Banks fined record amounts for currency rigging scandal

Posted on May 21st, 2015

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Some of the world’s largest banks have been fined a record breaking amount by US Attorney General Loretta Lynch from their involvement in a currency rigging scandal spanning the last five years.

UBS, Barclays, JP Morgan, Citigroup and RBS will pay a total of $5.7bn – with Barclays paying the lion’s share ($2.4bn) since it did not settle investigations with regulators last November.

Several employees are set to lose their jobs at the banks affected, while investors may also contemplate the possibility of launching lawsuits against the banks.

The chief executive of RBS, Ross McEwan, said: “The serious misconduct that lies at the heart of today’s announcements has no place in the bank that I am building.[...]Pleading guilty for such wrongdoing is another stark reminder of how badly this bank lost its way and how important it is for us to regain trust.”

FTSE boost after General Election results

Posted on May 8th, 2015

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The UK’s major stock market – the FTSE 100 – got a major boost after the General Election results were announced, rising by 2%. Investors are expecting the Conservatives to form a new government relatively quickly, enabling them to continue their economic recovery plans without any major hiccups.

With the Conservatives winning the majority of the vote, shareholders can breathe a sign of relief. UBS noted the lack of uncertainty was a piece of positive news, remarking “It appears that we will avoid weeks of uncertainty and horse-trading.”

Banks, house builders and energy firms were among the beneficiaries of the rally as investors took in the news. The prospect of a Labour government would have been an unappealing one to energy firm investors – the party was pushing for the freezing of prices and more powers to the sector’s regulator, significantly impacting future growth.

The major economic obstacles that will need to be overcome will be the EU referendum and the situation concerning interest rates. Interest rates may rise as early as this autumn – a situation investors will be looking at very closely.

 

 

 

UK Household Income Set to Drop

Posted on April 28th, 2015

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Expect your income to fall, no matter who wins this year’s General Election. That’s the view from the Institute for Fiscal Studies, who say that the average household income will drop no matter what party actually wins.

It looked at the manifesto promises laid out by all the major parties and found there was no clear winner among them. We all set to lose, no matter what the outcome. The benefits bill will need to be slashed by as much as 10% in order to implement the Conservative Party’s plans to make welfare savings, while extending the personal allowance would not benefit those who pay no tax at all.

The controversial mansion tax would be unnecessarily complicated, while the idea of creating specific targets for revenue achieved by improved tax avoidance measures was slammed for the lack of detailed policies needed to help achieve them. They said: “Yet none of the parties has proposed specific measures that would increase revenues by these sorts of amounts.”

UK economy set for strong growth

Posted on April 20th, 2015

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The UK economy is set for some spectacular growth, according to the latest report from the EY ITEM Club. It estimates that growth this year could be as much as 2.8%, thanks to a combination of low inflation and an improving situation in the Eurozone. The recovering economy has enabled the UK to surge ahead of its European counterparts, which have languished as of late thanks to high unemployment and tough conditions for exports.

Things could get even better for the UK if the recovery continues this year. The low cum no inflation economic environment is set to benefit from the European Central Bank’s decision to buy over £790bn of assets, helping to stabilise the finances of governments across the continent and bolster export and investment opportunities for the UK.

The EY Item Club’s chief economic adviser said: “The economy is taking the general election in its stride as ‘noflation’ trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.”

Is a Federal Reserve rate increase on the cards?

Posted on March 19th, 2015

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Could interest rates start to increase in the US? There are signs that rates might be hiked in the coming future by the Federal Reserve, if the language from its statements is to be believed.

While the US Federal Reserve is still, for the time being, taking a wait and see approach with the economy, if unemployment continues to fall and the economy marches on, it could be time to increase them. It removed the word ‘patience’ from the statement, indicating to many economists that it might be getting impatient with rates remaining at their current level.

But Janet Yellen, chair of the Federal Reserve, said this was not necessarily the case at a press conference after the latest statement was published. She remarked that: “Just because we removed the word patient from the statement doesn’t mean we’re going to be impatient.”

Rates have remained low for almost ten years and it is not clear how long this will remain the case. The US economy has been on an upward streak; if it takes a downturn, any rate increase would be an unwise move.

 

 

 

Retail Sales Report Drop

Posted on February 20th, 2015

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Retail sales in the UK fell in January, according to the latest figures from the Office of National Statistics. They dropped by 0.3%, compared to a rise of 0.2% in December.

The ONS said the drop was the largest in eight years, the result of retailers and consumers digesting a year of heavy discounting, sales and other promotions. Shoppers were spoilt for choice in 2014, with a range of online and offline promotions vying for their attention.

Keith Richardson, retail managing director of Lloyds Bank, said: “As retailers try to get back to normal after several months of promotions-driven sales, the message from shoppers is clear: heavy discounts are the new norm.”

There was some good news, however, as online sales rose by over 12% in January. With the rise of mobile commerce on smartphones, this figure could increase throughout the year.

Economists say the retail sector should perform strongly this year, with the impact of the growing economy reflecting in stronger than usual figures for the retail sector.  The chief European and UK economist at IHS Global Insight, Howard Archer, said: ”The prospects for retail sales and consumer spending overall for 2015 currently look bright, given significantly improving real earnings growth, rising employment and elevated confidence.”

 

Pressure Piles On For Standard Chartered’s Peter Sands

Posted on January 26th, 2015

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There is mounting institutional pressure for Standard Chartered’s Chief Executive, Peter Sands, to quit his position of the beleaguered bank. According to recent reports, Aberdeen Asset Management and Temasek, two of the bank’s biggest investors, have reputedly asked its chairman Sir John Peace to start a replacement process within the next few months to enable Mr Sands to leave by the end of the year. They own close to 29% of the bank, giving them significant clout over the board.

The bank issued three profit warnings in 2014 alone, as slowing growth in emerging markets and problems with the commodity market hit earnings.  These problems alone have stretched investor’s patience. While the Chief Executive of Aberdeen Asset Management has previously backed Mr Sands’ plans for recovery, the problems encountered may have eroded any confidence in the Chief Executive.

One major problem may lie with potential successors. The Chief Financial Officer, Andy Halford, lacks banking experience, while Mike Rees, the Deputy Chief Executive, is not thought to be in the running. Many shareholders will be looking to May’s AGM for details of the succession plan and a refresh of the current board to help alleviate their woes.

 

 

 

UK Unemployment falls to lowest in six years

Posted on January 21st, 2015

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Things have never been better in the UK’s job market. That’s the view from the Office of National Statistics, whose latest unemployment figures show a drop in the number of people out of work – 1.91 million, down by 58,000. The number of JSA claimants fell to 867,000 in December. The figures, from the three months to last November, show how far the economic recovery has come. Average earnings also rose by 1.8%.

It was not all good news, however. Unemployment among 16-24 year old’s rose to 764,000 – an increase of over 30,000 for the period. This is the first major increase since the June to August period in 2013, reflecting the fragile and difficult state of this particular segment of the labour market.

Economists were positive about the news but said  the momentum must be maintained. The chief economist at the British Chamber of Commerce, David Kern, said: “The modest upturn in average earnings growth is a positive development. However, wage growth will only be sustainable if it is matched by increased productivity. The focus of economic policy must remain on sustaining and improving economic growth.”

Jonathan Moulds Set to Join Barclays

Posted on January 14th, 2015

Jonathan Moulds, a former executive at Bank of America Merrill Lynch, has been announced as Barclays’ new Group Chief Operating Officer, reporting to Antony Jenkins, who has been Chief Executive since 2012.

He comes from a derivatives trading background and was, most recently, president of Bank of America’s European subsidiary. Commenting on his appointment, he said in a statement: “This is a period of profound change for Barclays as the group builds momentum in the implementation of its strategy and deals with external forces including structural reform. [...]I am looking forward to taking up my new post and to working with Antony and my colleagues on the Executive Committee in helping the bank realize its full potential.”

Antony Jenkins has pushed ahead with an aggressive cost cutting strategy to help improve profitability, including shedding thousands of jobs and overseeing the creation of a ‘bad bank’ to help shelter negative assets.

Jenkins said the role would help push forward the programs in place needed to deliver better returns for its shareholders. In a statement he said:”My decision to create a group COO role at this time is specifically intended to ensure we continue to deliver on our strategy, but more importantly to accelerate execution where possible.[...]There are multiple major change programs in flight across the group, designed to achieve our ambitious goals, and which will in turn help to drive the sustainable returns our shareholders deserve.”

 

 

UK Inflation Falls Sharply

Posted on January 13th, 2015

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Inflation in the UK has fallen further than previously expected, dropping to 0.5% in December from 1% in November. This is the lowest rate for almost fifteen years, prompting many economists to suggest the Bank of England’s Monetary Policy Committee may hold off increasing interest rates in the near future. The Retail Prices Index also fell from 2% to 1.6%, according to figures from the Office of National Statistics.

The sharp drop in interest rates can be attributed to steep falls in the price of crude oil, helping to cut the rate of inflation in addition to prices at the pumps. Falling prices for food and other items have also helped cut the rate.

The CBI’s director of Economics, Rain Newton Smith, said the low figure indicated low interest rates would be the norm in the short term, saying: “With falling inflation rates and subdued earnings growth, we do not see the first rise in interest rates happening any time soon. [..]Even by the end of 2016, the stance of monetary policy is likely to remain loose, providing a bit more breathing space for the UK’s recovery.”

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