, but also in Pakistan, Iran andNorth Korea), and brewing discontent inAsias authoritarian regimes, could combineto make the region a nightmare for investorsin the year ahead. Andrew Markson

2013 will not be a groundhog year for the UKeconomy. Manufacturing data has begun topick up, and some retailers like John Lewisreported better than expected Christmassales. Headwinds that shook the globaleconomy in 2012 have begun to calm, andwe have much more certainty than we hadthis time last year. Alfred D. Woolf

Optimism about the UK economy ismisguided. The Eurozone looks certain tofall deeper into recession, which will hit theUK. Inflation will creep higher, and it is likelythat the economy contracted in the fourthquarter. There are few reasons to beoptimistic. Jim Ward

MILLIONS of words have

been written over the lastfew days about the USfiscal cliff. But few haveregarded this long, slow

and frankly tedious politicalprocess as in any way positive.

I disagree. The drawn-out debatethat preceded this weeks agree-ment is likely to be the best way for

America to resolve its problematicfiscal situation. Why? Because grad-ual but real progress may be betterfor the underlying economy. Andunplanned crash diets rarely proveto be the best way of losing weight even at the start of a new year. Thechances of long-term success areminimal if the target isnt agreed inadvance.

Like dieting, successfully balanc-ing a budget requires a commit-ment to distant goals and staying

within predefined limits over anextended period of time. Its aboutmaking fundamental choices pri-oritising limited resources and trim-ming away any excess. And in a democracy, this process

requires a debate. This is what has been happening vigorously in theUS over, for example, tax rises forthe wealthy or cuts to Medicaid enti-tlement spending. In fact, ratherthan criticising the Washington sys-tem for its inability to reach animmediate decision, Europe shouldperhaps be emulating the opennessof Americas fiscal discussion.

Many European countries main-tain similarly unaffordable long-term levels of spending on publicservices, and are failing to remainglobally competitive. The dif ferenceis that a great number of Europeanpoliticians are scared of honestly informing their voters of the under-lying situation. And these same Europeans are

also failing to properly debate the

TOP TWEETSEverything about the fiscal cliff deal was afailure: what Congress did, how Congressdid it, and what Congress failed to do.@SenMikeLee

The fiscal cliff has been averted, but the nextbig story of 2013 is the debt ceiling limit.Well be hearing a lot about that soon.@DaDavis7

The UK has taken over the presidency of theG8. The global economy and employmentare key focuses. The start of progress?@SRHills

The new rise in rail fares means my rent inLondon is now 100 cheaper per month thancommuting in.@AdetheBake

Is Sir Martin Sorrell right that corporation taxpayments are a question of judgement?

YESAs the public becomes increasingly aware of how much taxcompanies are paying, chief executives should be asking: Whatimpact will our tax affairs have on our brand? Sir Martin Sorrellis right to acknowledge that Starbuckss decision to pay 20mextra in corporation tax was motivated by the idea that doinggood is good business. But this highlights a broader issue: theUK has a tax gap of over 32bn a year the equivalent of sevengovernment departments annual budgets. Taxation must besimplified in response to increasing international and onlinebusiness, and HMRC must be properly resourced to tackleavoidance. Britain must be fair to all businesses, including smallfirms. The current position distorts competition and ultimatelyleaves individual taxpayers to make up the shortfall.Steve Barclay is a Conservative MP for North East Cambridgeshire and a member of the Public Accounts Committee.

Steve Barclay

NORichard Murphy

I disagree with Sir Martin Sorrells claim, which is based on theperception that capital can locate where it wishes and can moveat will. Three things perpetuate this myth. The first is that taxhavens (and low-tax jurisdictions), whose opacity allows muchof the supposed mobility of capital, obscure the reality that oftennothing moves bar the ink on a contract. The second is a financialsector that promotes and services this myth. The third is that taxauthorities are unwilling as the Public Accounts Committee hassuggested to tackle tax avoidance. Multinational companiescannot make money without engaging customers, staff, and byemploying assets. Paying tax in the right place at the right timeis not a moral obligation. The right place is where the customers,staff and assets are. The right time is when the law of the landdictates. It is not a matter of judgment; it is a legal obligation.Richard Murphy is director of Tax Research UK.

RAPIDresp onses Fiscal honesty hemerged from thUS deficit deba

menu of options that could providea sustainable solution. They may cut spending or raise taxes. But pro-

jections for the future are oftenignored. David Cameron has chosento prioritise the NHS, but will we be

willing to pay more taxes to fundthe cost?

Crucially, markets are largely unbothered by lengthy debate onthese sticky political issues.Investors and traders seem to be

willing to wait if they see progress,even if it is slow.

Central banks are currently keep-ing many economies afloat throughlow interest rates, quantitative eas-ing and other stimulus measures.

To put it bluntly, monetary stimu-lus is reducing the impact on f inan-cial markets of politicalincompetence. By effectively reduc-ing the interest rates on US

Treasuries, the Federal Reserve isensuring that markets do not cur-rently reflect the real risk to the

American economy of Congress andits decisions whether good, bad orotherwise.

Its also a question of scale. Giventhe sheer size of Americas debtmountain, the whole country needsto be behind the solution, which

will inevitably prove painful.Otherwise the US will just driftfrom crisis to crisis. If a vigorouspolitical debate ensures the eventu-al solution is more robust, then weshould embrace that discussion. Louise Cooper is a financial analyst and

founder of Cooper City.

LOUISE COOPER

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THURSDAY 3 JANUARY 2013 cityam.com18

LIFE& STYLEBY STEVE DINNEENTECHNOLOGY

A LONG WITH the smart phonerevolution came the birth of the app. Nowadays we use themfor everything from gaming

and banking to music and editing

photos but now, especially with theNew Year in full swing, its all aboutfitness apps and UK model DavidGandy is getting in on the action.

Following the success of his first appdedicated to mens style, the 30 year-old has designed and developed a new one dedicated to helping users achievetheir fitness goals, and the timingcouldnt be better.

Last year a report issued by the American Heart Association foundthat people find it easier to commit tofitness goals when they use electronicdevices and even if you dont end up

with a body like Gandys, the app willcertainly equip with you all of the tools

youll need to get in shape this year.City A.M.caught up with him recently

to find out what inspired him to createthe new app and how he keeps fit.

Why have you decided to launch afitness app?Demand really. I constantly get askedquestions about staying in shape andmy physique. Questions vary fromhow much I train and what exercisesI do, to how many days a week I work out. Ive even had personal trainersin gyms ask to train with me so Idecided to share everything Ivelearnt from the last 10 years of training so that people who want toget into shape, no matter what levelof fitness theyre at, can get advicethat is tailored for them andgenuinely works.

How difficult are the exercises and what level do you need to be to getstarted?

There are 3 body indexes to choosefrom: Lean, developed by personaltrainer to the stars Natalie Bomgrenfrom Bodyism, which is basedaround cardio type exercises; Cut,

which includes super sets; and Bulk, which covers free weight exercises. With difficulty, it really depends onthe body type you want to aim for.

The app is developed to allow you tochoose.

Can your app help guys achieve your physique?Change is in the hands of theindividual, as it takes commitment,

but I know first hand that theprogrammes developed for the app

work, as I use them myself. Foranyone training with the app two tofour times a week and maintaining agood diet, I would expect them to seea large improvement within amonth, which is a great motivator.Ive been training for many years.Looking after my body is part of my

job and I work at it in the same way that people do in any profession. Ivedone it using these techniques andexercises so if someone has a