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U.K. Unemployment Claims Decline the Most Since 2007 as Economy Recovers

January 20, 2010

By Svenja O’Donnell Jan. 20 (Bloomberg) — U.K. unemployment fell at the fastest pace since April 2007 as the economy showed signs of emerging from its worst recession on record. Claims for jobless benefits declined 15,200 to 1.61 million, the Office for National Statistics said in London today. The median forecast in a Bloomberg News survey of 25 economists was for a drop of 4,600. The number of people seeking work in the three months through November fell for the first time since March-May 2008. The figures will help Prime Minister Gordon Brown, who is trailing in opinion polls with a general election due by June. While employment levels are stabilizing, companies may be reluctant to resume hiring as the economy struggles to shake off the slump. “At face value it’s good news for Brown,” Alan Clarke, an economist at BNP Paribas in London, said in an interview before the report. “The improving trend in unemployment will continue. The economy’s expanding and we will have one or two good quarters. But I think it will top out towards end of the year.” Based on International Labour Organization methods, unemployment fell 7,000 in the three months through November to 2.46 million. The number of people in work declined 14,000 to 28.9 million. In November, the number of jobless claims fell by 10,800 instead of the 6,300 originally reported. In December, the claimant rate was unchanged at 5 percent. Unemployment has risen by less than officials initially predicted as companies froze pay and cut working hours to retain labor needed once the economy returns to growth. Jobless Rate At 7.8 percent, the U.K. jobless rate is below the 10 percent figure in the U.S. and the euro region. Many economists expect it to peak below 10 percent, compared with the postwar high of 11.9 percent recorded in 1984. Ford Motor Co. said this week it will build a derivative of its iconic Transit van in the U.K. when a new model is introduced, maintaining production at a factory whose future was in doubt following a 50 percent cut in the workforce. While the economy probably escaped the recession in the fourth quarter, the pace of recovery is likely to be muted and companies will increase working hours before they start hiring, economists say. Bank of England Governor Mervyn King said yesterday that unemployment is likely to remain high. In a speech, he said the U.K. faces “a long period of healing” as “at this very early stage of the recovery, it is particularly difficult to judge the medium-term prospects for the economy.” Job losses have borne down on pay pressures in the economy. New figures published by the statistics office today show average weekly pay grew 0.7 percent in the three months through November. Regular pay increased 1.1 percent and bonuses fell 9 percent, with bonuses in the finance and business services sector dropping 10.8 percent. Average earnings expanded 1.6 percent in the period through November, with earnings excluding bonuses growing at the same pace. To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net .

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Traders May Face Skittish U.K. Markets on Possible Delay in Election Count

January 20, 2010

By Robert Hutton and Kitty Donaldson Jan. 20 (Bloomberg) — Adam McCormack worked through election night in 1992, selling U.K. government bonds as markets rallied on an unexpected win by the Conservatives. For the 49-year-old head of gilt sales at Barclays Capital in London, trading after this year’s election may be little more than guesswork. That’s because the results, typically available by about 3 a.m., may not land until the next afternoon, sending prices swinging on partial tallies as traders bet on the outcome of what may be the closest election in 18 years. More than a third of U.K. election districts may drop the practice of counting ballots through the night. With opinion polls pointing to the prospect of no one gaining a majority — resulting in a so-called hung parliament — the delayed count includes nine seats that David Cameron’s Conservatives need to oust Gordon Brown’s Labour Party. “The market might be tense and skittish,” said McCormack. “You can’t price this in. The difference between the market’s perception of a Conservative victory and a hung parliament could be large.” The outcome may determine how quickly the government cuts its record peacetime budget deficit . The failure of either side to win a majority may lead to a paralyzed government unable to cut spending or raise taxes, risking “a run on sterling,” John White , who runs U.K. equity funds for London-based GLG Partners LP, told reporters yesterday. The 2010 election date hasn’t been set yet by Brown, who must go to the polls by June 3. Every vote since 1931 has been held on a Thursday. Because local balloting is scheduled for May 6, most analysts and Labour briefing documents point to that as the likely voting day. Districts Delaying The need for local governments to save money and new rules were among the reasons prompting 52 districts to delay counting votes until the day after the election, according to an Electoral Commission paper published Jan. 7. Seventeen say they’ll delay if the election is set for May 6. Another 187 say they’re still considering their options. Among those that won’t count on the night are two seats in Milton Keynes , a city northwest of London, and two in nearby Northampton. The Conservatives need to win all four to control Parliament. Birmingham , central England, has said that if Brown goes for May 6, it won’t count any of its nine seats until the next day. It has three Conservative targets. The Milton Keynes Council blamed regulations requiring identity checks on postal ballots for the delay. “It will take several hours after the polls close to complete all of the checks on the postal votes before we can start counting,” according to a council statement. ‘No Good Reason’ Labour is pushing voting districts not to delay the count, said Justice Secretary Jack Straw . “We believe that there is no good reason in the vast majority of cases why counting cannot take place on election night as it has in the past,” he said. When polls close at 10 p.m., BBC and ITN television news will publish exit polls. In 1992, these polls told Conservative Prime Minister John Major mistakenly that he’d lost. Robert Waller , the co-author of “The Almanac of British Politics” who worked on that poll, said the error was partly due to the exclusion of last-minute voters who favored the Conservatives. “Since then, the exit polls have been very close indeed,” he said in an interview. “I think they will be again. But don’t forget that even being a fraction of a percent out will make 10- 20 seats difference on the majority, or lack of one. If an exit poll is more accurate than that, it’s pure luck.” Polls suggest that any Conservative majority may fall within that margin of error. Rob Hayward , a former Conservative lawmaker who now advises the party on technical aspects of elections, predicts a Conservative majority of about 30 seats. ‘Morning After’ “There are enough marginal seats that are counting the next day that no one will know the result the morning after,” he said. “It’s unlikely Cameron will cross the line until at least midday and possibly 2 p.m. on the Friday.” Ruth Fox, director of the parliament and government program at the Hansard Society , a political-education charity, said it could take even longer. “It’s conceivable that we may not get the result until Saturday,” she said in an interview. “If it is that close, the market just won’t know.” Major’s surprise victory over Labour in 1992 pushed long- dated gilt futures up 3 percent between the close on polling day and the markets’ open the next day. Trading volume the day after the election exceeded the four preceding days combined total. Stocks’ Gains Then, the result was clear by 3:30 a.m. and the benchmark FTSE-100 stock index opened up 5 percent. Stephen Lewis , 61, who has 40 years of experience in the financial industry, said the election of 1974 may offer a precedent for 2010: no one emerged with a majority, resulting in four days of negotiations over who would form the government. In the end Labour, who took more seats, formed a government instead of the Conservatives, who won more votes. “There was real uncertainty,” said Lewis, now chief economist at London-based Monument Securities. “One could imagine that today’s market will be flying around a lot on the uncertainty,” said Lewis. “But very small amounts are going to be moving around in the morning awaiting the result. If the result is unclear, the real-money investors will be holding back waiting for information, leaving the market to the traders.” To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net ; Kitty Donaldson in London at kdonaldson1@bloomberg.net

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Cameron Favors Barclays’s Varley as Bank of England Chief, Times Reports

January 16, 2010

By Abigail Moses Jan. 16 (Bloomberg) — Barclays Plc Chief Executive Officer John Varley may be named Governor of the Bank of England if David Cameron ’s Conservative party wins the election, the Times reported, without saying where it got the information. Stephen Green , executive chairman of HSBC Holdings Plc , is also being considered, the newspaper said. Barclays and HSBC declined to comment, the Times said. To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net

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Morphine for Combat Injured Halved Rate of Post-Traumatic Stress Disorder

January 13, 2010

By Alexandra Thomas Jan. 13 (Bloomberg) — Giving morphine to troops injured in fighting in Iraq lowered their risk of post-traumatic stress disorder by half, a study found. The study, published today in the New England Journal of Medicine , identified 696 U.S. Navy and Marine Corps personnel who suffered a major combat injury from 2004 to 2006. Seventy- six percent of those who didn’t develop the disorder had received morphine, compared with about 60 percent of those who hadn’t, the researchers found. As many as one in five veterans of the Iraq war have experienced post-traumatic stress disorder, or PTSD, after a serious injury during combat, according to the U.S. Veterans Affairs Department . A reliable way to prevent PTSD would significantly change military emergency medicine, said the researchers from the Naval Health Research Center in San Diego. “Such findings suggest a potential for prophylactic use of rapid pain reduction among injured, traumatic persons in both military and civilian acute care settings,” wrote Matthew Friedman from Dartmouth Medical School in Hanover, New Hampshire, in an editorial accompanying the study. Friedman likened the morphine treatment to “a morning-after pill.” PTSD is an anxiety disorder that some people get after living through a dangerous or painful event, according to the National Institutes of Health, a U.S. agency. Gunshots, Grenades The military personnel in the study included those injured by improvised explosive devices, gunshots, mortars and grenades. The results showed 147 of the 243 with PTSD had received morphine compared with 346 of 453 without PTSD who had gotten morphine. The stress disorder develops after the brain encodes memories during a traumatic event, researchers said in the study. The results suggested morphine and related opiates, may reduce or prevent the disorder by blocking this process when given soon, usually within one hour, after injury. If people who suffer only minor injuries don’t need morphine for physical pain, the drug could protect them from later developing PTSD, according to the editorial. Even if it’s unlikely morphine will be given to everyone undergoing a trauma, drugs like propranolol and clonidine may have the same effect. To contact the reporter on this story: Alexandra Thomas in Washington at athomas48@bloomberg.net .

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Stocks in U.S., Europe Advance as Bonds, Crude Oil Retreat; Pound Climbs

January 13, 2010

By Gavin Serkin Jan. 13 (Bloomberg) — Emerging-market stocks and oil slid, while the pound rose, as central banks prepared to scale back emergency economic support. U.S. equities advanced as Kraft Foods Inc. said profit topped its forecast and analyst upgrades lifted consumer and drug companies. The MSCI Emerging Markets Index slipped more than 1 percent at 11:28 a.m. in New York, its biggest drop since Dec. 17, and the Shanghai Composite Index lost 3.1 percent, the most in seven weeks. The Standard & Poor’s 500 Index added 0.2 percent, while Google Inc. lost 1.3 percent after saying it may exit China. Oil dropped below $79 a barrel, and corn plunged to a more than two- month low. The pound strengthened against all 16 major counterparts and government bonds slid, with the 10-year Treasury note yield rising 3 basis points to 3.74 percent. Federal Reserve Bank of Philadelphia President Charles Plosser said U.S. rates should rise as the economy recovers. The Bank of England’s Andrew Sentance was cited by the Guardian as saying policy makers may have to increase U.K. borrowing costs this year. China yesterday raised the proportion of deposits banks must set aside as reserves, a move that may herald an interest-rate increase. “China tightened policy sooner than people were thinking, so that spooked the market,” said Nicholas Field , who helps manage about $11 billion in emerging-market stocks at Schroders Plc in London. “We have now passed that sweet spot where economies are starting to recover and there is a great earnings boost from the low point. This is not a collapse or a crash, but we will get a correction.” China, Dubai Banks in China will need to increase deposits set aside as reserves starting Jan. 18, sooner than the April timing predicted by economists in a Bloomberg survey last week. Industrial Bank Co. slumped 6.5 percent in Shanghai. Hong Kong’s Hang Seng Index dropped 2.6 percent, the most since Nov. 27. The S&P 500, the benchmark gauge for U.S. equities, rebounded after dropping yesterday for the first time this year. Kraft added as much as 2.8 percent, while Merck & Co. and Wyndham Worldwide Corp. added at least 3.6 percent as analysts advised buying the shares. Google, the owner of the most popular Internet search engine, fell 1.5 percent after saying it may shut its Chinese Web site and offices after a “highly sophisticated” cyber attack aimed at the e-mail accounts of human-rights activists. Crude oil futures fell after a government report showed a bigger-than-forecast increase in inventories. Crude dropped as low as $78.37 a barrel in New York. Corn for March delivery dropped as much as 6.2 percent to $3.68 a bushel in Chicago trading, the lowest on an intraday basis since October, after the U.S. raised its production estimate to a record. Wheat declined 1.5 percent. Dubai Slumps Dubai led stock declines in the Gulf with the Dubai Financial Market General Index dropping 2.7 percent to a four- week low and Abu Dhabi’s index retreating 1.6 percent. The MSCI World Index of 23 developed nations’ stocks lost 0.3 percent as shares in Asia fell the most in almost seven weeks. Japan Airlines Corp. tumbled 81 percent to a record low on concern it will file for bankruptcy. Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses. Infineon Technologies AG rose more than 3.4 percent in Frankfurt after Goldman Sachs Group Inc. recommended Europe’s second-largest maker of semiconductors. Societe Generale SA, France’s second-biggest bank by market value, led banks lower, plunging more than 3.4 percent in Paris after saying it had 1.4 billion euros ($2.03 billion) of writedowns and provisions on risky assets in the fourth quarter. Pound Rallies The pound advanced 0.7 percent against the dollar and 0.7 percent compared with the euro after the Guardian cited Sentance as saying policy makers have done enough to stimulate the economy. Gilts dropped, with the yield on the two-year note rising four basis points to 1.23 percent. Treasuries fell for the first time this week before the government auctions $21 billion of 10-year securities today, part of $84 billion of notes and bonds being sold this week. The ten-year note yields rose three basis points to 3.74 percent. Governments around the world are selling unprecedented amounts of debt to help finance stimulus measures designed to revive their economies. Germany’s gross domestic product fell 5 percent in 2009, after expanding 1.3 percent in 2008, the Federal Statistics Office said in Frankfurt today. Germany, Italy and Portugal sold a combined 16.3 billion euros ($24 billion) of debt today. To contact the reporter on this story: Gavin Serkin at gserkin@bloomberg.net

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Treasury Investors Most Bearish in Two Years as Deficits Rise to Records

January 13, 2010

By Daniel Kruger Jan. 13 (Bloomberg) — Investors are the most bearish on Treasuries in more than two years as the reliance on government debt to revive economic growth weighs on sovereign issues, a survey of Bloomberg users showed. Yields on the benchmark U.S. 10-year note will rise over the next six months, according to the Bloomberg Professional Global Confidence Index. The 5,437 respondents from New York to Tokyo to Paris were optimistic on the outlook for the global economy for a sixth consecutive month, pushing the index, which began in November 2007, to a record high. Treasury yields will rise for a second consecutive year as U.S. debt sales climb above $2 trillion and the Federal Reserve unwinds stimulus programs, according to the 18 primary dealers that trade with the central bank. The survey shows sentiment is also the most pessimistic on record for the U.K., Spain and Switzerland, where governments also enacted measures to support their economies. “The market will have to absorb a significantly greater amount of supply as the Fed steps away,” said Michael Pond , a survey participant and an interest-rate strategist in New York at Barclays Plc, one of the primary dealers required to bid on Treasury auctions. “We do expect yields to go higher. Bearishness across all sovereign issuers may be warranted.” Bond Index Expectations for an increase in 10-year Treasury note yields rose to 76.65 in January, the highest since Bloomberg began compiling the data in November 2007. The reading was 70.45 in December, and 55.93 a year ago. The measure is a diffusion index, meaning a reading above 50 indicates Bloomberg users expect bonds to decline. Outstanding public Treasury debt has soared 60 percent to a record $7.27 trillion since the end of 2007 as the U.S. funded two fiscal stimulus programs totaling $955 billion and the $700 billion Troubled Asset Relief Program that bailed out banks. The deficit may be 9.2 percent of gross domestic product this year, according to a survey of economists by Bloomberg. While that is down from 10 percent last year, it’s up from 4.7 percent in 2008. The Fed is near the end of its $1.75 billion commitment to support debt markets. The central bank said in November 2008 that it would buy $300 billion of Treasuries and $600 billion of mortgage securities, which it later expanded to $1.45 billion. It stopped buying Treasuries in October and has acquired $1.12 trillion of mortgages. Yield Forecast Yields on 10-year notes will end 2010 at 4.14 percent, the highest level since June 2008, according to a separate Bloomberg News survey. The yield on the benchmark 3.375 percent security due in November 2019 rose 3 basis points to 3.74 percent at 6:37 p.m. in New York, according to BGCantor Market data, after increasing from 2.21 percent at the end of 2008. The Bloomberg Professional Global Confidence Index rose to 66.6 this month from 58.9 in December. While the outlook for bonds dimmed, sentiment toward the dollar increased for a fourth month, climbing to 53.11 from 51.99 in December. The index is the highest since March. A reading above 50 indicates Bloomberg users expect the dollar to strengthen. The index covering the yen tumbled to a record low of 35.54 from 50.60. The replacement of Japan’s finance minister four months into the government’s term increases concern about the commitment to rein in budget deficits, Moody’s Investors Service said yesterday. Sovereign Sentiment Brazilian, French, German, Japanese, Mexican, Spanish, Swiss and U.K. bond yields will all rise, the Bloomberg user survey showed. A Bank of America Merrill Lynch index measuring returns on government debt shows that the securities lost 1.1 percent in December, the biggest decline since losing 1.53 percent in January 2009. Speculation about eroding credit quality for European sovereign issuers has pushed yields higher in Greece, Spain and Ireland. The European Commission said yesterday that “severe irregularities” in Greece’s statistical data leave the accuracy of the European Union’s largest deficit in doubt. Pessimism was the highest for U.K. debt, with the index rising to record 78.17 in January from 72.47 last month. The Bank of England last week pledged to complete its bond- purchase program as policy makers gauged the strength of the economic recovery. Improving Economy Treasuries fell 3.7 percent in 2009 in their worst performance since at least 1978 when Bank of America Corp.’s Merrill Lynch indexes began tracking the debt, compared with a 20 percent gain for corporate bonds, the best since 1995. A year earlier Treasuries rallied 14 percent as investors sought a refuge in government debt as credit markets froze and the recession deepened. John Lipsky , the first deputy managing director at the International Monetary Fund, said in a Bloomberg Radio interview on Jan. 6 that the agency may raise its 3.1 percent forecast for global growth. “You’re not seeing the flight to quality that you did before,” said Sean Simko , a survey participant who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania. The improving economy will continue to support demand for higher risk assets at the expense of Treasuries, he said. To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net

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Soccer Stars in Africa Cup Spur European Clubs to Urge Changing Start Date

January 13, 2010

By Tariq Panja Jan. 13 (Bloomberg) — European soccer clubs and fans say they have nothing against the Africa Cup of Nations, except the timing. Around the corner from Chelsea’s Stamford Bridge stadium, off-duty London firefighter David Barnard already misses Didier Drogba , his team’s top scorer. Drogba is among the 210 players on European soccer squads who’ve left for as long as a month to join their national teams for the event, the only major international soccer tournament held during the European season. “Drogba’s been class, absolute class,” said Barnard, 52, drinking with fellow fans at Conservative Club, a pub populated by Blues supporters. “He’ll be a huge loss.” It’s not just the fans that are missing the players. English League leader Chelsea and European champion Barcelona — through the European Club Association — are among the teams petitioning FIFA, the sport’s ruling body, to force the Confederation of African Football to move the tournament to the offseason. Fifty-seven percent of the 368 players in the event play for European clubs. Moving to the summer would put the competition in line with the World Cup, European Championships and South America’s Copa America, which are all held in the summer. Oldest Continental Championship The Africa Cup of Nations, the world’s oldest continental championship, is held every two years. It’s played now because African summers are so severe: Central and western parts of the continent get heavy rains while northern countries have temperatures that exceed 100 degrees Fahrenheit (38 Celsius), said Ian Hawkey, author of “Feet of the Chameleon: The History of African Football.” The event started Jan. 11, when host Angola surrendered a four-goal lead with 11 minutes left to wind up in a 4-4 draw with Mali. Players such as the 31-year-old Drogba, who is tied for the Premier League lead with 14 goals this season, and 24-year-old Salomon Kalou , left Chelsea to play for the Ivory Coast. Ghana’s Michael Essien and Nigeria’s John Mikel Obi also left the Blues. Champions League winner Barcelona lost midfielders Yaya Toure and Seydou Keita to the Ivory Coast and Mali. Inter Milan’s top scorer Samuel Eto’o is with Cameroon. In Chelsea’s case, it is inopportune timing. The Blues lead defending champion Manchester United by a point and hold a three-point advantage over fellow London club Arsenal. While United hasn’t lost any players to the tournament, the Gunners are missing midfielders Emmanuel Eboue (Ivory Coast) and Alexandre Song (Cameroon). Results In yesterday’s group games, record six-time winner and defending champion Egypt beat Nigeria 3-1 and Mozambique drew 2- 2 with Benin. Ivory Coast’s campaign got under way Jan. 11 with a 0-0 draw with Burkina Faso. Unlike other major events, the European clubs aren’t compensated for losing their players. For the World Cup in South Africa, FIFA has promised $40 million to clubs who provide players. UEFA, Europe’s soccer governing body, distributed 43.5 million euros ($62 million) to teams after Euro 2008. Still, the European clubs say that money is not the problem. “The bigger issue is the timing of the event,” said Therese Courvoisier, spokeswoman for the European Club Association, a lobby group for about 130 teams. “We know January isn’t practical.” A clash with the World Cup would mean any changes to the biennial event’s calendar would only affect every second tournament. Togo Attack Mahmoud Garga, a spokesman for the African soccer governing body, didn’t respond to calls and text messages seeking comment. FIFA deferred comment to the African organization. Some European clubs called for the event to be canceled after a machine-gun attack on the Togolese team bus on Jan. 8 killed a driver, assistant coach and press officer. Others, like Arsenal coach Arsene Wenger , disagreed. He said some teams would use the security concerns as “selfish motivation” to recall players. European teams shouldn’t complain, said Graham Taylor , a former coach of the English national team who has more than three decades of management experience. They knew what they were getting into. “I have no sympathy with managers who sign African international players and then complain when this tournament takes place in the middle of the season,” Taylor said in an interview. “You know that when you sign those players that you’re likely to lose them for the best part of the month.” Adding Players The competition takes place during the January transfer window, which allows coaches to sign players to fill in the gaps in their squads. The Daily Telegraph said Chelsea is considering a 30 million-pound ($48.4 million) offer for Atletico Madrid forward Sergio Aguero. Inter signed Macedonian striker Goran Pandev to prepare for Eto’o’s exit. The African contingent will be back in time for the start of the knockout phase of the Champions League in February after FIFA convinced organizers of the Africa Cup to bring forward the start of the 53-year-old event by 10 days. The final takes place in Luanda, Angola, on Jan. 31. Meantime, Barnard, the London firefighter, said moving it a week and a half isn’t enough. “It’s not just England that’s been affected, it’s the whole of Europe,” he said. “It should be in the summer.” To contact the reporter on this story: Tariq Panja in the London newsroom on at tpanja@bloomberg.net

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Emerging-Market Stocks Decline Most in Four Weeks; Crude Oil, Corn Slide

January 13, 2010

By Gavin Serkin Jan. 13 (Bloomberg) — Emerging-market stocks dropped the most in four weeks, oil dipped below $80 a barrel and the pound rose on evidence central banks are preparing to scale back their emergency support for economic growth. The MSCI Emerging Markets Index slipped 1 percent at 10:16 a.m. in London and the Shanghai Composite Index lost 3.1 percent, the most in seven weeks. Futures on the Standard & Poor’s 500 Index climbed 0.2 percent while Google Inc. fell in Germany after saying it may exit China. Crude oil declined as much as 1.4 percent in New York, and corn plunged to a two-month low. The pound strengthened and government bonds slid, with the 10-year Treasury note yield rising 4 basis points. The People’s Bank of China yesterday raised the proportion of deposits banks must set aside as reserves, a move that may herald an interest-rate increase. Federal Reserve Bank of Philadelphia President Charles Plosser said U.S. rates should rise as the economy recovers. The Bank of England’s Andrew Sentance was cited by the Guardian as saying policy makers may have to raise U.K. borrowing costs this year. “China tightened policy sooner than people were thinking, so that spooked the market,” said Nicholas Field , who helps manage about $11 billion in emerging-market stocks at Schroders Plc in London. “We have now passed that sweet spot where economies are starting to recover and there is a great earnings boost from the low point. This is not a collapse or a crash, but we will get a correction.” China, Dubai Banks in China will need to increase deposits set aside as reserves starting Jan. 18, sooner than the April timing predicted by economists in a Bloomberg survey last week. Industrial Bank Co. slumped 6.5 percent in Shanghai. Hong Kong’s Hang Seng Index dropped 2.3 percent, the most since Nov. 27. Dubai led stock declines in the Gulf with the Dubai Financial Market General Index dropping 2.7 percent to a four- week low and Abu Dhabi’s index retreating 1.6 percent. The MSCI World Index of 23 developed nations’ stocks fell 0.3 percent as shares in Asia fell the most in almost seven weeks. Japan Airlines Corp. tumbled 81 percent to a record low on concern it will file for bankruptcy. Europe’s Dow Jones Stoxx 600 Index gained 0.2 percent. Infineon Technologies AG rose more than 3 percent in Frankfurt after Goldman Sachs Group Inc. recommended Europe’s second- largest maker of semiconductors. Societe Generale SA, France’s second-biggest bank by market value, led banks lower, plunging more than 4 percent in Paris after saying it had 1.4 billion euros ($2.03 billion) of writedowns and provisions on risky assets in the fourth quarter. U.S. Futures Futures on the Standard & Poor’s 500 Index rose, indicating the benchmark gauge for U.S. equities may rebound after dropping yesterday the most this month. Gains may be limited after Google, the owner of the most popular Internet search engine, fell 1.6 percent in German trading. The company said it may shut its Chinese Web site and offices after a “highly sophisticated” cyber attack aimed at the e-mail accounts of human-rights activists. Crude oil futures fell as low as $79.63 a barrel in electronic trading on the New York Mercantile Exchange. Corn for March delivery fell as much as 4.9 percent to $3.7325 a bushel in Chicago trading, the lowest since Nov. 9, after the U.S. raised its production estimate to a record. Wheat declined 1.4 percent. Copper dropped 1.3 percent and aluminum retreated 1.1 percent. Pound Rallies The pound advanced 0.5 percent against the dollar and 0.4 percent compared with the euro after the Guardian cited Sentance as saying policy makers have done enough to stimulate the economy. Gilts dropped, with the yield on the two-year note rising 4 basis points to 1.21 percent. Ten-year notes led declines for Treasuries before the government auctions $21 billion of the securities today, part of $84 billion of notes and bonds being sold this week. Governments around the world are selling unprecedented amounts of debt to help finance stimulus measures designed to revive their economies. Germany’s gross domestic product fell 5 percent in 2009, after expanding 1.3 percent in 2008, the Federal Statistics Office said in Frankfurt today. Germany, Italy and Portugal are scheduled to sell as much as $25 billion of bonds today. To contact the reporter on this story: Gavin Serkin at gserkin@bloomberg.net

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Bank of England Should Pause Bond Program as U.K. Recovery Looms, BCC Says

January 12, 2010

By Scott Hamilton and David Tweed Jan. 12 (Bloomberg) — The Bank of England should pause its bond-purchase plan after completing the current 200 billion- pound ($323 billion) tranche as the economy shifts toward a recovery, the British Chambers of Commerce said. “The Bank of England has done as much as it can at this stage,” David Frost , director general of the BCC, told Bloomberg Television in London yesterday. “If it emerges in the spring and towards the middle of the year that the economy is not sustaining itself, then we have to come back and look to see where we need additional money pumped in.” Confidence about sales at manufacturers and services companies rose in the fourth quarter to the highest level since the first three months of 2008, before the onset of the recession, the BCC said in a survey released today. The data shows the economy is on the brink of exiting the slump, the lobby group said. The Bank of England last week pledged to complete its bond program as policy makers gauged the strength of the economic recovery against a backdrop of political squabbles on how to cut the nation’s budget deficit . Prime Minister Gordon Brown yesterday told his ruling Labour Party lawmakers that they can still win this year’s general election. The index for manufacturing domestic sales rose to 3 from minus 10 in the previous three months, and the index for export sales climbed to 20 from zero, the BCC’s report showed. For service companies, the domestic sales index slipped 1 point to minus 2, while the exports index increased to 8 from 6, the BCC said. The survey covered more than 5,400 companies. ‘Primary Concern’ “There was an improvement in the economy, but it’s not at the rate that we saw in the third quarter,” Frost said. “There was a sharp improvement in the third quarter, but it’s not been maintained. That’s got to be a primary concern.” The lobby group, which has supported policy makers’ moves to expand the bank’s asset-purchase program to its current size, said the plan hasn’t done enough to aid bank lending, which is now a key obstacle to sustaining the recovery. Economic reports paint a mixed picture of the U.K.’s route out of recession. Consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society said Jan. 6. Manufacturing activity increased to the strongest in more than two years, and mortgage approvals rose to the highest since March 2008, separate surveys showed on Jan. 4. Bank of England policy makers last week kept the benchmark interest rate at a record low of 0.5 percent to nurture the recovery. They will next assess the effectiveness of their monetary policy in February, when officials produce quarterly economic forecasts. “I don’t expect them to put up interest rates any time soon,” David Kern , chief economist at the BCC said in an interview. “They will not do anything until September. My focus is that by the end of the year, they’ll be 1 percent. They’ll be 2.5 percent by the end of 2011.” To contact the reporters on this story: Scott Hamilton in London at shamilton8@bloomberg.net ; David Tweed in London on jtweed@bloomberg.net .

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U.K. Bans Islamist Group That Planned Afghanistan Protest in Memorial Town

January 12, 2010

By Thomas Penny Jan. 12 (Bloomberg) — The U.K. has banned an Islamist group that planned to hold a march in a town in England through which the bodies of dead servicemen are carried on their return from Afghanistan. Home Secretary Alan Johnson made an order at 7.30 a.m. today to ban Islam4UK, a Home Office spokesman said in a telephone interview. The group, which is also known as Al Muhajiroun and is already banned under two other names, has been proscribed under anti-terrorism laws, the Home Office said in an e-mailed statement. “We are clear that an organization should not be able to circumvent proscription by simply changing its name,” Johnson said in the statement. The group planned to hold a march through Wootton Bassett in Wiltshire, southwestern England, to protest civilian deaths in Afghanistan. The town has become famous for the tribute it pays to fallen soldiers flown into the nearby Royal Air Force base Lyneham and then carried along Wootton Bassett main street. The plans sparked anger in the U.K. media. To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net

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New York Jets’ Super Bowl Odds Are Cut to 18-1 as Colts Remain Favorites

January 10, 2010

By Erik Matuszewski Jan. 11 (Bloomberg) — The New York Jets’ odds of winning the Super Bowl dropped to 18-1 after their playoff victory, while Las Vegas oddsmakers still favor the Indianapolis Colts to win the National Football League title. The Jets were rated a 25-1 chance to win the Super Bowl before beating the Cincinnati Bengals 24-14 two days ago in the first round of the playoffs. New York still has the longest championship odds among the NFL’s eight remaining teams, according to Las Vegas Sports Consultants, which advises Nevada sports books on gambling lines. The Colts have 2-1 odds to win the Super Bowl, followed by the Jets’ next opponents, the San Diego Chargers, at 11-4. “It breaks down to this: If we can win three games, we are world champions,” Jets coach Rex Ryan said last night during a media conference call. “That’s all you need for motivation.” The Jets (10-7) opened as nine-point underdogs against the Chargers, who are 13-3 and riding an 11-game winning streak. They’ll meet in San Diego on Jan. 17, playing the last of this weekend’s four playoff games. The Colts, who have an NFL-best 14-2 record, host the Baltimore Ravens (10-7) on Jan. 16 and are seven-point favorites. The Ravens, who yesterday beat the New England Patriots 33-14, have the second-longest Super Bowl odds at 14-1. NFC’s Top Contender The New Orleans Saints, the top seed in the National Football Conference, have 3-1 odds to win the Super Bowl, meaning a winning $100 wager would return $300 along with the initial stake. The Saints host the defending NFC-champion Arizona Cardinals on Jan. 16. Although New Orleans has lost three straight games after a 13-0 start, the Saints are seven-point favorites against a Cardinals team that gave up six touchdowns in a 51-45 overtime playoff win against Green Bay yesterday. The Cardinals (11-6) are given 10-1 odds of winning the Super Bowl, behind the Minnesota Vikings at 11-2 and the Dallas Cowboys at 6-1, according to Las Vegas Sports Consultants. The Vikings (12-4), led by quarterback Brett Favre , host the Cowboys (12-5) on Jan. 17 and are favored by 2 1/2 points. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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FSB’s Draghi Warns Markets Against Excess Optimism, Taking on More Risk

January 9, 2010

By Joseph Heaven and Simon Kennedy Jan. 10 (Bloomberg) — Financial Stability Board Chairman Mario Draghi said markets may be overly optimistic about the recovery from their worst crisis since the Great Depression as he cautioned bankers against taking on too much risk. “The markets are becoming risky again, bankers are becoming risk takers again,” Draghi told reporters in Basel, Switzerland, late yesterday. “At the same time, bankers should be aware of the fragilities in the system.” Draghi spoke as Deutsche Bank AG Chief Executive Officer Josef Ackermann and other finance executives prepare to meet today with policy makers in Basel. The gathering is being held amid concern that banks are increasingly rebuffing tougher regulation and embracing risk as the turmoil of the last three years ebbs. “The general situation is better than what we could expect a year ago,” Draghi said after chairing a meeting of his panel, which is composed of international regulators, central bankers and government ministers. “I don’t think it’s as good as the markets think it is.” Risk is back in the spotlight as China witnessed a record increase in credit, Goldman Sachs Group Inc. posted its best earnings ever and the MSCI World index of stocks logged a 74 percent gain since its March low. European Central Bank President Jean-Claude Trichet and Federal Reserve Chairman Ben S. Bernanke are also attending the talks. Risk Taking “Private bankers are trying to run their businesses and if policy makers try to exert influence over what they do then we could see tension,” said Colin Ellis , an economist at Daiwa Capital Markets Europe in London and a former Bank of England official. Draghi, who is also governor of the Bank of Italy, joins a chorus of officials voicing concern about a renewal of excessive risk taking, which led to the credit bust of 2007. The Bank for International Settlements, host of the weekend meeting, last month warned that low interest rates often spur banks to take on too much risk. Fed Bank of Kansas City President Thomas Hoenig said Jan. 7 that the Fed should move “sooner rather than later” to reduce stimulus. Peer Review In the U.S., regulators told banks on Jan. 7 that financial companies should guard against possible losses from an eventual end to low interest rates. “It is important for institutions to have robust processes for measuring and, where necessary, mitigating their exposure to potential increases” in borrowing costs, the U.S. Federal Financial Institutions Examination Council, which includes the Fed, said. The FSB’s members agreed to review by March the implementation of measures the Group of 20 nations backed to restrain bonuses and executive compensation, Canadian Deputy Finance Minister Tiff Macklem said in Basel. Countries will also undergo a peer review process and the FSB asked banks for feedback on adopting new pay structures. The FSB will draw up a framework to identify which nations outside its membership aren’t meeting the standards and may publish a list of those which are uncooperative, Macklem said. The board will also present options in June on how to handle the risks posed by large banks. Increased Lobbying Markets are rediscovering their appetite for risk after central bankers truncated the recession with record low interest rates and governments around the world bailed out the banking system. The Fed has cut its benchmark rate to almost zero and added more than $1 trillion of assets to its balance sheet to combat the credit freeze, while Japan’s benchmark is also near zero . The ECB’s main rate is a record-low 1 percent. Goldman Sachs and JPMorgan Chase & Co. are among the banks taking advantage of low rates, a stock-market rally and the demise of competitors like Lehman Brothers Holdings Inc. to bolster profits. Banks have also increased lobbying against reforms aimed at restricting how much risk they can take. The BIS said in a report last month that central bankers should allow financial stability to play a role in monetary policy because low rates often spur banks to take on too much risk. The Basel Committee on Banking Supervision, for which the BIS provides a secretariat, is seeking feedback on proposals aimed at making the banking industry more resilient by increasing the quality and quantity of capital it holds. Still, Draghi acknowledged that the liquidity of banks and their ability to raise capital are improving. Those signs of recovery mean policies should be “more targeted to addressing specific areas of weakness” than during the crisis, the board said in a statement. To contact the reporter on this story: Joseph Heaven in Basel at jheaven1@bloomberg.net Simon Kennedy in Paris at skennedy4@bloomberg.net

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Dollar Has Biggest Weekly Fall Since November on Surprise Drop in Payrolls

January 9, 2010

By Ben Levisohn and Inyoung Hwang Jan. 9 (Bloomberg) — The dollar posted its biggest weekly loss since November versus the currencies of major U.S. trading partners as an unexpected drop in jobs boosted speculation that the Federal Reserve may extend stimulus measures. Sterling was the only major currency to fall against the dollar this week as Prime Minister Gordon Brown clashed with the Conservative opposition on the U.K.’s budget deficit. The greenback slid from a four-month high against the yen on the prospects for the world’s largest economy. A report next week is forecast to show U.S. retail sales grew at a slower pace. “Investors were disappointed and sold dollars,” said Hidetoshi Yanagihara , a senior currency trader at Mizuho Corporate Bank Ltd. in New York. “The market was expecting too much.” The trade-weighted Dollar Index , which the ICE futures exchange uses to track the greenback against currencies including the euro, yen and pound, decreased 0.5 percent to 77.471 yesterday, from 77.860 on Jan. 1. It touched 78.449 on Dec. 22, the highest level since September. Futures on the Chicago Board of Trade showed a 33 percent chance yesterday that the Fed will raise the target lending rate by at least a quarter-percentage point by the June meeting, down from 60 percent odds a week earlier. U.S. employers eliminated 85,000 jobs in December, the Labor Department said yesterday. The median estimate of 76 economists in a Bloomberg News survey was for no change in nonfarm payrolls. The unemployment rate held at 10 percent. ‘Doesn’t Sit Well’ “The headline doesn’t sit well with the dollar,” said Brian Kim , a currency strategist at UBS AG in Stamford, Connecticut. “People had been bracing for a flat to positive number. It puts expectations for a Fed rate hike on ice.” The dollar slid 0.4 percent to 92.66 yen this week, the greenback’s first five-day drop since Dec. 11. The dollar fell 0.6 to $1.4409 per euro, from $1.4324. The euro gained 0.2 percent to 133.46 yen, from 133.20. The greenback avoided declining beyond $1.45 per euro, a level last seen on Dec. 17, as the payrolls report showed a gain of 4,000 jobs in November, the first boost in almost two years. “The dollar has shown resilience,” said Vassili Serebriakov , a currency strategist at Wells Fargo & Co. in New York. “There were some mitigating factors. Should the damage to the dollar be limited in the aftermath of the report, that would be a positive sign for the greenback.” Dollar and Jobs The Dollar Index posted its biggest daily gain since January 2009 on Dec. 4, when the Labor Department reported an unexpected drop in U.S. unemployment. The index had fallen 17 percent from the 2009 peak reached in March as evidence of a global economic rebound spurred investors to buy higher-yielding assets funded with dollars. The dollar slid this week 3.1 percent to 12.6999 Mexican pesos, dropped 2.9 percent to 92.44 U.S. cents versus the Australian dollar and lost 1.9 percent to 5.6636 Norwegian kroner after the payrolls report. At their Dec. 15-16 meeting, Fed officials debated increasing and extending its stimulus program should the economy weaken, according to minutes released Jan. 6. A few favored such a move while one policy maker discussed a reduction. The target rate for overnight lending between banks was held at a range of zero to 0.25 percent. Retail sales increased 0.5 percent last month after a 1.3 percent advance in the previous month, according to the median forecast of 57 economists in a Bloomberg News survey. The report from the Commerce Department is due Jan. 14. Japan’s Politics Japan’s currency strengthened against the dollar earlier yesterday after Japan’s Prime Minister Yukio Hatoyama told reporters that rapid foreign-exchange moves were “not good” after the newly appointed Finance Minister Naoto Kan said he would welcome a weaker yen. Kan’s predecessor, Hirohisa Fujii , had dismissed the value of a weaker yen to Japan’s economy. The yen appreciated to a 14-year high against the dollar in November, threatening earnings at exporters including Toyota Motor Corp. and Sony Corp. Sterling dropped 0.8 percent to $1.6023 as the U.K.’s Conservative opposition leader, David Cameron , called the ruling Labour Party’s economic policies a threat to the nation’s credit ratings. The Bank of England pledged on Jan. 7 to spend the rest of its 200 billion-pound ($318 billion) bond purchase program and held the target lending rate at a record low 0.5 percent. The U.K.’s producer prices rose 0.5 percent in December, the Office for National Statistics said yesterday. The median forecast of 12 economists in a Bloomberg survey was for a 0.2 percent increase. “This increased optimism about U.K. prospects clashes with the prevailing mood of most of the investors we meet,” Paul Robinson, a currency strategist at Barclays Plc in London, said in a research note. “There remains the risk of an increase of asset purchases” and “politics and the fiscal position” are negative for the pound, he said. To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net ; Inyoung Hwang in New York at ihwang7@bloomberg.net

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Wall Street Reform: Traditional Foes Join Forces To Take On Bankers

January 8, 2010

On Thursday evening, a roomful of people more accustomed to fighting each other met to unite against a common enemy: Wall Street. The forces that are gathering against the bankers include energy companies, airlines, truckers, farmers and other end users of derivatives, along with unions, consumer advocates and a host of progressive organizations. “I can’t think of anything where such a diverse group has come together. Some of these organizations don’t see eye to eye on other issues,” said Jim Collura, a lobbyist with the New England Fuel Institute and a lead organizer behind the Commodity Markets Oversight Coalition (CMOC), which includes end users of derivatives such as corn or gas futures. The businesses rely on futures contracts to hedge against the risk of price spikes or declines. A senior administration official who addressed the coalition partners at the meeting would have been considered just as unlikely a bedfellow a year ago. Gary Gensler, now the chairman of the Commodity Futures Trading Commission (CFTC), spent nine years with Goldman Sachs and, as a Treasury official in the ’90s, pushed the type of deregulation that contributed to wild speculation in derivatives and helped bring about the financial collapse. For those sins, Sen. Bernie Sanders (I-Vt.) put a hold on his nomination to the CFTC. He eventually let him move through, convinced that Gensler had seen the error of his ways. Close observers of the fight to reform Wall Street say that Sanders’s judgment has been proven wise and that Gensler has been one of the strongest advocates for reform within an administration often seen as too sympathetic to the financial services industry. “The meeting went fantastic,” said Collura, who had been worried that the differences between the groups would prove irreconcilable. “I think everybody expected little and walked away with a lot.” Graham Steele, policy counsel with Public Citizen’s Congress Watch, said that Gensler offered the groups encouragement and the full support of the administration. Some coalition members pressed Gensler on the administration’s commitment to reform, given that Treasury Secretary Tim Geithner has pushed for a wide range of exemptions that could allow speculators to continue to trade in the dark rather than on an exchange similar to the New York Stock Exchange. “The White House believes in reform,” Gensler told the group, according to Steele, though there were lingering doubts among some participants. “They’ve been arguing for almost as many exemptions as industry,” Steele said of the Treasury Department. Gensler, however, exhibited little sympathy for the financial industry’s arguments against reform. Wall Street traders insist that if derivatives are regulated too tightly, or if firms are limited in the size of the positions they can take, then capital will simply move offshore and cost American jobs. Gensler is ready to call their bluff. “He thinks they’ll try to evade regulations in another way,” said Steele. Indeed, every reform proposed for Wall Street — or for London, for that matter — over the last century sparked warnings that business will go elsewhere. But, overall, the threats never end up materializing because capital isn’t an abstraction that floats as freely as the wind — as Wall Street portrays it — but is rather the resource at the foundation of real businesses that have office space, fax machines, gym memberships and employees with children in private school. “They’re going to be uprooting everything? It just doesn’t make sense,” says Steele, echoing Gensler. “They always threaten to leave and they never do.” What they will do instead, Gensler told the group, is much more logical: Look for ways to water down the legislation or root around the regulations. Wall Street is furiously engaged in both steps now. The formation of the reform coalition is a direct effort to challenge derivatives dealers and Wall Street traders who have marshaled an army of little guys to lobby Congress against reforming the way that derivatives are traded. The traders like to use these surrogates because the financial crisis has cost them their esteem in the eyes of the public. Meanwhile, hedge funds are preparing for regulation that would curb speculation. Several end users in the meeting with Gensler said that they’d seen hedge funds and other investors begin to purchase the physical product that underlies the derivatives. In other words, hedge funds that want to speculate on corn futures are going out and actually buying corn, as well. Then, when the regulations are in effect, they can claim to be commercial end users. Collura said the group is a bit flummoxed at how to respond to such efforts. It shows, he said, how much surplus profit exists in speculation that traders are willing to buy physical commodities they have no use for. The lack of transparency in the market, however, primarily benefits Wall Street dealers, since only they know the real difference between the bid and ask prices. “These rules would obviously impact the largest banks and brokers that benefit from the current market setup,” reads a fall Citigroup report on the proposed regulations. “The shift to exchanges is expected to reduce profitability as a result of more market transparency… Exchange trading will likely reduce bid/ask spreads and require dealers to share economics with exchanges.” Collura said that the first step the new coalition plans to take will be to walk the halls of Congress to let senators know that the end users trotted out by the banks don’t represent the interests of all small businesses. “There are some people who ware skeptical about our chances to get a strong bill out of the Senate. The new commitment to make a coordinated effort has given us some hope,” said Collura. The new coalition is essentially made up of the end user group CMOC and Americans for Financial Reform, a coalition of unions, consumer advocates and progressive organizations. The group is outgunned by Wall Street, but ready for the fight, Collura said. “We can’t match them with dollars,” he said. “But I think we can and will reach out to the American public, because I think the American public realizes that Wall Street interests are basically negotiating the terms of their own medicine. There could be a huge backlash and the president and Democrats in Congress don’t want that to happen.”

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British Election Pits Brown’s Rhododendrons Against Cameron’s Wellington

January 8, 2010

By Robert Hutton and Farah Nayeri Jan. 8 (Bloomberg) — While Prime Minister Gordon Brown and opposition leader David Cameron clash on how to revive the economy, the first overhaul after this year’s British election may be more about fine art than finance. Eight hours after John Major lost power in 1997, the former premier’s handpicked paintings were being removed from his office. With Brown’s Labour Party trailing in the polls to Cameron’s Conservatives for the past year, the curators of the U.K.’s official art collections are gearing up for another swift change of décor. The vote must happen by June. “Usually a new minister will want to make a change to the works in their office,” said Penny Johnson, director of the U.K.’s Government Art Collection . “It looks like they’ve made a change — more quickly than they can make other changes.” British government handovers take place within hours rather than days, and premiers see their choice of artworks as a way of reflecting their politics and interests, according to Johnson. Margaret Thatcher , who won the 1979 election and saw off Argentina during the war over the Falkland Islands, had a penchant for military figures and hung a portrait of Winston Churchill on the wall. Major, a cricket fanatic, liked portraits of players when he took over in 1990. Tony Blair , who was the youngest prime minister since 1812, swept in seven years later with more contemporary works. “I’m sure some masterful practitioners of the craft of politics choose what they want to hang to show an image of themselves that they want to portray,” said Conservative lawmaker Hugo Swire , who is chairman of parliament’s advisory committee on works of art. Stairway to Cameron At election time, the prime minister’s office , the Treasury, and government buildings undergo the biggest art swaps. Parliament’s paintings don’t change, though an exception is the stairway to the office of the leader of the opposition. There, Cameron has on show 14 pictures of 18th- and 19th- century prime ministers, including Pitt the Younger , the Duke of Wellington and Robert Peel , all Tory figures. Should Brown lose the vote and become opposition leader, curators will face the challenge of finding substitutes. While the Tories trace their roots to landed gentry supporting the monarchy in the 17th century, the Labour Party was born out of the blue-collar union movement prior to World War I. “We couldn’t do the staircase in Labour politicians,” said Melanie Unwin, deputy Curator of the Parliament collection, whose team looks after 7,000 artworks shown in the House of Commons and the House of Lords. “The problem we have with the early Labour Party is that they didn’t come from the sort of homes that would require paintings of them to hang on walls.” Blair Years At the Government Art Collection , Johnson is in charge of 13,500 works destined for offices worldwide. Major was on his way to a final interview with Queen Elizabeth II when Johnson took down a portrait of English cricketing hero W.G. Grace, a bearded Victorian, from 10 Downing Street, the prime minister’s official residence in London. When Blair took office at age 43, a set of Anish Kapoor drawings labeled “Untitled” from 1986-87 headed to Downing Street from the Tate Gallery and monotypes by Sean Scully , Therese Oulton and Mark Francis were put up. His wife, Cherie, asked for female achievers to be shown. Up went portraits of Queen Elizabeth I, Mary Queen of Scots, painter Angelica Kauffmann and Ada Lovelace , a scientist credited with helping invent the first computer and who was the daughter of poet Lord Byron. ‘Rescued Rhododendrons’ Brown, now 58, moved into 11 Downing Street as Chancellor of the Exchequer from 1997 to 2007 and oversaw “wholesale change” at the Treasury, said Johnson. “Works of art came out from the Treasury that had been on display for many, many years,” she said. “There were portraits of previous chancellors. Some, if not all, were replaced with 20th-century landscapes.” When he moved next door in June 2007 and took over from Blair, Brown kept the contemporary art. In the antechamber to the “war room,” where he sits with senior aides, is a series of photographs by the 2005 Turner Prize winner Simon Starling, “Rescued Rhododendrons.” Brown now is more concerned with rescuing himself. Just as his election campaign begin in earnest, two former cabinet ministers this week called for a secret ballot on whether to keep him as prime minister ahead of the vote. Hogarth, Hockney The collection was set up in 1898. In 1907, money was allotted to buy paintings for London buildings, and in 1935, for diplomatic posts. It has an annual budget of 551,000 pounds ($877,000), 200,000 pounds of which is for buying works. It includes work by British artists, or ones with strong British connections, such as William Hogarth, Lucian Freud and David Hockney . Andy Warhol is one anomaly. His 1985 screen prints of Queen Elizabeth hang in U.K. government buildings in New York and Washington. Faced with taking over record debt and an economy limping out of recession, any prime minister will have more on his mind than the taste in art, said Swire. “I hope there will be wonderful views of rural England and traditional sports,” he said. To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net ; Farah Nayeri in London at farahn@bloomberg.net .

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Bank of England May Make $96 Million on Corporate Bonds, Evolution Says

January 8, 2010

By John Glover Jan. 8 (Bloomberg) — The Bank of England may have made a profit of about 60 million pounds ($96 million) on corporate bonds bought under its so-called quantitative easing policy as it starts selling the securities, according to Evolution Securities Ltd. The U.K. central bank is taking bids today for as much as 322.9 million pounds ($515 million) of notes issued by companies such as AstraZeneca Plc , Deutsche Telekom AG and Unilever Plc . The bonds were bought as part of a 200 billion-pound Asset Purchase Facility, an initiative to thaw credit markets. The Bank of England holds about 1.55 billion pounds of corporate bonds and it made the profit as yield premiums tightened amid economic recovery, Evolution said. The total doesn’t take account of coupon payments of as much as 45 million pounds. “The bank has been successful enough as a fund manager that you might question whether to buy if they are selling,” said Elisabeth Afseth , an analyst at Evolution in London. The yield premium investors demand to hold corporate bonds in pounds rather than similar-maturity government debt has narrowed to 154 basis points from 382 in March, according to Bank of America Merrill Lynch’s Sterling Corporates Industrials index. The gauge, which contains many bonds bought by the bank, has returned 16.8 percent since the beginning of March. The U.K. central bank started buying corporate and government bonds in March to shore up financial markets amid concern General Motors Corp. and Chrysler LLC would collapse. The bank may still buy corporate bonds under the program, which it has extended twice by a total of 75 billion pounds. A Bank of England spokesman declined to comment. The approximation of the bank’s return on its investment is derived from changes in spread and an estimate of the effect of changes in underlying gilt yields. It doesn’t take account of accrued interest and the duration of individual bonds. A basis point is 0.01 percentage point. To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

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Eurostar Again Halts All Train Service Through Channel Tunnel After Snow

January 7, 2010

By Andrea Rothman Jan. 7 (Bloomberg) — Eurostar Group Ltd. halted services through the Channel Tunnel after a train broke down in snowy weather, echoing a series of failures last month that crippled locomotives and left more than 40,000 passengers stranded. A train that departed Brussels for London at 8:05 a.m. this morning lost traction in the tunnel after encountering heavy snow in northern France, Fabienne Lissak, a spokesman for tunnel operator Groupe Eurotunnel SA , said in a telephone interview. The unit, carrying 236 people, was dragged to Ashford, east of the London, by a Eurotunnel rescue locomotive, Lissak said. Eurostar halted subsequent services, leaving trains stranded at Folkestone, England, and near Calais, France, she said. Eurostar spokesman Paul Raeburn earlier confirmed the breakdown of service 9113 from Brussels while stating that it was “too early to say” why the failure had occurred. Eurotunnel’s own vehicle-shuttle services through the 30- mile (48-kilometer) tunnel were delayed by the incident but are now operating normally, Lissak said. She said that the stricken Eurostar train was towed from the tunnel at 11:17 a.m. and that passengers were taken forward for transfer to London. About 7 centimeters of snow has fallen near Calais and the breakdown appears similar to those on Dec. 18, when electrical systems on Eurostar units were shorted by melting snow that had been sucked into air intakes, Lissak said. Eurotunnel will hold a telephone conference with Eurostar to determine when services can resume, she said. Three-Day Shutdown Last month’s failures left 2,000 people stuck for more than 10 hours in the tunnel, stranded tens of thousands more in London, Paris and Brussels and resulted in a three-day shutdown during the peak pre-Christmas travel period through Dec. 22. Eurostar said yesterday that four trains would be cancelled today because of poor weather conditions, with its Web site warning of a “restricted service” over the next few days. “If you do not need to travel we recommend you cancel or postpone your trip to a later date,” the company advises. To contact the reporter on this story: Andrea Rothman in Toulouse, France, at aerothman@bloomberg.net

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China Curbs Power Use, Florida Citrus Threatened as Cold Weather Persists

January 6, 2010

By Bloomberg News Jan. 7 (Bloomberg) — China curbed electricity use because of coal shortages, Florida citrus growers braced for more nights of freezing temperatures and snow blanketed southern England as icy weather continued to grip the Northern Hemisphere. China will be hit by a new cold front this weekend, with snowstorms forecast for the provinces of Jiangsu, Anhui, Henan and Hubei on Jan. 9, China National Radio reported. Mexico will have “severe winter” weather. In the U.S., frigid air sent orange-juice futures up as much as 4.3 percent to a two-year high yesterday and natural gas jumped to a 13-month peak. “The cold weather is hitting a lot of the more populated areas, such as western and northern Europe, a lot of the eastern U.S.,” Bob Tarr , a meteorologist at AccuWeather Inc. , said in a telephone interview yesterday. “It’s a rare pattern, and unusual to see this cold weather affecting a number of major population centers and persisting for about three weeks.” The Chinese provinces of Jiangsu, Hubei, Henan, Hunan and Jiangxi and the municipalities of Shanghai and Chongqing have limited electricity consumption because of fuel shortages, the official Xinhua News Agency said today, without giving details. Some aluminum smelters in Henan, the largest producing province, received notices from power suppliers to prepare for stoppages, according to CRU International Ltd. China is the world’s biggest maker of aluminum used in homes and cars. There have been “periodic power supply disruptions” in provinces including Henan and Hunan, though the impact “is not serious” so far, Wan Ling , a Beijing-based analyst, said by phone today. She declined to identify the smelters affected. Mexico Freezes Mexico will have “severe winter” weather in most of the nation from today, the National Meteorological Service said in an e-mailed statement. Temperatures below freezing are forecast for 10 states and Mexico City, it said. At least seven deaths in the U.S. have been blamed on icy roads or cold-related accidents, the Associated Press reported. In the U.K., which is enduring the longest cold snap since 1981, the British army was called out to help rescue motorists from as many as 1,000 vehicles. Eurostar canceled four trains between London, Paris and Brussels, a spokesman, Richard Holligan , said yesterday. Temperatures in New York City are forecast to be as much as 13 degrees below average by Jan. 10, according to MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland. The U.S. Northeast is responsible for about four-fifths of the country’s heating oil use. Temperatures will be 25 degrees below average in Houston and St. Louis on Jan. 9, EarthSat said. About 72 percent of households in the Midwest use natural gas for heat. Citrus at Risk Florida’s orange growers face frigid weather again early today after freezing conditions did minimal damage yesterday, according to AccuWeather Inc. The cold in the past 24 hours harmed less than 1 percent of the crop, said Dale Mohler , a senior meteorologist with AccuWeather. Citrus may sustain “light damage” overnight as freezing weather returns, said AccuWeather’s Dan Kottlowski . Oranges can be ruined when exposed for too long to temperatures below 28 degrees Fahrenheit (minus 2.2 degrees Celsius). “The entire Florida crop is at risk for these next few nights,” Pete Spyke, the owner of Arapaho Citrus Management Inc., said yesterday by telephone. The company has 300 acres (121 hectares) of citrus groves, with 60 percent producing oranges, 25 percent grapefruit, and the rest tangerines. Lower Crop Florida’s crop will fall to 135 million boxes in the season through June from a year earlier, the smallest in three years, the U.S. Department of Agriculture said Dec. 10. Last season, growers packed 162.4 million boxes, each weighing 90 pounds (41 kilograms). Florida is the largest producer after Brazil. Orange-juice futures for March delivery fell 1.5 cents, or 1 percent, to $1.4205 a pound on ICE Futures U.S. in New York yesterday. Earlier, the price rose to $1.4965, the highest level for a most-active contract since Jan. 2, 2008. French electricity demand may reach a record next week as temperatures are expected to drop as much as 7.7 degrees Celsius below average, the grid operator Reseau de Transport d’Electricite said on its Web site. Temperatures were at or below freezing across most of northern and central France, sinking as low as minus 4 degrees Celsius in Paris, according to the forecaster Meteo-France .

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Winter Weather Threatens Livestock, Disrupts Travel From China to Europe

January 5, 2010

By Margot Habiby and Whitney McFerron Jan. 6 (Bloomberg) — Crude oil traded near its highest level in 14 months, citrus growers in Florida fought to protect their crops and Beijing had its coldest morning for almost four decades as winter weather gripped the U.S., China and Europe. London’s Gatwick and Luton airports and Birmingham airport in the Midlands suspended all inbound and outbound flights because of snow and severe weather, the airports said. At least four deaths on American highways have been blamed on the weather, according to the Associated Press, while seven people were killed in an avalanche in Switzerland. Temperatures in northern China may drop as low as minus-32 degrees Celsius from this evening to tomorrow night, the China Meteorological Administration said. AccuWeather.com predicted the worst U.S. winter in 25 years. “People have just forgotten what winter is,” Mike Halpert , the deputy director of the U.S. National Weather Service’s Climate Prediction Center , said by telephone yesterday from Camp Springs, Maryland. Temperatures in December “were below average, but they weren’t like the record-breaking cold that you see back in November and December 2000.” Overnight temperatures in the U.S. were forecast to be 15 to 35 degrees below average, dropping into the teens, in some areas along the U.S. Gulf Coast, said Jim Rouiller , a senior energy meteorologist for Planalytics Inc. of Wayne, Pennsylvania. Oil, Orange Juice Crude oil traded at $81.60 a barrel on the New York Mercantile Exchange, near the $81.77 settlement yesterday, which was the highest since October 2008. Temperatures in the U.S. Northeast, the area responsible for four-fifths of the country’s heating oil use, are forecast to remain below normal through Jan. 15, according to the National Weather Service. Orange-juice futures jumped by the most allowed by ICE Futures U.S. for a second straight day on concern that freezing weather may damage citrus groves in Florida, the world’s largest producer of the fruit after Brazil. The contract for March delivery climbed 10 cents, or 7.5 percent, to $1.4355 a pound. Andrew Meadows , a spokesman for Florida Citrus Mutual, a trade organization based in Lakeland, said in an interview yesterday it would be “a nerve-wracking night” for growers. “I would expect fruit damage to occur in colder areas” by early today, said Pete Spyke, owner of Arapaho Citrus Management Inc. , a farming company with about 300 acres (121 hectares) of oranges, grapefruit and tangerines. Four-Decade Low The temperature in Orlando, Florida, is forecast to reach 27 degrees Fahrenheit, breaking the record low of 31 degrees for the day set in 1999, according to Accuweather.com, based in State College, Pennsylvania. A cold front in China will move south today, lowering temperatures by as much as 8 degrees Celsius, the China Meteorological Administration said. Temperatures in Beijing dropped as low as minus-20 degrees Celsius last night and the weather this morning was the coldest for this time of year since 1971, according to the agency. Snowstorms in the north have disrupted coal transportation on roads and at ports, causing coal stockpiles at power plants to dwindle, China Business News said. State Grid Corp. of China, the biggest grid operator, is limiting electricity use in the center of the country because of low coal inventories, the newspaper said. Vegetable prices in Beijing jumped as much as 40 percent because of transport disruptions, it said. Still, supply overall is enough to meet demand, it added. U.K. Freeze London’s Gatwick and Luton airports, Birmingham airport in the Midlands and Southampton airport suspended flights, they said in statements. “The runway at Gatwick Airport is currently closed for snow clearance,” the airport said. London’s Luton airport canceled all flights until 4:30 a.m. Heathrow airport is warning passengers to check with airlines before travelling. The U.K. is experiencing its longest period of “widespread” freezing and snowy conditions since December 1981, Sarah Holland, a spokeswoman for the Met Office, said. Overnight, more than 30 centimeters (12 inches) of snow may fall in parts of southern England as the office issued severe weather warnings. In the U.S., the northern Great Plains and upper Midwest may receive 4 to 8 inches (10 to 20 centimeters) of snow through today, said Mike Tannura , the president of T-Storm Weather in Chicago. Omaha, Nebraska, has received 27 inches since Dec. 1, he said. Another “big Arctic blast” may occur from Jan. 8 to Jan. 9, Tannura said. Possible Reprieve The Climate Prediction Center of the National Weather Service forecast a reprieve from the cold for the U.S. Midwest in the next six to 10 days, with normal to above-normal temperatures from Michigan to Nebraska. The outlook calls for below-normal temperatures east of the Mississippi, with the southeastern U.S. getting the brunt of it. Temperatures will also remain below normal in Oklahoma and Texas, according to the agency. “The intensely cold weather pattern experience across the country will essentially peak this week, then begin losing its grip from west to east across the country next week,” Rouiller from Planalytics said in an e-mail. To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net ; Whitney McFerron in Chicago at wmcferron1@bloomberg.net .

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Colts Picked by Vegas to Win Super Bowl as Jets Biggest Long Shot at 25-1

January 4, 2010

By Michael Buteau (Corrects second-round matchups in third, seventh paragraphs, Cardinals’ division in 12th.) Jan. 4 (Bloomberg) — The Indianapolis Colts are favored by Las Vegas oddsmakers to win the Super Bowl, while the New York Jets are the biggest underdogs. The Colts have the best record among the 12 teams to qualify for the National Football League’s playoffs, at 14-2, and are 8-5 picks to claim their second Super Bowl title in four seasons on Feb. 7, according to Las Vegas Sports Consultants, which advises Nevada sports books on betting lines. Indianapolis will have a bye in the first round of the American Football Conference playoffs before facing the lowest remaining seed in the second. That could be the No. 4 Cincinnati Bengals (10-6), the No. 5 Jets (9-7) or the No. 6 Baltimore Ravens (9-7). “Indy has been the most consistent team all year,” Mike Seba , a senior oddsmaker, said in a telephone interview. “They don’t blow teams out, but they win the big games. You can play with them, but it’s hard to beat them.” The Jets, who beat the Bengals 37-0 yesterday at Giants Stadium in East Rutherford, New Jersey, to finish 9-7, have the longest odds of any team, at 25-1. They will be four-point underdogs for their rematch with the Bengals in Cincinnati, according to Seba. The Bengals have the second-longest odds of winding up Super Bowl champions, at 20-1. “With their defense, they can stay in any game, but they are offensively challenged,” Seba said of the Jets. “I wouldn’t be surprised if they win the first week, but I think it’s all over after that.” Chargers, Saints The San Diego Chargers, winners of the AFC West division at 13-3, also have a first-round bye and will face the higher seed of the two first-round AFC winners. The No. 3 seed belongs to the New England Patriots (10-6), who were 6-1 favorites at the start of the season to wind up Super Bowl champions and play the Ravens in the first round. The Colts were tied for third at 8-1 with the New York Giants, who didn’t make the playoffs. Neither did the defending Super Bowl champion Pittsburgh Steelers, who were the second choice in preseason odds at 7-1. The Chargers and New Orleans Saints (13-3) are tied as the second favorite at 5-2, Las Vegas Sports Consultants said, followed by the Dallas Cowboys and Minnesota Vikings, at 5-1. Favre’s Impact The Saints, who won the National Football Conference South division at 13-3, and Vikings have byes in first round. The Vikings captured the NFC North at 12-4 behind quarterback Brett Favre . “Without him, they’d be 20-1,” Seba said of the 40-year- old Favre. The Cowboys (11-5) and Vikings (12-4) are followed by the Arizona Cardinals, with odds of 10-1. The Cardinals (10-6), who won the NFC West division, host the Green Bay Packers (11-5) in a first-round matchup on Jan. 10. The Packers have 12-1 odds, tied with the Patriots, who won the AFC East. The Ravens, at 15-1, are tied with the Philadelphia Eagles, who play Jan. 9 against the Cowboys. Odds to win the Super Bowl, according to Las Vegas Sports Consultants: To contact the reporter on this story: Michael Buteau in Atlanta at mbuteau@bloomberg.net

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Body Scan Isn’t Only Way to See Bomb in Underwear: Ann Woolner

January 4, 2010

Commentary by Ann Woolner Jan. 4 (Bloomberg) — Sixteen days before an al-Qaeda trained Nigerian with explosives in his underwear boarded a Detroit-bound plane, the U.S. director of terrorist screening crowed about the “true information success” of U.S. watch- listing. “An excellent example of interagency information sharing,” Timothy Healy told a Senate committee . These days Healy is eating those words as he tries to figure out how clues given U.S., Nigerian and British authorities about Umar Farouk Abdulmutallab’s apparent slide into terrorism didn’t subject him to at least more careful screening. That’s why we need airport scanning devices that capture every crevice and every bulge in every body, some argue. Already they’re in limited use here and abroad, including Amsterdam, where Abdulmutallab boarded. But airport officials there weren’t using the scans on U.S.-bound passengers at the request of U.S. officials who worried about the privacy of Americans. In reality, the cost and implausibility of installing full body scanners at every port of entry around the world make this impractical. And that’s if people can get over their privacy concerns or if modifications make the machines less graphic. No, what this country needs is focused screening of the population most likely to terrorize the U.S., meaning, Muslims, claim others. Bad idea. Even if you disregard constitutional and moral qualms about harassing a group of people because of their religion, the truth is that ethnic profiling is ineffective and counter-productive. Picking Targets Mostly innocents populate the target group, and plenty of terrorists-in-training exist outside it. Besides, good intelligence requires cooperation from the very people profiling-advocates would target. If you treat everyone within the group as enemy agents, they aren’t going to be your friends. It’s worth remembering that the best information the U.S. received about Abdulmutallab came from his father, who had become alarmed by his son’s extreme religious views and disappearance into Yemen. Targeting for close watch those groups that train people to attack the U.S. is what’s required, whether driven by religious fervor or not. Before spending billions on more sophisticated airport screeners, before approving government surveillance based on religion or nationality, look at what the U.S. already has in place. Ask why it didn’t stop Abdulmutallab from boarding Northwest 253 in Amsterdam wearing explosives between his legs. Mishandling Crucial Information What you’ll find is the same thing discovered in the wake of Sept. 11, 2001: Crucial information wasn’t given the attention or the distribution it deserved within government agencies. The Federal Bureau of Investigation in Minneapolis knew in August 2001 that a foreign national had been attending flight school but showed no interest in landing the giant jets he was learning to fly. French authorities confirmed Zacarias Moussaoui’s links to radical Islamic groups and to Osama bin Laden , who by then had declared war on the U.S. So while U.S. officials detained Moussaoui on an immigration violation, they didn’t push the investigation further to see whether a larger plot was afoot. No one connected that information to other intelligence pointing to a possible attack on the U.S. using commercial jetliners. Terrorist Screening Center Ah, but that was then. Since 2001, U.S. intelligence operations have had a consciousness-raising and have been ordered to join hands and share information to prevent another attack. In 2004 the government combined their disparate watch lists into one superlist, overseen by the FBI’s Terrorist Screening Center, which Healy directs. Vast improvement resulted. I have no doubt lives have been saved as a result. And yet . . . An internal FBI report last May found disturbing lapses. Fifteen percent of the subjects of terrorism investigations never were put on the watch list as they were supposed to be, according to the agency’s inspector general. That’s the big list naming about 400,000 people for whom authorities have at least some information indicating terrorist leanings. As more solid evidence emerges, or as one piece of intelligence is linked to another, the FBI compiles sub-groups for additional airport screening. In the worst cases, individuals are put on the no-fly list — about 4,000 currently. The inspector general found that while 15 percent of investigative subjects were omitted completely from the list, 80 percent were added belatedly. That is, agents took longer than guidelines required to add the names to the list. Not Making Connections And when agents received new information, usually they never got around to modifying the list accordingly. If no one adds a new dot, how can it be connected to the old one? Worse yet, the audit said that people had been entering the U.S. whose names matched subjects that were supposed to have been watch-listed but weren’t. So when Abdulmutallab boarded the flight to Detroit without so much as a round of questioning, “There was a mix of human and systemic failures that contributed to this potential catastrophic breach of security,” as President Barack Obama put it last week. Operating without information that clearly pointed to Abdulmutallab’s plan, government officials failed to link the bits of information that did come their way, John Brennan , Obama’s deputy national security adviser said on NBC and ABC programs Sunday. Warning Signs The Central Intelligence Agency knew in August that an unnamed Nigerian was being readied for a terrorist attack. In November, Abdulmutallab’s father contacted U.S. embassy officials in Nigeria to report his son’s disappearance and apparent shift toward radicalism. At that point, the CIA added the 23-year-old’s name to the watch list, which isn’t shared with other countries. If the U.S. and England had been comparing notes, someone might have noticed that the same Nigerian appeared on both. Then there is the question of why no airline personnel thought it odd that a man would book an international round trip carrying only a back pack. At the least, that should have led to more questioning. No fancy equipment needed. No ethnic profiling. Then we might have had what Healy called a “true information success.” ( Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.) Click on “Send Comment” in sidebar display to send a letter to the editor. To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net .

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British Hostage Moore Spent Part of His Captivity in Iran, Petraeus Says

January 1, 2010

By Caroline Alexander Jan. 1 (Bloomberg) — British hostage Peter Moore, freed this week after being kidnapped in Iraq in May 2007, spent at least part of his time in captivity in neighboring Iran, U.S. regional military commander Gen. David Petraeus said. “Our intelligence assessment is that he certainly has spent part of the time, at the very least, in Iran, part of the time that he was a hostage,” Petraeus told reporters in Baghdad today during a briefing aired by al-Iraqiya Television. Petraeus said it was difficult to tell what role Iran’s Revolutionary Guard or the Quds Force, a branch of the Guard accused of supporting attacks in Iraq, had in Moore’s capture. The commander said he hasn’t talked to the Briton or heard anything that he has said about his ordeal. Moore, 36, arrived back in the U.K. today to be reunited with his family, the Foreign Office in London said in a statement. An Iranian foreign ministry spokesman described claims the abduction had been organized by the Revolutionary Guards as “baseless,” the British Broadcasting Corp. reported. Moore was set free and delivered to Baghdad authorities on Dec. 30, ending Britain’s longest-running hostage crisis since 1991 when Church of England envoy Terry Waite was released after being held for almost five years by the Islamic Jihad organization in Lebanon. Bodyguards Killed Three of four British bodyguards seized with Moore in the Iraqi capital have been killed. U.K. officials believe the fourth is dead. Moore, from Lincoln in eastern England, was working as an computer consultant for U.S. management consulting firm BearingPoint Inc. when he was taken. Moore arrived in the U.K. on a flight into RAF Brize Norton in Oxfordshire. “Peter was met by Foreign Office staff and will be reunited with his family later,” today’s statement said. In a statement issued by the Foreign Office on their behalf, the Moore family said they “are thrilled to have Peter back safely — we have a lot of catching up to do and would like to have time with Peter on our own.” To contact the reporter on this story: Caroline Alexander in London at calexander1@bloomberg.net .

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Unusual Political Career of Calvin Coolidge, Never Defeated for an Office (New York Times)

January 1, 2010

Calvin Coolidge began his career as a small-town lawyer, the first of his line to leave the soil after three centuries in New England. The Coolidges had always been farmers, frugal in their living, Puritan in spirit, and honorable in their dealings with their neighbors.

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Cricket: England on verge of big victory

December 30, 2009

Cricket: England on verge of big victory

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Favre, Seven Vikings on NFC Pro Bowl Team; Six Colts on AFC Squad

December 30, 2009

By Nancy Kercheval Dec. 30 (Bloomberg) — Brett Favre and seven Minnesota Vikings were named to the National Football Conference’s Pro Bowl team, while Peyton Manning and five Indianapolis Colts were selected to the American Football Conference squad. Favre has made 11 Pro Bowl teams, a record for quarterbacks, while Manning has been tapped 10 times for the National Football League all-star post. The 2010 Pro Bowl game is scheduled for Jan. 31, at Dolphin Stadium in Miami, and will be played a week before the Super Bowl for the first time. Drew Brees of New Orleans was tapped to be the starting quarterback for the NFC, with Favre and Green Bay’s Aaron Rodgers as backups. Thirteen members of the 42-player squad would be participating in their first Pro Bowl. Two-time All-Star Shaun O’Hara of the New York Giants earned a post as starting NFC center. For the AFC, Manning was selected to start as quarterback and will be backed by New England’s Tom Brady and Philip Rivers of San Diego. The AFC roster has eight first-time players. The New York Jets have three Pro Bowl selections, including Nick Mangold , who will make his second trip as center for the AFC. Guard Alan Faneca will make his ninth appearance. Two-time All-Star Darrelle Revis will start as cornerback, representing the Jets’ top-ranked defense with a league-low 264.3 yards per game and 163.9 passing yards per game. The NFC defeated the AFC 30-21 in last season’s Pro Bowl. The AFC holds a 20-19 series lead over the opponent as the All- Stars prepare for their 40th game. Each player on the winning Pro Bowl team receives $45,000; each member of the losing squad gets $22,500, according to the league’s collective bargaining agreement. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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Homeowners pay down mortgage debt

December 29, 2009

LONDON (Reuters) – Britons put nearly 5 billion pounds of equity into their homes in the third quarter of the year as record low interest rates encouraged homeowners to pay down debt. Bank of England figures on Tuesday show Britons injected

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Jets-Bengals Game Moved to Prime Time Jan. 3 Amid New York’s Playoff Quest

December 28, 2009

By Erik Matuszewski Dec. 28 (Bloomberg) — The New York Jets will play the final game of the National Football League’s regular season in prime time as they try to claim a playoff berth for the first time since 2006. The Jan. 3 game between the Jets and Cincinnati Bengals has been moved to 8:30 p.m. New York time and will be televised nationally on General Electric Co.’s NBC network. The matchup was originally scheduled to start at 1 p.m. at Giants Stadium in East Rutherford, New Jersey. The Jets (8-7) would earn a spot in the NFL’s postseason with a victory over the Bengals, who have already clinched a playoff berth as the American Football Conference North Division champions. Cincinnati has a 10-5 record and is competing with the New England Patriots for the No. 3 playoff seed in the AFC. The Sunday night matchup will be the final game of the NFL’s regular season. New York sent the Indianapolis Colts to their first loss of the season yesterday and is among five teams with 8-7 records competing for the AFC’s final two playoff spots. In another time change, the Dallas Cowboys and Philadelphia Eagles will start at 4:15 p.m. on Jan. 3 instead of 1 p.m. The game, televised by News Corp.’s Fox network, will determine the National Football Conference’s East Division winner. the release. The league’s flexible scheduling creates marquee match-ups for the Sunday night games on NBC during the season’s final seven weeks. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Injecting Cells Into Brains of Stroke Victims Tests ReNeuron’s Viability

December 23, 2009

By Andrea Gerlin Dec. 23 (Bloomberg) — A neurosurgeon at Southern General Hospital in Glasgow, Scotland, plans to drill a hole in a patient’s skull, insert a needle and inject 2 million stem cells from ReNeuron Group Plc into his brain early next year. The patient is the first of 12 men disabled by strokes who expect to receive from 2 million to 20 million stem cells grown from the brain of an aborted 12-week-old fetus. The men would be studied for two years to see if the cells help the brain repair damage, without causing further harm. ReNeuron won U.K. government approval in January to test its ReN001 stem-cell line after three failures get permission from U.S. regulators. Preliminary analysis of the study next year will determine whether Guildford, England-based ReNeuron can continue developing the treatment and may also determine the viability of the company, whose market value is 19.9 million pounds ($32 million). “The facts are it certainly may fail,” said Michael D. West , who founded Geron Corp., the first company to use human embryonic stem cells after they were discovered in 1996, and now is chief executive officer of BioTime Inc. , a biotechnology company in Alameda, California. “The risks of this and other cell-based therapies are currently unknown.” ReNeuron faces financial pressure as well: The company has access to 7.1 million pounds ($11.5 million) in cash, enough to keep running until mid-2011, which isn’t long enough to see final data from the trial. The company says it aims to begin the study early next year, and is awaiting government signoff on trial details. Potential Market ReNeuron closed unchanged at 5.83 pence in London trading yesterday. The shares have more than doubled in 12 months. There aren’t any treatments to reverse the disability caused by strokes, which occur when there is a sudden loss of blood to the brain. Every year, about 5 million people worldwide are disabled by strokes, according to the World Health Organization in Geneva. The price of an effective stem-cell treatment may be $20,000 and the potential market $3 billion, assuming it is suitable for 1 million people and that 15 percent of them can afford it, said Vadim Alexandre , an analyst at London-based Daniel Stewart & Co., which helped ReNeuron raise money this year. Halving the Odds The odds that any treatment in an early-stage safety trial will eventually progress to the market are about 10 percent, according to Alexandre. He said he halved that probability to 5 percent for ReN001 because of the novelty of cell-based treatments. After the U.K. regulator authorized the trial in January, Alexandre recommended that investors buy shares of ReNeuron, citing the “large potential market” if the product is one day approved. The stock may more than double to 13 pence in the next year, he wrote on Nov. 26. Stem cells are the building blocks of life and researchers around the world are studying them to see whether they can cure disease. Those derived from embryos have the ability to become any of the roughly 210 types of cells in the human body. Fetal stem cells are grown from tissue taken from a fetus, which an embryo becomes eight weeks after conception. The biotechnology company’s trial will be the first to use fetal stem cells for treating stroke in humans, after successful tests in rodents. Other trials have used stem cells derived from a patient’s bone marrow, fetal pig brain cells or tumors grown from germ cells, the precursors to eggs and sperm. None has proceeded to mid-stage trials after encountering safety or financing problems. Biocompatibles Study Biocompatibles International Plc , of Farnham in the U.K., is delivering stem cells from other patients’ bone marrow to stroke patients through a removable inch-square “tea bag” device in a safety trial in Germany. Stem Cell Therapeutics Corp. of Calgary was ordered by North American regulators last year to halt human tests of its stroke treatment, which uses patients’ stem cells to stimulate growth of new brain cells, for safety reasons. ReNeuron has accumulated losses of 26.6 million pounds since its founding 12 years ago. It generated revenue of 93,000 pounds last year from sales of non-therapeutic stem cell products for use in research. The company raised 3 million pounds through a stock sale in the first half. The company will be spending cash and require additional funding, posing “a material uncertainty which may cast significant doubt over the ability of the group to continue as a going concern,” wrote PricewaterhouseCoopers LLP in an auditing opinion dated July 23. Matrix Corporate Capital LLP agreed in November to provide ReNeuron as much as 5 million pounds over two years. War Chest “We’ve never had a huge war chest,” CEO Michael Hunt said in an interview on Oct. 28. The company had 2.15 million pounds in cash at Sept. 30. ReNeuron plans to test the same fetal stem cell line for peripheral artery disease, Hunt said. The condition occurs when vessels in the extremities harden, blocking arteries and reducing blood flow to limbs. The company will begin discussions with regulators, probably in the U.S. or Europe, Hunt said. If ReNeuron obtains approval next year, the trial may start in 2011, he said. ReNeuron researchers and the Bristol Heart Institute in England found that the company’s stem cells improved blood flow to the legs of mice 21 days after their femoral arteries were blocked. The results of the study were presented at the American Heart Association conference in Orlando, Florida, on Nov. 15. Three-Year Quest The procedures in the stroke patients will complete ReNeuron’s three-year quest to begin testing its therapy, which comes from a stem-cell line grown from a tissue sample taken in 2003 from the brain of an aborted fetus. ReNeuron can grow all the cells needed for treatment from the single tissue sample, averting the need to collect more. The company has slowed or stopped work on the eye disease retinitis pigmentosa, Parkinson’s disease and diabetes to save money and focus on the stroke trial, Hunt said. It has cut staff to 15 from 45 since 2007 and reduced research and development spending by 39 percent last year, saving about 2 million pounds. The U.S. Food and Drug Administration in 2008 placed the stroke trial on clinical hold, citing safety issues associated with putting cells from a human fetus into a person’s brain for a nonfatal condition, Hunt said. Safety Test The company has been negotiating safety aspects of the trial with the U.K. government’s Gene Therapy Advisory Committee since February. The panel gave the company a favorable opinion, subject to the provision of more data and compliance with clinical protocols, Hunt said. Once ReNeuron satisfies the committee, Keith Muir , a neurologist at the University of Glasgow , will recruit patients, a process Muir said will take at least two months. No more than one patient can be treated in a month, he said. Complications such as bleeding or injury to the brain are Muir’s biggest concern, he said. Introducing foreign cells into a patient’s body also could lead to immune rejection or swelling. Muir said those risks didn’t appear in rodents or in Parkinson’s disease patients who have undergone fetal brain tissue transplants. “We’ve had a long discussion with people who are experts in immunology and transplant rejection and it seems highly improbable that there’s going to be any clinically important reaction,” Muir said. Another potential risk is cancer. Stem cells may work because they are capable of multiplying, much as cancer cells do. The key to their use is controlling their growth, a process that researchers don’t understand completely. ‘Chemical Switch’ ReNeuron has modified the ReN001 stem cell line with a gene called c-myc to provide a “chemical switch” that enables doctors to control the cells’ growth by adding or removing the drug tamoxifen. That gene is associated with cancer, said Sean Savitz , a neurologist at the University of Houston. Whether it will produce tumors in patients won’t be known until years after the trial. The company is enrolling only men in the trial because the drug needed to activate or inactivate the gene may have risks for certain women, said Hunt and John Sinden , ReNeuron’s chief scientific officer. Women may be added at a later stage of testing. If ReNeuron does show promise in either trial, the company may attract attention from bigger drugmakers. In the past year, Pfizer Inc. , based in New York, said it would invest $100 million in the field over five years and GlaxoSmithKline Plc , based in London, said it would fund $25 million of research at the Harvard Stem Cell Institute in Cambridge, Massachusetts. “The big deals will occur when they have substantial data,” said Navid Malik , an analyst at Matrix. “Two years out, that could be a possibility.” To contact the reporter responsible for this story: Andrea Gerlin at agerlin@bloomberg.net

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U.K., Europe Travel Disruption to Ease as Temperatures Rise Above Freezing

December 23, 2009

By Morwenna Coniam and Gregory Viscusi Dec. 23 (Bloomberg) — Travel disruptions may ease in many areas of the U.K. and Europe today as temperatures rise above freezing in most places. More snow is forecast in northern England, Scotland and eastern Germany. Eurostar Group Ltd. said the backlog of passengers from the weekend has been cleared after trains through the Channel Tunnel began running following three days of cancellations. The company said procedures that were put in place to move waiting passengers had “worked well.” The rail company will continue to operate a restricted service today and tomorrow and said in an e-mailed statement that it will do its “best to allocate a seat on the next available train” for those customers with tickets for travel between Dec. 19 and tomorrow. The Groupe Eurotunnel SA shuttle train canceled same-day round trips for today and tomorrow. Heathrow, Europe’s busiest airport, is now open and runways are clear, with some disruptions, the airport said on its Web site. A total of 51 flights to British and European destinations were canceled yesterday. EasyJet canceled 52 flights from Luton Airport yesterday, according to Sky News. London Gatwick Airport and Luton Airport are open with some flights are delayed or canceled, according to their Web sites. Flights to and from airports in Glasgow and Edinburgh may be disrupted or canceled, the Scottish airports said. British Airways Plc said the majority of its flights are now operating normally. EasyJet flights from Luton and Gatwick remain severely disrupted, the British Broadcasting Corp. said. Full Schedule Ryanair Holdings Plc expects to operate a full flight schedule today and tomorrow, the airline said in an e-mailed statement. Frankfurt’s airport said on its Web site that delays and cancellations are still possible today, even though conditions are returning to normal. Berlin’s airport reported that flights are arriving and leaving on time. In Milan, delays are expected at Malpensa Airport, where it snowed throughout the night, SEA, the airport’s operator, said on its Web site. Flights are normal at Linate, the city’s smaller airport. Flights at both airports were delayed yesterday because of snow. Some early trains in northern Italy were canceled because of ice covering electrical wires, the state railroad system said on its Web site. Service is now running normally. Paris Airports Paris’s airports were back to normal, as temperature rose above freezing yesterday and are expected to stay there through the Christmas weekend. Earlier this week, Charles de Gaulle and Orly airports had asked airlines to cancel up to a third of their short-haul flights. A major commuter line in Paris was running at less than half service because of a strike, while the Austerlitz train station is only partially open because of a car accident that caused a block of concrete to fall on the rails. Two homeless people died in France this week from the cold, Agence France-Presse reported. In Poland, 79 people have died this week as temperatures fell to as low as minus 20 Celsius (minus 4 Fahrenheit). The temperature in Warsaw yesterday rose above freezing for the first time in 10 days and should remain there for the next two days, www.weather.com reported. Rail Network The vast majority of the British rail network is now open, according to a National Rail Enquiries recorded telephone message. Even so, domestic rail services are continuing to experience delays, with late arrivals reported near Lancaster in northeastern England. Services in Glasgow are returning to normal after heavy snow in the Strathclyde area led to a signal failure and the central station concourse had to be closed yesterday evening, the BBC reported, citing Network Rail Ltd. Go-Ahead Group Plc’s Southeastern commuter train unit said it plans to operate a “normal weekday timetable service,” following a Saturday timetable of reduced frequencies on all routes yesterday, according to a statement on its Web site . Chiltern Railways Co. Ltd. has canceled and altered several services, according to the company Web site. The Met Office was forecasting further snow showers in Scotland and Northern England overnight and this morning, with widespread cold and icy conditions. Aberdeen ‘Mayhem’ Police say there is “mayhem” on the roads of Aberdeen, Scotland, according to the BBC. Nine severe weather warnings have been issued throughout the country, according to the Met Office Web site , and the Highways Agency is urging people to check their routes for delays before setting out and to be prepared for the cold, according to a notice on its Web site . The Automobile Association reported it had more than twice as many call-outs yesterday as it would have on a typical Tuesday, receiving 18,000 calls compared with the usual number of around 8,500. The rescue service’s specialist Land Rovers are were moving up to the north last night in expectation of worse weather conditions there today, AA spokesman Luke Bosdet said in a telephone interview. Many rescue vehicles were called to “mop up” abandoned cars, Bosdet said. The mountain rescue service was also called into action, with a woman in northern England giving birth to a baby girl in the back of a rescue vehicle after an ambulance was unable to reach the mother because of the snow, the BBC reported. Two people were killed and 48 people were injured after a bus overturned on an icy road last night in Cornwall, southwestern England, the Devon and Cornwall Police service said on its Web site . The bus was returning from a trip to see local Christmas lights, the police said. A Royal Air Force helicopter was sent to assist in removing injured people, the service said. To contact the reporter on this story: Morwenna Coniam in London at mconiam@bloomberg.net .

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BOE Voted 9-0 to Maintain Bond Plan as Dale, Miles Switched to Consensus

December 23, 2009

By Jennifer Ryan Dec. 23 (Bloomberg) — Bank of England policy makers unanimously kept their bond-purchase plan at 200 billion pounds ($320 billion) this month as Spencer Dale and David Miles suspended dissenting votes and opted for consensus. Miles, who favored 215 billion pounds in November, and Chief Economist Dale, who had wanted to limit it to 175 billion pounds, said it was better to continue the current program , minutes of the Dec. 10 meeting published today in London showed. They said their previous arguments could still be justified. The nine-member Monetary Policy Committee, led by Governor Mervyn King , is counting on a return to economic growth as soon as this quarter in its fight against the threat of deflation. The economy shrank 0.2 percent in the third quarter, less than previously estimated, as a jump in construction drew the longest recession on record closer to an end, data showed yesterday. “Most members felt that there had been some positive developments for the near term, albeit relatively minor ones by comparison to the uncertainties,” the minutes said. “Developments during this month had not been sufficient to alter committee members’ views about the major forces driving the medium-term outlook for inflation or about the risks.” The panel also voted unanimously to keep the benchmark interest rate at a record low of 0.5 percent, the minutes show. The pound was little changed after the report, trading at $1.5950 as of 9:50 a.m. in London. The yield on the two-year gilt rose 5 basis points today to 1.264 percent. February Decision “For those members who had preferred a different policy action at the November meeting, a slightly different scale of asset purchases could still be justified,” the minutes said. Policy makers have signaled they prefer to assess the size of their so-called quantitative-easing program only in months where they publish new quarterly growth and inflation forecasts. The next projections will be released in February. “There’s a sense that the January meeting will be a bit of an irrelevance,” said Ross Walker , an economist at Royal Bank of Scotland Group Plc in London. “The decision in February is still quite finely balanced. They probably won’t do more but there’s a significant risk, perhaps 35 percent to 40 percent, they might extend it. Economic reports are still painting a mixed picture of the U.K.’s route out of recession. The U.K. statistics office said today that services industries contracted in the three months through October. At the same time, mortgage lending rose to the highest in two years last month, the British Bankers Association said today. Momentum While policy makers said that the economy’s performance in the third quarter “was consistent with greater momentum looking ahead,” they also said that there had been “less favorable developments.” Growth in money supply has been “disappointing,” the minutes said. The panel said that the narrowing in the spread between gilt yields and corresponding swap rates, which they had previously seen as a positive sign of the bond plan’s success, has “partly reversed” in the past two months. The measure of M4 money supply that the bank uses to assess the effectiveness of quantitative easing fell 0.7 percent in October from the previous month and was down an annualized 5.3 percent in the three months through October, the bank said Nov. 30. The gauge excludes financial companies that specialize in intermediating between banks. The panel also noted recent events in Dubai and Greece during their meeting. “Financial market volatility surrounding events in Dubai and the rating agency downgrade of Greek sovereign debt had provided a reminder of the potential for shocks to affect the United Kingdom,” the minutes said. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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Stocks Climb in Europe, Asia on Signs Economy Recovering; Oil, Copper Gain

December 23, 2009

By Michael Patterson Dec. 23 (Bloomberg) — Stocks rose around the world, driving Europe’s Dow Jones Stoxx 600 Index to a 14-month high, on evidence that the global economy is recovering from its recession. Oil and copper advanced. The MSCI World Index of developed-nation shares climbed 0.3 percent at 9:41 a.m. in London. Futures on the Standard & Poor’s 500 Index added 0.3 percent and the MSCI Asia Pacific Index increased 0.5 percent. Oil gained 0.6 percent in New York, while the dollar traded near a three-month high against the euro. U.S. consumer spending probably rose in November for the sixth time in seven months as households took advantage of holiday discounting, economists said before reports today. China’s growth may surge to as much as 12 percent next year, according to Citic Securities Co., the nation’s biggest listed brokerage. Consumer confidence in Italy unexpectedly rose in December to the highest in more than seven years after Europe’s fourth-biggest economy emerged from a recession. “The path of least resistance will continue to be to the upside,” Robert Doll , who helps oversee about $3.2 trillion as chief investment officer for global equities at New York-based BlackRock Inc., said in a Bloomberg Television interview. The economic recovery “means earnings should be somewhat better and liquidity should still be plentiful. That’s a recipe for equities moving higher,” Doll said. Final Rally The Stoxx 600 rose for a third day, adding 0.5 percent to reach its highest level since October 2008. Michael Page International Plc, the U.K.’s second-largest recruitment company, climbed 2.6 percent in London after UBS AG lifted its recommendation on the stock. Today is the last full day of trading in Europe before the Christmas holiday. The Bombay Stock Exchange Sensitive Index rose 3 percent, the steepest gain among world equity gauges. Indian exporters including Tata Consultancy Services Ltd. and Infosys Technologies Ltd. rallied as higher-than-expected existing U.S. home sales yesterday spurred speculation the U.S. economic recovery is strengthening. The gain in U.S. futures indicated the S&P 500 may advance for a fourth straight day. U.S. consumer purchases increased by 0.7 percent for a second consecutive month, according to the median estimate of 72 economists surveyed by Bloomberg News. The report may also show incomes grew by the most in six months. Confidence and new-home sales probably also climbed, other reports may show. Waning Volatility The VIX benchmark index for U.S. stock options volatility slipped below 20 yesterday for the first time since August 2008, signaling the rally in stocks has quelled demand for protection against market swings. China’s Shanghai Composite Index rebounded from a seven- week low, advancing 0.8 percent. The nation’s central bank reaffirmed plans to keep a “moderately loose” stance for 2010 and to restrict credit for industries with excess capacity, in its final policy statement for the year. OPEC Secretary-General Abdalla Salem El-Badri said yesterday emerging-market countries such as China are becoming increasingly important for the group, which produces 40 percent of the world’s oil. Crude oil for February delivery rose as much as 45 cents to $74.85 a barrel in electronic trading on the New York Mercantile Exchange. Copper for delivery in three months climbed 0.5 percent to $6,918 a metric ton on the London Metal Exchange. Kiwi Drops The dollar traded within half a cent of its strongest level against the euro since Sept. 4. New Zealand’s currency dropped as much as 0.3 percent to the weakest level in more than three months against its U.S. counterpart after the nation’s economy expanded at half the pace economists forecast. The pound stayed lower after minutes from the last Bank of England meeting showed policy makers voted unanimously not to boost asset purchases. The U.K. currency declined 0.1 percent to $1.5933 and 89.33 pence per euro. Government bonds were little changed, with the yield on the U.S. 10-year note falling 1 basis point to 3.75 percent, near the highest level since Aug. 13, as the Treasury prepared to announce the size of its auctions for next week. The yield on the 10-year German bund, Europe’s benchmark government security, climbed 1 basis point to 3.27 percent. Declines in Treasuries yesterday drove the yield on the 10- year note to 49 basis points more than bunds, the widest spread since July 2007. It was at 48 basis points today. The cost of insuring European corporate bonds against default fell to the lowest level since May 2008, with the Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropping 4.5 basis points at 439, according to JPMorgan Chase & Co. prices at 9:30 a.m. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 0.75 basis point to 75, meaning it costs 75,000 euros a year to insure 10 million euros of debt against default for five years. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net .

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U.K. Travel Disruptions Continue as Temperatures Drop, More Snow Forecast

December 22, 2009

By Morwenna Coniam Dec. 23 (Bloomberg) — Travel disruptions will continue in many areas of the U.K. today as temperatures drop below freezing and more snow is forecast. That is expected to leave roads icy and lead to some rail and air services being altered or canceled, while some earlier problems have been resolved. Eurostar Group Ltd . said the backlog of passengers from the weekend has been cleared after trains through the Channel Tunnel began running following three days of cancellations. The company said procedures that were put in place to move waiting passengers had “worked well.” The rail company will continue to operate a restricted service today and tomorrow and said in an e-mailed statement that it will do its “best to allocate a seat on the next available train” for those customers with tickets for travel between Dec. 19 and tomorrow. The Groupe Eurotunnel SA shuttle train canceled day-trip services for today. Heathrow, Europe’s busiest airport, is now open and runways are clear, with some disruptions, the airport Web site said. A total of 51 flights to British and European destinations were canceled yesterday. EasyJet canceled 52 flights from Luton Airport yesterday according to Sky. London Gatwick Airport, Luton Airport and Glasgow Airport are open but some flights are delayed or canceled, according to their Web sites. Flights to and from Edinburgh Airport may be disrupted. British Airways Plc said the “majority” of its flights are now operating “normally.” Easyjet flights from Luton and Gatwick remain severely disrupted, the BBC said. Ryanair Holdings Plc expects to operate a full flight schedule today and tomorrow, the airline said in an e-mailed statement. Rail Network The vast majority of the rail network is now open, according to a National Rail Enquiries recorded telephone message, but domestic rail services are continuing to experience problems, with delays reported near Lancaster in Northeast England by several operators. Services in Glasgow are returning to normal after heavy snow in the Strathclyde area led to a signal failure and the central station concourse had to be closed yesterday evening, the BBC reported, citing Network Rail Ltd. Go-Ahead Group Plc’s Southeastern commuter train unit said it plans to operate a “normal weekday timetable service,” following a Saturday timetable of reduced frequencies on all routes yesterday, according to a statement on its Web site . Chiltern Railway Co Ltd. has canceled and altered several services, according to the company Web site. The Met Office was forecasting further snow showers in Scotland and Northern England overnight and this morning, with widespread cold and icy conditions. Aberdeen ‘Mayhem’ Police say there is “mayhem” on the roads of Aberdeen, Scotland, according to the BBC. Nine severe weather warnings have been issued throughout the country, according to the Met office Web site , and the Highways Agency is urging people to check their routes for delays before setting out and to be prepared for the cold, a notice on its Web site said. The Automobile Association reported it had more than twice as many call-outs yesterday as it would have on a typical Tuesday, receiving 18,000 calls compared with the usual number of around 8,500. The rescue service’s specialist Land Rovers are were moving up to the north last night in expectation of worse weather conditions there today, AA spokesman Luke Bosdet said in a telephone interview. Many rescue vehicles were called to “mop up” abandoned cars, Bosdet said. The mountain rescue service was also called into action, with a woman in northern England giving birth to a baby girl in the back of a rescue vehicle after an ambulance was unable to reach the mother because of the snow, the British Broadcasting Corp. reported. Forty-eight people were injured and one was in a critical condition after a highway bus overturned on icy roads last night in Cornwall, southwest England, the Devon and Cornwall Police service said on its Web site. The bus was believed to be returning from a trip to see local Christmas lights, the police said. A Royal Air Force helicopter was to assist in removing injured people, it said. To contact the reporter on this story: Morwenna Coniam in London at mconiam@bloomberg.net .

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U.K. Economy Shrank 0.2% in Third Quarter, Less Than Previously Estimated

December 22, 2009

By Jennifer Ryan Dec. 22 (Bloomberg) — The U.K. economy shrank less than previously estimated in the third quarter as a jump in construction and fixed investment brought the longest recession on record closer to ending. Gross domestic product fell 0.2 percent from the second quarter, compared with a previous measurement of a 0.3 percent drop, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 24 economists was for a 0.1 percent contraction. The Confederation of British Industry yesterday raised its 2010 economic growth forecast and said the Bank of England may pause its bond-purchase plan in February. Policy makers have pledged to print 200 billion pounds of new money to stoke spending and shake off Britain’s longest recession on record. “It looks like the fourth quarter will be in positive territory and pick up pace next year,” Nick Kounis, chief European economist at Fortis Bank Nederland NV in Amsterdam and a former U.K. Treasury official, said before the report. “The bank could start to become uncomfortable with the extremely loose monetary policy.” The pound was little changed at $1.6042, down 0.2 percent on the day as of 9:33 a.m. in London. The yield on the two-year government bond was up 1 basis point today at 1.198 percent. Recession Damage The recession has now shaved 6 percent off gross domestic product, the statistics office said. The economy contracted 5.1 percent from a year earlier, more than the 4.9 percent median forecast in a Bloomberg News survey of 21 economists. The U.S. economy probably grew an annualized 2.8 percent in the third quarter, according to the median forecast of 62 economists. The Commerce Department will publish that data at 8:30 a.m. in Washington. Construction jumped 1.9 percent, compared with a previous estimate of a 1.1 percent drop, the statistics office said. That offset bigger contractions in services and industrial production. Travis Perkins Plc, the U.K. building-materials supplier that owns the Wickes home-improvement chain, said Dec. 17 it expects earnings for 2009 to be “at the upper end” of analyst estimates as spending on do-it-yourself projects aided sales. Fixed investment increased 2.2 percent, instead of the 0.3 percent drop previously measured. Government spending rose 0.3 percent and consumer spending increased 0.1 percent, the statistics office said. Election Looming Prime Minister Gordon Brown is trying to revive the economy and rebuild support in time for an election which he must call by June. In an Ipsos-Mori poll published in the Observer on Dec. 20, the opposition Conservatives had support of 43 percent of voters, a 17 percentage point lead over Brown’s ruling Labour Party. The economy may already be expanding again. Bank of England policy maker Kate Barker said in an interview last week that economic growth probably resumed in the fourth quarter. Unemployment unexpectedly fell in November for the first time since February 2008. The Royal Institution of Chartered Surveyors today forecast house prices will rise as much as 2 percent in 2010. The CBI yesterday raised its 2010 growth forecast to 1.2 percent from a previous prediction of 0.9 percent. The group said the central bank will start raising the key interest rate from a record low of 0.5 percent in the second quarter. Barker, speaking on Dec. 15, said that the economic pickup may still lapse in 2010. ‘Bumpy’ Recovery “I’ve always been one of the people who thought that the path of this recovery was likely to be quite bumpy and uneven,” she said. “I wouldn’t rule out the possibility that we’d see another quarter of negative growth.” The household savings ratio, which measures the proportion of income hoarded by consumers, rose to 8.6 percent in the third quarter, the most since the first quarter of 1998, the statistics office said. The central bank kept its bond purchase plan unchanged and held the benchmark interest rate at a record low of 0.5 percent. Minutes showing how Barker and her colleagues voted will be released tomorrow. The current account gap widened to 4.7 billion pounds in the third quarter, or 1.3 percent of GDP, from 4.4 billion pounds in the previous three months, the statistics office said in a separate report today. To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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Falcons Beat Jets on Late Touchdown, Damage New York’s Playoff Chances

December 20, 2009

By Erik Matuszewski Dec. 20 (Bloomberg) — Tony Gonzalez caught a six-yard touchdown pass with 1:38 left to play as the Atlanta Falcons beat the New York Jets 10-7, a damaging blow to the Jets’ chances of making the National Football League playoffs. The Falcons drove 57 yards for the winning score at Giants Stadium in East Rutherford, New Jersey. The touchdown came on a fourth-down pass by Matt Ryan . On the Jets’ final drive, rookie quarterback Mark Sanchez was intercepted for the third time in the game. New York fell to 7-7 and is a half-game behind Baltimore for the final playoff berth in the American Football Conference with two games left in the NFL’s regular season. At 7-7, the Jets are tied with the Jacksonville Jaguars, Tennessee Titans, Houston Texans and Miami Dolphins. The Titans beat the Dolphins 27-24 in overtime, while the Texans defeated the St. Louis Rams 16-13. While the Falcons also are 7-7, they had been eliminated from postseason contention in the National Football Conference. The New England Patriots moved a step closer to clinching the AFC East Division title with a 17-10 win against Buffalo. Randy Moss had a touchdown catch as the Patriots improved to 9-5 with their 13th straight win over the Bills. Jerome Harrison rushed for a team-record 286 yards and three touchdowns to lift the Cleveland Browns to a 41-34 win over the Kansas City Chiefs. Harrison eclipsed Jim Brown’s single-game franchise record and his 28-yard touchdown run with 44 seconds left snapped a 34-34 tie. Josh Cribbs scored on kickoff returns of 100 and 103 yards for the Browns at Arrowhead Stadium in Kansas City to set an NFL career record with eight kickoff runbacks for touchdowns. In today’s other early game, Arizona beat Detroit 31-24. The New Orleans Saints lost to the Dallas Cowboys 24-17 yesterday, their first loss after a 13-0 start. The Indianapolis Colts remained undefeated three days ago with a 35-31 victory over the Jaguars, becoming the third team in NFL history to win their first 14 games. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net .

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UK property black hole threatens banks’ lending (Daily Telegraph)

December 20, 2009

Britain is at risk of a mass sell-off of distressed commercial properties that would send values dipping and impair lending, warns Bank of England.

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Eurostar Aims to Operate Eight Trains Tonight, `Limited’ Service Tomorrow

December 19, 2009

By Thomas Biesheuvel and Anne-Sylvaine Chassany Dec. 19 (Bloomberg) — Eurostar Group Ltd., operator of high-speed trains between London, Paris and Brussels, will run a “limited service” tomorrow after severe weather and locomotive failure caused it to cancel services today. “There will be a limited service and we strongly recommend that travelers whose journeys are not essential change their tickets,” company spokeswoman Emelle Mouhaddib said. Eurostar aims to run eight services this evening for “vulnerable” people, she said. All services were suspended today, affecting more than 31,000 passengers, after four Eurostar trains broke down in the Channel Tunnel overnight and a fifth was delayed. Eurostar Chief Executive Officer Richard Brown said in an interview with Sky News that the temperature change on entering the tunnel created condensation that caused the locomotives to fail. The breakdowns had trapped more than 2,000 passengers in the Channel Tunnel, according to Eurostar’s Mouhaddib. As much as 6 inches (15 centimeters) of snow fell in southeast England yesterday and temperatures dropped to as low as minus-2 Celsius (24 Fahrenheit) overnight, according to the U.K. Met Office’s Web site . While car and truck shuttle services run by tunnel operator Groupe Eurotunnel SA reopened this morning, freight services across the English Channel were suspended after the French authorities closed motorways to lorries following severe weather conditions, John Keefe, a U.K.-based spokesman for Eurotunnel said in a telephone interview. “Several thousand” trucks remain backed up on the M20 motorway in the south-east English county of Kent as a result, he said. Trucks Stuck Trucks coming from Dover were stuck at Calais port because the A16 motorway was closed to them, Gerard Baron, a spokesman for Port de Calais, said. About 8 inches of snow fell overnight in the region, he said. Passenger shuttle services through the tunnel between Folkestone and Calais are currently running a “limited service” with “significant delays” and will be affected for the rest of the day, Keefe said. Eurotunnel said its locomotives and shuttles are prepared so that rapid temperature changes do not affect them. There will be further snow showers this evening in southeast England and temperatures will drop to as low as minus- 4 Celsius, according to the Met Office. Eurostar is seeking to run four trains from London to Paris, three from Paris to London and one from Brussels to London, Eurostar’s Mouhaddib said. The services are intended for elderly people, passengers with young children and pregnant women, she said. “It’s absolutely unprecedented,” Eurotunnel’s Keefe said. “The knock-on effect on passenger shuttle services and freight shuttle services is huge.” A Kent Police statement said “Operation Stack” had been implemented on the M20, where 2,300 trucks have been parked on the road. To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net .

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East Coast Snowstorm Creates Blizzard Conditions, Snarls Weekend Travel

December 19, 2009

By Dan Hart Dec. 19 (Bloomberg) — A major snowstorm dumped as much as 10 inches on the Washington D.C. area overnight and threatened blizzard conditions throughout the northeast U.S. on the last travel and shopping weekend before the Christmas holiday. As much two feet of snow is forecast for the Washington- Baltimore corridor and between 10 and 15 inches in New York City. Winter storm and blizzard warnings and watches extend from Georgia to Massachusetts. Both Reagan National Airport and Dulles International Airport in Chantilly, Virginia, were open, but most airlines had canceled flights today. Baltimore/Washington International Airport near Baltimore was also open, with most flights canceled. “This is going to be a major storm for Washington, Baltimore, Philadelphia and New York and even up into Boston,” Tom Kines , a senior meteorologist at private forecaster AccuWeather.com in State College, Pennsylvania. Kines said blizzard conditions may extend all along the coast from New Jersey to New England. A second storm may be headed for the New York area in time for Christmas, AccuWeather said. The storm puts Long Island residents in “life-threatening conditions” today, as the winter tempest moves north and blankets North Carolina to New England with snow, the National Weather Service said. Life-Threatening Conditions Nassau and Suffolk counties on Long Island may receive as much as 14 inches (35 centimeters) of snow along with winds as strong as 50 miles (80 kilometers) per hour today, according to a weather service statement , which put the region under a blizzard warning. “A blizzard warning means life-threatening conditions,” said Joe Pollina, a weather service meteorologist in Upton, New York. “You may not be able to see a few feet in front of you.” The agency advises people to avoid traveling after noon and says anyone taking to the roads should pack a winter survival kit. The forecast prompted the National Football League’s Baltimore Ravens to postpone the start of their game against the Chicago Bears by more than three hours, to 4:15 p.m. local time, Dec. 20, according to a statement on the team Web site. The snow should be tapering off or ending by the time the New York Jets host the Atlanta Falcons in an NFL game in New Jersey’s Meadowlands the same day, said Brian Ciemnecki , a National Weather Service meteorologist in Upton, New York. Smithsonian Closed The Smithsonian Institution’s Washington museums were closed, as well as schools, universities and state and local governments. Washington area hospitals and nursing homes are asking for volunteers with four-wheel drive vehicles to transport hospital staff to work and the U.S. Navy Band canceled its holiday concert. The storm failed to disrupt an unusual weekend session of the U.S. Senate, where legislators passed a $636.3 billion defense spending measure this morning and moved on to consider health-care legislation. Democratic Senator Mark Begich said at a news conference he had already sent his family home to Alaska and was prepared to stay although it might be tough to get out of Washington afterward. “You get 1 inch, and everything shuts down,” Begich said. “Maybe that’s just desserts.” To contact the reporter on this story: Dan Hart at dahart@bloomberg.net

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Eurostar Cancels Service Amid `Severe Weather’, 31,000 Passengers Affected

December 19, 2009

By Thomas Biesheuvel Dec. 19 (Bloomberg) — Eurostar Group Ltd., operator of high-speed trains between London, Paris and Brussels, canceled all services today due to severe weather conditions in France. “We are not going to be running any services today because of the continuing weather conditions in northern France,” Eurostar spokeswoman Emelle Mouhaddib said. The decision will affect more than 31,000 passengers, she said. Services were suspended after four Eurostar trains broke down in the Channel Tunnel overnight, and a fifth was delayed, trapping more than 2,000 passengers, Mouhaddib said. The company will issue an update on tomorrow’s services at 4 p.m. London time today. Freight services across the English Channel have also been suspended after the French authorities closed motorways to lorries following severe weather conditions, John Keefe, U.K.- based spokesman for Groupe Eurotunnel SA , operator of the tunnel, said in a telephone interview. “Several thousand” trucks remain backed up on the M20 motorway in the south-east English county of Kent as a result, he said. Gerad Baron, a spokesman for Port de Calais, didn’t immediately answer telephone calls today. Passenger shuttle services through the tunnel between Folkestone and Calais are currently running a “limited service” with “significant delays” and will be affected for the rest of the day, Keefe said. ‘Unprecedented’ “It’s absolutely unprecedented,” he said. “The knock- on effect on passenger shuttle services and freight shuttle services is huge.” A Kent Police statement said “Operation Stack” has been implemented on the M20, where 2,300 trucks have been parked on the motorway More than 2,000 people were trapped for several hours in the tunnel in trains without heating and lighting, in some cases, the British Broadcasting Corp. reported today. Passengers from two services were moved to different trains, while two others trains were pushed out, the BBC said. All passengers have now been removed from the tunnel, Mouhaddib said, adding that the trains broke down because of the temperature difference between the cold air and warm tunnel. Eurostar Chief Executive Officer Richard Brown apologized for the inconvenience caused to passengers. The company’s staff “did everything they could” for those involved, Brown told Sky News in an interview. As much as 6 inches (15 centimeters) of snow fell in southeast England yesterday and temperatures dropped to as low as minus-2 Celsius (24 Fahrenheit) overnight, according to the U.K. Metrological Office’s Web site . To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net

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East Coast Snowstorm Drops 10 Inches on Washington, New York May Get 15

December 19, 2009

By Dan Hart Dec. 19 (Bloomberg) — A major snowstorm dumped as much as 10 inches on the Washington D.C. area overnight and threatened blizzard conditions throughout the northeast U.S. on the last travel and shopping weekend before the Christmas holiday. As much two feet of snow is forecast for the Washington- Baltimore corridor and between 10 and 15 inches in New York City. Winter storm and blizzard warnings and watches extend from Georgia to Massachusetts. Both Reagan National Airport and Dulles International Airport in Chantilly, Virginia, were open, but most airlines had canceled flights today. Baltimore/Washington International Airport near Baltimore was also open, with most flights canceled. “This is going to be a major storm for Washington, Baltimore, Philadelphia and New York and even up into Boston,” Tom Kines , a senior meteorologist at private forecaster AccuWeather.com in State College, Pennsylvania. Kines said blizzard conditions may extend all along the coast from New Jersey to New England. A second storm may be headed for the New York area in time for Christmas, AccuWeather said. The storm puts Long Island residents in “life-threatening conditions” today, as the winter tempest moves north and blankets North Carolina to New England with snow, the National Weather Service said. Life-Threatening Conditions Nassau and Suffolk counties on Long Island may receive as much as 14 inches (35 centimeters) of snow along with winds as strong as 50 miles (80 kilometers) per hour today, according to a weather service statement , which put the region under a blizzard warning. “A blizzard warning means life-threatening conditions,” said Joe Pollina, a weather service meteorologist in Upton, New York. “You may not be able to see a few feet in front of you.” The agency advises people to avoid traveling after noon and says anyone taking to the roads should pack a winter survival kit. The forecast prompted the National Football League’s Baltimore Ravens to postpone the start of their game against the Chicago Bears by more than three hours, to 4:15 p.m. local time, Dec. 20, according to a statement on the team Web site. The snow should be tapering off or ending by the time the New York Jets host the Atlanta Falcons in an NFL game in New Jersey’s Meadowlands the same day, said Brian Ciemnecki , a National Weather Service meteorologist in Upton, New York. Smithsonian Closed The Smithsonian Institution’s Washington museums were closed, as well as schools, universities and state and local governments. Washington area hospitals and nursing homes are asking for volunteers with four-wheel drive vehicles to transport hospital staff to work and the U.S. Navy Band canceled its holiday concert. The storm failed to disrupt an unusual weekend session of the U.S. Senate, where legislators passed a $636.3 billion defense spending measure this morning and moved on to consider health-care legislation. Democratic Senator Mark Begich said at a news conference he had already sent his family home to Alaska and was prepared to stay although it might be tough to get out of Washington afterward. “You get 1 inch, and everything shuts down,” Begich said. “Maybe that’s just desserts.” To contact the reporter on this story: Dan Hart at dahart@bloomberg.net

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Bank of England sees bumpy road ahead

December 19, 2009

Bank of England sees bumpy road ahead

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East Coast Snow Storm May Damp TJX, Kohl’s Sales, Stifel Nicolaus Says

December 18, 2009

By Chris Burritt Dec. 18 (Bloomberg) — TJX Cos. , Kohl’s Corp. and other strip shopping-center retailers may be hurt the last weekend before Christmas if an East Coast snowstorm prompts consumers to stay home and buy more online, Stifel Nicolaus & Co. said. Companies with popular Web sites, such as Urban Outfitters Inc. and J.Crew Group Inc., may counter sales declines at their stores with higher online revenue, Richard Jaffe , a Stifel analyst in New York, wrote today in a note. Internet sales probably won’t overcome lower store revenue “during what historically has been the busiest weekend of the year,” he said. A storm moving north from North Carolina to New England may dump as much as 16 inches in the Washington-Baltimore corridor and 6 inches to 12 inches in New York, according to the National Weather Service. The storm is likely to hit all large Eastern Seaboard cities hard, said Tom Kines , a senior meteorologist at private forecaster AccuWeather.com in State College, Pennsylvania. “If the storm comes to fruition,” or if the media continues reporting about it, “consumers will likely stay home,” according to the note by Jaffe and fellow New York-based Stifel analysts Megan Roesch and Beth Stewart. “If consumers venture out in the storm, they will likely travel to malls, where they can shop indoors and have numerous retail options.” Chains with stores in strip shopping centers will suffer the most as people avoid outlets exposed to the weather, according to the analysts. They rate TJX and Urban Outfitters “buy” and Kohl’s and J.Crew “hold.” Waiting Game Sherry Lang , a spokeswoman for Framingham, Massachusetts- based TJX, which operates the T.J. Maxx and Marshalls clothing- store chains, didn’t immediately return a telephone call seeking comment. Nor did Jen Johnson, a spokeswoman for Menomonee Falls, Wisconsin-based Kohl’s. Urban Outfitters, based in Philadelphia, and J.Crew, based in New York, didn’t return calls for comment. More consumers are waiting until the last minute to complete gift purchases this year, prompting the National Retail Federation to repeat its forecast for a 1 percent drop in holiday sales. Consumers on average had completed 46.7 percent of their shopping by the second week in December. That’s the lowest level since 2004, according to a survey by BIGresearch released Dec. 16 by the National Retail Federation. The projected 1 percent slide in sales in November and December compares with last year’s decline of 3.4 percent, the first drop since the Washington-based group started tracking holiday sales in 1995. To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net .

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Corporate Borrowing Costs Will Rise as Europe Withdraws Stimulus Measures

December 18, 2009

By John Glover and Caroline Hyde Dec. 18 (Bloomberg) — Corporate borrowing costs may rise next year in Europe as governments and central banks seek to rein in stimulus measures used to ease the global recession, driving up yields from close to record lows. Companies have benefited from the unprecedented state support which helped cut investment-grade bond yields to as little as 3.8 percent from 6.97 percent a year ago, according to Merrill Lynch & Co. With investors willing to accept riskier assets, corporate issuance in Europe soared to a record $1.5 trillion this year, according to data compiled by Bloomberg. “Our key risk for markets next year is higher bond yields,” said Jim Reid , head of strategy at Deutsche Bank AG in London. That may be “due to government supply starting to overwhelm demand, or because of inflation fears starting to mount,” he said. Governments have spent $5.3 trillion shoring up banks since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to European Union data. Germany alone will sell a total 343 billion euros ($494 billion) of debt in 2010, compared with 329 billion euros this year and 213 billion euros in 2008, the Federal Finance Agency said yesterday. The European Central Bank, which has been lending banks as much money as they want for up to a year at its benchmark interest rate, is starting to pull back on its emergency measures. ECB President Jean-Claude Trichet said on Dec. 10 that market conditions are “stable enough” to allow the bank to withdraw some funding. ‘Biggest Challenge’ Higher interest rates as the stimulus fades are the “biggest challenge” for debt markets next year, according to Barnaby Martin , European credit strategist at Bank of America Merrill Lynch in London. “The withdrawal of government and central bank supports is certain,” said David Watts , a strategist at CreditSights Inc. in London. “The only question is timing.” It’s “anyone’s guess” how bond yields will respond when the Bank of England ends its so-called quantitative easing program of gilt and corporate bond purchases next year, according to Watts. The cost of buying insurance against losses on government debt has surged in the past month on concern countries with deteriorating public finances will struggle to fund their commitments. Greece was downgraded by Standard & Poor’s on speculation Prime Minister George Papandreou will struggle to fulfill his pledge to cut the nation’s deficit by 4 percentage points next year from 12.7 percent of output. Default Swaps Credit-default swaps on Greek government bonds surged more than 130 percent since the start of August and were trading at 266 basis points today, according to CMA DataVision prices. Swaps on U.K. gilts surged 14 basis points to 84 this month while contracts on Portugal climbed 13 basis points to 82.5 and Spain jumped 20.5 to 103.5. “There is definitely a potential danger to credit in sovereign CDS,” said Martin at Bank of America. “When sovereign CDS spreads widen, they act as a lower boundary for credit spreads.” Corporate bond issuance is likely to slow, because companies have already funded their 2010 maturities, according to BNP Paribas SA analysts led by Vivek Tawadey in London. BNP expects 235 billion euros of investment-grade non-financial corporate issuance in 2010, a decline of more than 40 percent from 2009. Mergers and Acquisitions The total covers 139 billion euros of redemptions and means net positive issuance in 2010 of 86 billion euros, the analysts wrote. It also factors in a potential increase in supply caused by mergers and acquisitions and some pre-funding of maturities in 2011. Novasep Holdings SAS, the Pompey, France-based pharmaceutical services company, sold 270 million euros of 9.625 percent seven-year bonds this week as part of debt issuance totaling about $544 million in euros and dollars, according to data compiled by Bloomberg. The company, rated five levels below investment-grade at B by Standard & Poor’s, took advantage of the fall in the cost of borrowing for high-yield issuers. The average yield junk-rated companies pay has tumbled 61 percent to 10.6 percent from 27.8, according to Merrill Lynch index data. BNP Paribas , France’s largest bank, issued 1 billion euros of floating-rate notes due June 2012, Bloomberg data show, as bond sales fell 60 percent in Europe to 3.4 billion euros. Banks, which under new regulations are facing a higher capital charge to buy each other’s senior debt, may find they are competing with companies for funds in public markets, according to Bill Blain , co-head of fixed income at Matrix Corporate Capital LLP in London. “This would be a real headwind for total returns on investment grade corporate bonds, and could initially disappoint the recent influx of retail investors who enjoyed outsized total returns in 2009,” said Andrew Sheets , European credit strategist at Morgan Stanley in London. To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net ; Caroline Hyde at chyde3@bloomberg.net

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U.K.’s `Bumper’ Holiday Shopping to Boost Marks & Spencer Profit Estimates

December 18, 2009

By Sarah Shannon Dec. 18 (Bloomberg) — At a Harvey Nichols holiday store in northern England, shoppers are taking little notice of the country’s longest recession on record. They’re snapping up the luxury retailer’s 200-pound ($323) food gift baskets instead. “It’s greatly exceeded expectations,” general manager Iain Mackenzie said of the 2,000 square-foot (186 square-meter) outlet in Manchester’s Trafford shopping center. Harvey Nichols, known for its flagship London luxury department store, has to send a truckload of new stock to the shop every day, he said. U.K. retailers can expect “bumper Christmas sales” as Britons start to dispel 18 months of concern about the economy, according to a study published this week by Datamonitor Group. About 70 percent of the country’s consumers plan to spend more than normal, the study found. With fewer discounts being offered before the holiday, analysts say profit estimates for store owners such as Marks & Spencer Group Plc may have to rise. “Undoubtedly people are spending more and throwing off the shackles they had earlier in the year,” Andrew Parkinson, general manager of the Bluewater shopping mall in Kent, southeast England, said by phone. Gifts, jewelry and catering are doing “tremendously well,” he said. According to Datamonitor, 16 percent of Britons now say they can see early signs of economic recovery, compared with 9 percent in June. The researcher conducts a monthly survey of about 300 consumers in each of 19 countries. ‘More Optimistic’ “U.K. consumers have become more optimistic about their spending because they believe we’ve seen the worst of the recession,” said Annabel Gorringe, lead analyst at Datamonitor. John Lewis Partnership Plc, the U.K.’s biggest department- store owner, said yesterday that sales at the chain rose 15 percent in the week ended Dec. 12, with growth accelerating to more than 16 percent in the following four days. At the Bluewater mall, Parkinson said he expects the highest Christmas sales in two years, with revenue likely to be up by as much as 5 percent on last year. “A healthy December 2009 should deliver forecast upgrades,” for U.K. retailers’ earnings, said Rod Whitehead , retail analyst at Deutsche Bank AG in London. He estimates total non-food same- store sales will rise by 4 percent in December, compared with an 8 percent decline for the same month last year. Morgan Stanley analysts say increases to profit estimates of about 10 percent will be “widespread” for retailers in January, helped by stronger sales, reductions in inventory and less discounting. Marks & Spencer, the U.K.’s largest clothing retailer, and smaller rival Next Plc are the first publicly traded retailers scheduled to report Christmas sales on Jan. 6. Good As It Gets Christmas may be as good as it gets for retailers. Value added tax will rise to 17.5 percent from 15 percent in January, while possible interest-rate hikes and higher income taxes next year mean the rebound in consumer spending probably won’t last, according to Nick Coulter , an analyst at Numis Securities. “A number of negatives are out there,” Coulter said. “A lot of the good news is already priced into the stocks.” U.K. retail stocks rallied in 2009 as consumer confidence rose to the highest in 1 1/2 years and lower mortgage repayments prompted Britons to make purchases. The 18-member FTSE 350 General Retailers Index has risen 69 percent since Jan. 1, compared with a 22 percent gain by the benchmark FTSE 100 Index. “Investors should sell given that we believe upgrades are now expected whereas the risk of negative same-store sales growth excluding value added tax is now,” said Caroline Gulliver an analyst at Execution Ltd. in London. She has an “underweight” rating on U.K. general retailers. Christian Audigier In Manchester, Harvey Nichols’ Mackenzie says 60-pound bottles of Christian Audigier champagne wrapped in signature tattoo designs are flying off the shelves at the luxury chain’s so-called pop-up store. The seasonal outlet, which opened in November and won’t close until at least the turn of the year, has already run out of 30-pound Christmas breakfast giftboxes offering tea, coffee, clotted cream biscuits and ‘lashings of preserves.’ No discounts are being offered, compared with 25 percent off promotions offered at stores last year. “It’s appealing to a market looking for stocking fillers and gifts for friends and family,” Mackenzie said. The new store has been “very exciting.” To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net .

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U.K. House Price Pickup Will Stall in 2010 on Forced Sales, Rightmove Says

December 14, 2009

By Jennifer Ryan Dec. 14 (Bloomberg) — The U.K. housing market recovery will peter out in 2010 as the supply of homes increases because of forced sales, Rightmove Plc said. Average asking prices will stagnate next year after rising about 2 percent in 2009, the operator of the U.K.’s biggest property Web site said in a statement today. Prices fell 2.2 percent this month to an average of 221,463 pounds ($361,405), and may drop again next month, the group said. Banks may show “less forbearance” to consumers who are late on mortgage payments after the general election, which Prime Minister Gordon Brown must call by June 2010, Rightmove said. A shortage of properties available helped stoke prices this year and erased some losses in values caused during the slump. “2009 turned out to be a good time to trade up,” Miles Shipside , commercial director of Rightmove, said in the statement. “We forecast the positive mood will continue into 2010 until the post-election hang-over kicks in.” The pound was fell 0.1 percent against the dollar today to $1.6223 as of 9:13 a.m. in London. The two-year gilt was 2 basis points lower at 1.19 percent. Asking prices fell 5.8 percent from November in the North of England, making it the worst-performing of 10 regions tracked by Rightmove. East Anglia, where prices rose 0.5 percent on the month, was the only area to show a monthly increase. Rightmove measured asking prices from listings on its site from Nov. 8 to Dec. 5. 100,000-Pound Drop Prices in London fell 1.2 percent, led by a 6.2 percent drop in Hounslow. The next-biggest drop was in Kensington and Chelsea, the capital’s most expensive district, where prices declined 5 percent, or almost 100,000 pounds in a month. The average number of properties available for sale per real estate agent fell to 67, the lowest since February 2008, from 69 the previous month, Rightmove said. The Council of Mortgage Lenders cut its forecast for U.K. mortgage repossessions this year after low interest rates helped Britons manage their payments. The CML last month forecast 48,000 repossessions, down from an earlier prediction of 75,000. Repossessions may increase from the second half of 2010 because banks may become less patient with as many as 240,000 homeowners who have been late on mortgage payments and if interest rates increase, Rightmove said. Record-low interest rates have made borrowing more affordable and helped more U.K. households meet debt payments, the Bank of England said today, citing a survey it conducted with NMG Financial Services Consulting from September to October. Still, Shipside said a jump in mortgage lending next year isn’t likely. “We have seen recovery to a degree in mortgage lending, which is fairly a snail’s pace, and they are being particularly choosy,” Shipside said in an interview on Bloomberg Television. “I can’t see that changing particularly next year, it may even tighten up after the election.” To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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Bank of England holds interest rate at 0.5%

December 12, 2009

Bank of England holds interest rate at 0.5%

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Volcker Says `Basic Structure’ of American Economy Will Impede Its Growth

December 11, 2009

By Simon Kennedy and Michael Doermer Dec. 11 (Bloomberg) — Former Federal Reserve Chairman Paul Volcker said imbalances in the structure of the U.S. economy pose a bigger challenge than the financial crisis and will impede economic growth for some time. “We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export,” Volcker, an adviser to President Barack Obama , said today in Berlin. “It’s involved with the financial crisis but in a way it’s more difficult than the financial crisis because it reflects the basic structure of the economy.” The Fed, European Central Bank and Bank of England have provided record liquidity to support a recovery from the worst financial crisis since the 1930s and have signaled there is no rush to raise interest rates. Fed Chairman Ben S. Bernanke said this week the U.S. economy faces “formidable headwinds,” while the ECB last week left interest rates at a record low. “It’s likely that economic growth is going to be pretty sluggish for a while,” Volcker said in a Bloomberg Television interview. The Obama administration has endorsed a plan by the Group of 20 to rebalance the world economy so that it’s less reliant on U.S. demand. Fed policy makers said Nov. 4 that the economy “has continued to pick up” while constrained by “job losses, sluggish income growth, lower housing wealth and tight credit.” They kept the benchmark interest rate in a range of zero to 0.25 percent and said rates will stay low for an “extended period.” Policy makers meet again next week. To contact the reporters on this story: Simon Kennedy in Paris at at skennedy4@bloomberg.net ; Michel Doermer in Berlin at mdoermer@bloomberg.net

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Stocks Rise as Treasury Yield Curve Widens to Most Since 1980 on U.S. Sale

December 10, 2009

By Mary Childs and Cordell Eddings Dec. 10 (Bloomberg) — Stocks rose in the U.S. and Europe and bonds and the yen dropped on signs central banks are confident enough in the strength of the economic recovery to remove stimulus measures. The yield gap between Treasury 2- and 30-year notes reached the widest level since at least 1980. The Standard & Poor’s 500 Index climbed 0.6 percent to 1,102.35 at 4 p.m. in New York, and Europe’s Dow Jones Stoxx 600 Index added 1 percent. The New Zealand dollar gained against all 16 of the world’s major currencies while the Australian dollar advanced against 15. The so-called Treasury yield curve touched 372 basis points after a $13 billion offering of 30-year bonds drew lower-than-forecast demand. The Swiss National Bank said it will halt bond purchases designed to bolster the economy and the Bank of England said it will spend no more than the 200 billion pounds ($326 billion) already pledged to buy bonds. Australian employment soared for a third month, while U.S. jobless claims over the past four weeks dropped to a one-year low. “If we’re going to profit still from some economic recovery, then you don’t want to be in the safe sectors, but in some of the more leveraged sectors,” Florian Esterer , a money manager at Swisscanto Asset Management in Zurich, which oversees about $58 billion, said in an interview on Bloomberg Television. Esterer said he’s a “selective buyer” of Greek banks. Discretionary Spending Companies that rely on discretionary consumer spending climbed 1.4 percent as a group to lead the advance in the S&P 500. After rising as much as 64 percent from a 12-year low on March 9, the S&P 500 is little changed since mid-&cls;October amid concern the rally outpaced prospects for the economic recovery. The Dow Jones Industrial Average increased 68.78 points, or 0.7 percent, to 10,405.83 today as Alcoa Inc., Walt Disney Co. and Home Depot Inc. climbed at least 1.6 percent. The yield curve widened as the bonds sold by the Treasury drew a yield of 4.52 percent, compared with an average forecast of 4.483 percent in a Bloomberg News survey of five of the Federal Reserve’s 18 primary dealers. The yield curve has widened from 191 basis points at the end of 2008, with the Fed anchoring its target rate at a record-low range of zero to 0.25 percent and the Treasury extending the average maturity of debt. Credit-Default Swaps Credit-default swaps on the Markit CDX North America Investment-Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 1.5 basis point to 96.25 basis points, according to broker Phoenix Partners Group. The index declined to its lowest since Oct. 14, according CMA DataVision pricing. European shares advanced, snapping three days of declines. National Bank of Greece SA, the nation’s biggest lender, advanced 7.1 percent in Athens trading, recovering all of yesterday’s plunge. Inditex SA, the world’s largest clothing retailer, gained 3.6 percent in Madrid after posting third- quarter profit that beat analysts’ estimates. The MSCI Asia Pacific Index lost 0.8 percent. Mazda Motor Corp., Japan’s fourth-largest automaker, slid 3 percent in Tokyo while Honda Motor Co. lost 1.5 percent. Suzuki Motor Corp. dropped 6.5 percent even after Volkswagen AG said it will buy a 19.9 percent stake in the Japanese automaker. The Dubai Financial Market General Index rose 7 percent, its steepest advance since February in a rebound from the 17 percent slide in the last three days. Emaar Properties PJSC, the developer of the world’s tallest tower in Dubai, surged 15 percent after it abandoned a merger with three real-estate units of Dubai Holding LLC. The MSCI Emerging Markets Index gained 0.3 percent, snapping a four-day losing streak. Higher Yields The yen declined against higher-yielding currencies after a government report showed companies in Australia added six times more jobs than economists estimated. Japan’s currency snapped three days of gains against the so-called Aussie and fell for a second day against the kiwi. The New Zealand dollar gained 1.8 percent against the yen for the top advance among 16 currencies. Reserve Bank of New Zealand Governor Alan Bollard said he expects to begin raising interest rates in the middle of 2010. The Australian dollar climbed 1.4 percent against the Japanese currency. Copper fell 0.7 percent in New York. The metal has dropped six consecutive days, the longest losing streak since May. Crude oil for January delivery declined to a two-month low of $69.81 a barrel. Gold advanced 0.5 percent in New York, the first gain in five days. To contact the reporters on this story: Mary Childs in New York at mchilds4@bloomberg.net ; Cordell Eddings in New York at ceddings@bloomberg.net .

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Japan Mask Wearing, Tamiflu Rush Beat Swine Flu Better Than U.S., Europe

December 10, 2009

By Kanoko Matsuyama and Jason Gale Dec. 11 (Bloomberg) — Eight hours after Tokyo office worker Shungo Yamamoto started feeling feverish and faint, he got a diagnosis of swine flu, received antiviral drugs and embarked on three days of self-imposed isolation last month. “I knew it was influenza immediately” because of the fever and joint pain, Yamamoto, 25, said. His doctor confirmed the diagnosis with a nose swab test and prescribed five days of Roche Holding AG’s antiviral drug Tamiflu. When he left the doctor’s office, Yamamoto put on a mask, bought a three-day supply of food, rented DVDs and headed home, where he stayed for the duration of his illness. Japan’s aggressiveness against H1N1 influenza, the result of hygiene standards, social etiquette and a willingness to test and medicate immediately, means the country has fared better than the U.S. or the U.K. in battling the first pandemic in 41 years. A World Health Organization report shows Japan’s mortality rate is 2 deaths for every 100,000 people. The rate is higher by 11 times in the U.K., 16 times in the U.S. and 43 times in Australia. “No doctor in Japan would tell a flu patient just to go home and sleep it off,” said Norio Sugaya , a pediatric specialist at Keiyu Hospital in Yokohama, a port city south of Tokyo. Sugaya sits on a committee that advises WHO, a Geneva- based arm of the United Nations, on managing swine flu patients. In the U.K., a study this month found patients typically waited three days to start taking Tamiflu, one of two medicines available to fight the new virus as well as seasonal influenza. Complication Risk The U.S. Centers for Disease Control and Prevention , based in Atlanta, recommends that antiflu drugs be given to hospitalized patients, pregnant women and others with increased risk of complications. In Japan, doctors are advised to administer the medicines to anyone suspected of having flu, even if a rapid diagnostic test is negative, according to the Japanese Association for Infectious Diseases , a Tokyo-based organization of specialist doctors that provides treatment recommendations. Japan accounted for three-quarters of the Tamiflu dispensed globally in the drug’s first five years of sale, Roche, based in Basel, Switzerland, said in a November 2005 filing to the U.S. Food and Drug Administration. Three years later, Japan’s government announced plans to stockpile enough antiflu medicines for 45 percent of its 128 million people. That may be triple the amount required to treat every swine flu patient. The proportion of people sickened by the pandemic virus ranges from 7 percent to 15 percent, depending on the country, according to WHO. Japanese Practices Japan’s status as one of the biggest users of antiviral medicines and its approach to treating seasonal and pandemic flu should be compared with practices elsewhere and the data should be published in English, said Lance Jennings , a clinical virologist with Canterbury Health Laboratories in Christchurch, New Zealand, who has studied flu for more than 30 years. “If you have better capacity to diagnose cases earlier and are treating appropriately and early, you’re more likely to reduce the number of patients who will go on to develop more- severe influenza,” Jennings said in an interview. While the majority of pandemic flu sufferers got over their illness within days without treatment, 1 percent to 10 percent needed hospitalization and as many as a quarter of those patients required intensive care, WHO said on Dec. 4 . Early Treatment Tamiflu and Relenza, an inhaled medicine made by London- based GlaxoSmithKline Plc , appear beneficial in fighting the H1N1 virus, especially if treatment begins within 48 hours of the onset of symptoms, researchers said in a study in the New England Journal of Medicine in November. A paper in the same journal in December reported reduced complications, including deaths, among hospitalized patients treated with the medications. A survey of Japanese patients in 2005 found 85 percent sought medical treatment for flu and 90 percent of consultations took place within 48 hours after the first symptoms appeared, according to David Reddy , who heads Roche’s influenza task force in Basel. “These people do not wait until it’s too late,” Reddy said in a telephone interview. “Japan has to be the gold standard of management of influenza. It’s almost a societal response in terms of the way people modify their behavior.” Japanese have become accustomed during the past decade to wearing masks in public to ward off allergic reactions to pollen from cedar trees throughout the country, said Masataka Yoshikawa , a researcher who tracks consumer behavior at Hakuhodo Institute of Life and Living, the research arm of a Tokyo-based advertising company. Japanese expect someone with a cold or flu to wear a mask to limit the spread of the virus, he said. Wash and Gargle “Hand-washing, gargling and wearing masks are three hygiene measures that are very well accepted in the community in Japan,” said Nikki Shindo , the Japanese doctor who is leading WHO’s investigation of swine flu patients. “People don’t really hesitate to wear masks in public places. Even the 24/7 convenience stores sell high-particulate respirators at a reasonable price.” Some researchers say they are skeptical that Tamiflu is effective and concerned that the virus will develop resistance to the drug because of misuse. An analysis of 20 studies published in the British Medical Journal on Dec. 8 showed Tamiflu offered mild benefits for healthy adults and found no proof it prevented lower respiratory tract infections or complications of flu. There is little evidence to show that otherwise healthy people should be given Tamiflu routinely, the researchers said. ‘No Doubt’ “Based on our analysis and other subsequent work, there is no doubt that the drug can reduce complications,” said Frederick Hayden , a professor of clinical virology at the University of Virginia School of Medicine in Charlottesville, who was one of the first doctors to study Tamiflu in patients. Missing doses or failing to complete a course of medicine increases the risk that a drug-evading strain will emerge, said William Aldis , an assistant professor of global health at Thammasat University in Bangkok and a former WHO representative to Thailand. In societies such as Japan, where treatment compliance is high, patients are less likely to contribute to drug resistance, he said. “So this is one more reason to think carefully before applying Japan’s approach elsewhere,” Aldis said. Japan, whose flu season typically peaks between January and March, may face more deaths from H1N1 if the infection trend follows that of seasonal flu, said Hitoshi Oshitani , a virology professor at Tohoku University in Sendai, in northern Japan. “Japan will enter its regular peak flu season from now, and we have to observe whether the pattern continues or not,” he said. Oshitani, who advises WHO on pandemic strategies for developing nations, also credits the country’s school-closure program for helping battle swine flu. To contact the reporters on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net ; Jason Gale at j.gale@bloomberg.net .

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Bank of England Sticks to $326 Billion Bond Purchase Plan; Rates Unchanged

December 10, 2009

By Svenja O’Donnell Dec. 10 (Bloomberg) — The Bank of England stuck to its plan to buy as much as 200 billion pounds ($326 billion) in bonds as officials seek to ensure the economy’s escape from the longest recession on record. The Monetary Policy Committee, led by Governor Mervyn King , kept the target for its asset-purchase program unchanged today, as predicted by all 38 economists in a Bloomberg News survey . The central bank also held the bank rate at a record low of 0.5 percent, according to a statement in London. Policy makers signaled last month that the most “natural” time to assess the bond program again will be in February, when they will have more evidence of the economic pickup and new forecasts. Chancellor of the Exchequer Alistair Darling said today that he wants to keep up support for the economy until a recovery is secured. “The Monetary Policy Committee is clearly in wait-and-see mode,” Philip Shaw , chief economist at Investec Securities in London, said before the decision. “The prospect of a self- sustaining recovery suggests no further stimulus coming from the bank. It’s probable we are in recovery mode.” U.K. government bonds stayed lower after the decision. The yield on the 10-year gilt was 11 basis points higher a 3.77 percent as of 12:02 p.m. in London. The two-year yield was 3 basis points higher at 1.13 percent. The pound rose 0.7 percent against the dollar today, trading at $1.6321. Rate Survey The bank’s decision to keep the interest rate unchanged was predicted by all 53 economists in a Bloomberg News survey. Iceland’s central bank cut the main interest rate by 1 percentage point to 10 percent today. The Swiss National Bank left its benchmark, the three-month Libor target, at 0.25 percent, while taking its first step to exit emergency measures by stopping purchases of corporate bonds. King said last month he has an “open mind” on whether to do further bond purchases as he weighs the risk that withdrawing stimulus too soon will jeopardize the recovery. The Bank of England has now spent more than 187 billion pounds of newly created money on bonds. The bulk of its purchases have been in gilts, with corporate securities accounting for the rest. Prime Minister Gordon Brown is trying to cement the economy’s recovery in time to win the next election, due by June next year. Britain’s opposition Conservative Party had support from 38 percent of voters, compared with 30 percent for the ruling Labour Party, a Populus opinion poll for the London-based Times showed this week. Darling’s Forecast Darling predicted yesterday that the economy will expand as much as 1.5 percent next year after contracting 4.75 percent in 2009. He pledged to increase some taxes on income as the recession drives up U.K. government borrowing . Public spending generally “will be much, much tighter,” Darling said in a Bloomberg Television interview today. “I want to start that process once I’ve got recovery established. That’s why we’re continuing to support the economy now.” Some indicators suggest the recession is over. An index of service company growth stayed close to a two-year high in November, the Chartered Institute of Purchasing and Supply and Markit Economics said last week. Unemployment claims rose in October at the slowest pace in 18 months. Gross domestic product rose 0.2 percent in the quarter through November, an estimate this week by the National Institute of Economic and Social Research showed. Company Profits Mulberry Group Plc , the U.K. maker of the Bayswater luxury leather handbag, said today that results for the full year will be “substantially” ahead of analyst forecasts. DS Smith Plc , owner of the Spicers office products brand, said it will likely exceed full-year expectations. While the Bank of England has been trying to keep a lid on yields with its purchases of government bonds, it has also pursued other measures to aid the recovery. Policy makers discussed last month whether to cut the deposit rate to spur lending. “It seems as though it has been discussed but it’s not at all clear there’s strong enough consensus to go ahead with that,” said Neil Mackinnon , an economist at VTB Capital Plc and a former U.K. Treasury official. “I’m not sure just buying up more gilts is necessarily the right thing to be doing.” To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net ;

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Bank of England May Stick to Bond Plan as British Economy Exits Recession

December 10, 2009

By Jennifer Ryan Dec. 10 (Bloomberg) — The Bank of England will probably today stick to its plan to spend 200 billion pounds ($324 billion) on bonds as officials seek to cement Britain’s recovery from recession . The Monetary Policy Committee, led by Governor Mervyn King , will keep the purchase program unchanged, according to all 38 economists in a Bloomberg News survey . Policy makers said last month they may also consider trying to stoke lending with a reduction in the rate paid on commercial bank deposits. The bank will announce today’s decision at 12 p.m. in London. Bank of England policy makers expanded the emergency bond plan last month after Britain unexpectedly stayed mired in the longest recession on record in the third quarter. Chancellor of the Exchequer Alistair Darling said yesterday he’s “confident” the economy is expanding again as his measures to aid growth swell Britain’s record budget deficit . “Darling and King both see the recovery as being fairly tentative at the outset and the need to maintain the stimulus that’s in place at least for the next year,” said David Tinsley , an economist at National Australia Bank who used to work at the central bank. “There’s an outlying risk that they move on the deposit rate, but our view is that if they want do anything more at all they’ll wait.” The bank will keep its benchmark interest rate at a record low of 0.5 percent, according to all 53 economists in a Bloomberg News survey. The Swiss National Bank will also leave its benchmark, the three-month Libor target, at 0.25 percent, according to all 16 economists in a Bloomberg News survey. The SNB will publish the decision at 8.30 a.m. London time. ‘Open Mind’ The Bank of England has now spent more than 187 billion pounds of newly created money on bonds. The bulk of its purchases have been in gilts, with the rest on corporate securities. King said last month he had an “open mind” on further bond purchases as he weighed the risk that withdrawing stimulus too soon will jeopardize the recovery. Policy makers said at the November decision that the next “most natural time” to assess the plan will be in February, when they produce new economic forecasts. The economy may now have escaped the recession. An index of service company growth stayed close to a two-year high in November, the Chartered Institute of Purchasing and Supply and Markit Economics said last week. Gross domestic product rose 0.2 percent in the quarter through November, an estimate by the National Institute of Economic and Social Research shows. Tesco Plc , the world’s third-largest retailer, is seeing “improving customer confidence and encouraging trends in both the U.K. and our international businesses,” Chief Executive Officer Terry Leahy said in a statement this week. Darling’s Forecast Darling predicted yesterday that the economy will expand as much as 1.5 percent next year after contracting 4.75 percent in 2009. He pledged to increase income taxes as the recession drives up U.K. government borrowing. The U.K. will increase gilt sales to a record 225.1 billion pounds in the year ending March 2010. Gilts advanced after the announcement yesterday, with the yield on the 10-year bond falling 3 basis points to 3.66 percent as of 5:09 p.m. in London. While the Bank of England has been trying to keep a lid on yields with its purchases of government bonds, it has also pursued other measures to ensure the recovery. The bank said last week it will consider selling corporate bonds it purchased to improve market liquidity. While conditions in the new issue, or primary, bond market have improved, buying and selling of company bonds in the secondary market is “somewhat restricted,” it said. Deposit Rate Policy makers also discussed cutting the deposit rate last month to spur lending. While they said it was “unlikely to have a significant impact on the outlook,” they said that it “could ease monetary conditions further” and might be something they would consider in future. “There won’t be any change at the Bank of England this month, though there may be some discussion of other measures,” said Jonathan Loynes , an economist at Capital Economics in London. “They won’t want to slam on the brakes when the economy hasn’t emerged from the recession.” To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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