May 24, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

As the US consumer takes his foot of the pedal, and reports circulate about the levels of debt in the UK, the global economy needs those old stalwarts of the economic scene, Germany and Japan, to take up the slack. And perhaps the English football team could do their bit, by losing a penalty shoot-out to Germany.

Just imagine, it’s the World Cup Final and the teams are still level after extra time. Germany has scored all five penalties, and Wayne Rooney steps up to make it five a piece, or to cede victory to Germany, again. The English should be praying for the metatarsal injury to play up, putting Rooney off his stride, and forcing him to emulate the likes of Pearce, Woddle, Southgate and England’s other famous penalty missers. Apparently, a German victory in the World Cup will do wonders for consumer confidence. In 1998, for example, the French economy surged after the Gallic victory, whereas with the Brits immersed in debt, the last thing the UK needs is a boost in confidence.

A victory for the host nation inspiring a German feel good factor aside, Capital Economics has calculated that the actual tournament is likely to contribute around 10 billion euros to the German economy. It may sound a lot, but, in reality, this will only boost GDP by around 0.2%.

Apparently, though, the tournament is likely to have the effect of boosting consumer expenditure on certain items - LCD TVs, for example. This will lead to a stronger rise in GDP during the quarter that sees the football - between 0.2% and 0.5% of GDP - followed by a fall in the following three-month period.

While the actual competition will have a relatively modest impact on the economy, the preparation is more important. The esteemed economic forecasting group, reckons the biggest impact of the World Cup on the Germany economy has already happened. Construction has seen an injection of 6.2 billion euros, upping GDP by 0.3%.

May 24, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

With the commodity bubble apparently bursting, some of our readers are asking, what next for gold? We predicted that a falling dollar could potentially lead to some countries gradually replacing their dollar holdings with gold, putting more upward pressure on yellow metal. But as the price has fallen, some say crashed, is that idea now ridiculed?

Gold broke through the $700 an ounce barrier at the beginning of this month, and went on rising, but this morning it was worth just $663, a fall of over $69 in less than ten days. There’s still no reason to conclude that gold is off the agenda again - bear in mind that as recently as November 29 last year the press were hailing a new 25-year high for gold, and dealers were celebrating as it passed $500 an ounce. Some say that, for investment, the yellow metal is in fact a kind of fools’ gold. On the other hand, its price today is around 50% up on its level 12 months ago - some crash#33;

May 24, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

This was not just any results announcement, this was a Marks and Spencer annual results announcement. The company’s boss did his best yesterday. He entertained, he sold the company’s wares, he even modelled some clothes. Stuart Rose talked big and outlined bold plans, but they weren’t convinced. Marks and Spencer is a mature stock, it’s not prone to sudden growth spurts, and, despite the razzmatazz yesterday, investors remembered that, from a share perspective, MS is a boring company. The share price has surged in recent years, from only a little more than 300p before Philip Green made his takeover attempt to 560p plus at the beginning of this week. But a mere whiff of bad news amongst all the good yesterday was enough to cause panic, and shares fell by 3%. And, at one point, the fall was even greater.

When Mr Rose was appointed as the new MS boss, in an attempt to fight off the Green bid, much was made of his knowledge. We recall quoting one analyst, who said if you’re with Rose, he can point at your suit and detail how much it cost to make, and where the materials came from. Mr Rose, goes the argument, knows his stuff.

And yesterday, in the company presentation, he focused on product, revealing items of clothing, revelling in their appeal. He even donned one outfit for his audience to admire. We wonder if the world missed the point a tad.

Shares fell because analysts pointed to the cost of refurbishing stores; half a billion pounds has been lined up, yet sales are only expected to jump 10%. Re-designs, according to the pundits, only ever lead to a temporary lift.

Still, Mr Rose revealed much to celebrate. He bemoaned the decision made by the previous management to pull out of France, Germany and Spain, hinted the store may make a return, and unveiled plans to move into the Ukraine, Dubai and other locations around the globe.

Mr Rose also came up with the quite radical idea of selling non branded MS items. No longer will shoppers wanting a camera have to nip over the road to John Lewis, instead MS will offer the goods. It even sold iPods in some stores recently. And there’s the Internet, it’s making a move for a share in the online grocery market.

In all, the company made a profit of £751 million, up 35% from last year.

With the likes of Twiggy and Erin O’Connor helping bring glamour to a company that was looking increasingly dowdy, and with TV ads that actually make you sit up - during the Christmas marketing blitz, even sprouts looked quite tasty in one ad - MS is back in the limelight.

But, what matters is good buying. Rose knows his stuff and, with George Davies’ Per Una range still proving a hit, the magic has returned. If there’s a doubt it’s this: if the last few years have taught us anything, it is that the mighty can fall, and good buying can become bad buying. People matter and, should Rose suffer the business equivalent of a metatarsal injury, the management team will be seriously weakened. But, if the current management regime retains its magic touch for a little longer, and if the proceeds are invested in building a stronger asset base for the future, MS will be great again.

May 23, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Pre tax profits at Marks and Spencer have jumped an
impressive 47 per cent, to hit £745.7 million. The year saw the number of weekly
shoppers jump 350,000 to 15 million.

The good results are unlikely to surprise many. The company has been regularly
posting improvements in its like for like sales figures of late. But MS has recovered
before, only to see malaise return. Under the previous management regime, sales picked
up, and at last the talk was of the beginning of a recovery. But then it all faltered,
spluttered and came to an abrupt halt.

MS’s boss Stuart Rose says there is still much to be done. Even so, this time
around, things really do look promising. This recovery seems to have marked something
of a return to its roots, with MS doing what it used to do well again. And shareholders
must be celebrating their decision to turn down Philip Green two years ago, with shares
now at 550p, compared with the 400p Mr Green offered.

May 23, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Yesterday, it seemed as though wedding bells were to
ring for the New York Stock Exchange and Euronext. Today, it’s Deutsche Boerse’s turn
to get on bended knees and await the response from the European network of stock
markets. And you would have thought that the German stock market had outgunned its
US rival, since its offer of $11 billion made yesterday, was only a little shy of a $1
billion more the NYSE’s $10.3 billion bid. But, despite the German bid being worth more
bucks, the company from New York remains favourite.

The advantages of the German bid are clear cut. More money is on offer and it
would create a Europe-wide market, presenting substantial cost saving opportunities. But
with the head office in Frankfurt, job losses would be a price to be paid.

On the other hand, the NYSE merger creates the opportunity for a global market, and
an unprecedented level of liquidity, together with a trading day only a little short of 24
hours.

The feature that most attracted the NYSE to Euronext was its ownership of the
London Liffe market. The opportunity to create a global derivatives
market, proved too attractive to resist.

Amsterdam, is to be the location for a gathering of Euronext’s share holders, who
will decide its fate. And ironically, despite the antipathy between France and the US over
the war in Iraq, it seems that a unification of the Paris centred Euronext and the New
York Stock exchange will form the world’s first global exchange.

Where does this leave the LSE? Some say its boss, Clara Furse, must surely be
rueing the day she didn’t grab Liffe. All of a sudden it only appears to have the one suitor
- NASDAQ - and some fear that NASDAQ can’t rustle up enough readies to make the
offer Ms Furse would settle for.

May 23, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

There was more blood letting yesterday as markets continued
their slide downhill. Emerging markets led the way, with the Indian stock market
dropping by 10% before it was suspended. Brazil and Russia suffered big losses too,
while in London the FTSE 100 fell to its lowest level since last December. In
comparison, losses in the US were quite subdued. One of the ironies of the current market
slide is that the US has not suffered so badly, but concerns about the US economy are
largely what is fuelling the crisis.

Now, attention is focusing on how much longer the declining market will continue.
Are we in the midst of a full blown crash, or is this a market correction?

First a contrary view. It could be argued that we are still in the midst of a much
bigger crash - one that kicked off at the beginning of this decade. Amongst all the
euphoria during April, in which markets broke five-year highs, it was often forgotten that
we were still below the peaks seen at the tail end of the previous decade and the beginning of this. The Dow Jones
got to within a couple of hundred points of its all time high, but the FTSE 100 was
languishing well below the giddy heights it once reached. As for the NASDAQ - it was as
far below the heights it reached before the dot com crash, as a mountain climber is below
the mountain he plans to ascend, before leaving base camp.

History sees the stock market crash of 1929 as catastrophic because losses were not
fully recovered until the mid ’50s. In fact, the bear run lasted for almost 30 years.
Perhaps the question is whether the recent highs are temporary, and not the other way round

Setting aside this ultra pessimistic argument, let’s look at the reason for the falls.

Fears that the massive US Balance of Trade deficit would eventually unravel are not
new. Search Google and you’ll unearth articles dating back to the ’90s that detail Uncle
Sam’s vulnerability, and warn that sooner or later the world will pay for the excesses of
the US consumer. In recent months, these fears have gained momentum. With American
shoppers apparently taking a break, the global economy needs Eurozone and Japanese
consumers to take up the slack - but alas, their track record is not good

Then there are fears over inflation. With commodity prices so high, the fear is that
inflation will rise, forcing rates to go up. Only time will tell if these are fears are well
founded, but inflation remains muted at present.

Some argue that the FTSE 100’s recent poor performance, in comparison with US
markets, is because the UK has more mining stocks, and it is these that are pulling us
down. Yet, over the last month, Health Care has been the worst performing sector.

We do know a few things about the long term prognosis. China and India, et al will
continue to grow. Any recent fall in stock markets in emerging countries is surely a
correction, a sign of an exciting market growing a little too fast.

But, with western markets, its less clear cut. There are no signs of the silly season in which company
valuations reach dizzying heights, which has traditionally heralded previous crashes.
But it would appear that the US consumer, who has for so long bailed out the global
economy, is satiated, and few can have faith that the European consumer will take up the
reins.

May 22, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

After seeing a record breaking year in 2004, its been a difficult time for Hollywood, with a distinct lack of blockbusters. But despite critical panning, “The Da Vinci Code” seems to have changed all that. In its opening weekend the film saw the biggest box office takings worldwide ever. In all, it made $224mn. In the US, it was the all time second, with the Spider Man movie doing better, and outside of the US, Star Wars: Episode III: Revenge of the Sith” did better. But combined, the Tom Hanks and Ian McKellen release was number one.

Here’s a conspiracy theory for you to ponder. In the movie, the word apple emerged as the solution to one of the key puzzles, somehow relating Issac Newton sitting under a tree to the Holly Grail. Has anyone noticed what a key role Apples have played throughout history? What with Eve’s bite in Eden, and today the world’s music industry seems to be inextricably linked to Apples too what with the Beatles and that computer company. And here’s a theory to make Dan Brown, with his somewhat far fetched links, proud. The boss of the computer company by that name, has a surname beginning with the letter J. Coincidence, even his Christian name, begins with an S, which sounds a little like a C, so that’s almost JC in reverse. Dan Brown at your heart out.

May 22, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Could BBC’s radios 1 and 2 be sold off? According to a report from the European Media Forum growth in the commercial sectors has been severally stunted by unfair competition from the two BBC music channels.

According to the report’s author, economist Keith Boyfield ” Our argument is that whereas you can put forward a pretty compelling case for a public sector role for Radios 4 and 3 - and also Radio 5, it gets a bit thin when you look at Radios 1 and 2 - and they could survive quite easily in the private sector,” The report also argued a sell of the two radio stations could also bring in £1/2bn to the Beeb.

May 22, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

When someone like Lakshmi Mittal wants something, you no its going to be difficult to resist . It’s not for nothing that he is the richest man living in Britain, or one of the five richest men in the world, and boy, he really does want Arcelor.

The latest offer from the real life man of steel, is a big jump above the last bid. For one thing, the value of the deal has been upped by 34%. For another thing, this time around there’s a bigger cash element, its been upped from 25% to 29% of the offer. But perhaps, more significantly, Mr Mittal has made a massive concession on the level of control he will have in the merged company. Currently, the Mittal family has 10 votes for every B share it holds. But under the revised offer, it will be a case of one share, one vote, and its is believed that their overall stake in the merged company will be just 45%

Arcelor is not making it easy for Mittal, however. Mittal had planned to partially fund the purchase by selling off Arcelor’s Canadian subsidiary, Dofasco. But, Arcelor then appointed independent directors, effectively ring fencing the company. Mittal will, as a result, not be able to sell of this asset.

Arcelor also pans to hand out 5bn euros in a share buy back. Even so, the latest Mittal offer represents an 18% premium on Arcelor’s share price at close of play on Thursday.

May 22, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

It’s musical chairs, but the this time the outcome really does matter. These are the players gathered in a circle. From America there’s the New York Stock Exchange, NASDAQ and the Chicago Mercantile Exchange. From Europe, there’s Euronext, which owns exchanges in France, Brussels, Portugal, Holland, as well as the London Liffe market, then there’s the Frankfurt based Deutsche Boarse, and the of courses the London Stock Exchange. Waiting in the wings is the Dubai Stock Exchange. Forward wind the clock a few months, and many of the players will have merged, a couple of whoppers will be left, and perhaps some tiddlers settling for left-overs. The prize awaiting the victors will the opportunity to become the IPO home for the new growth companies from the likes of China and Russia, and perhaps they will become new global exchanges for the world’s largest companies. And what will happen to London, for so long the exchange everyone else wanted to court, its boss Clara Furse (pictured) wants it to stay independent? Is this a wise strategy, one doomed to fail, or perhaps worse, a foolish strategy, that if successful will merely see the LSE as a bit player, feeding off scraps?

Its decision time for Euronext Not so long ago it was trying to buy out the LSE, now it has to decide between new owners. It had looked as if Deutshe Boarse was going to win the prize, with many of the Euronext’s leading shareholders wanting to see it pass to German hands. Euronext management were not so keen. This merger would have entailed moving centralised control of the Euronext network to Frankfurt, and job losses would have followed. But then, this weekend, news broke that the New York Stock Exchange has thrown its hat into the ring, and if press comments are any guide has become the favourite.

A NYSE and Euronext merger has many advantages. It will create a single home for companies such as Axa, ING and Philips, which currently have listing on both the New York Stock Exchange and on one of the Euronext exchanges. For another thing, the technology behind the Liffe derivatives market could be exported stateside and lead to the creation of a global derivatives market. And finally, but by no means least, are the wishes of Euronext’s management. The merger with NYSE will see two head offices, one in New York and one in Paris, and the current boss of the European network, Jean Francois Theodore will have a senior role in the merged company.

What will this mean for poor Deutshe Boarse, jilted once again? It was ahead of the game, when it made overtures towards the LSE back in 2004. It was turned down, now it looks as if it will lose out on Euronext, and is in danger of being left up the creek without a paddle.

Perhaps the single most important player in all this is the LSE boss. It sometimes seems as of Ms Furse has a treble barrelled Christian name, for she is often referred to in the press as “The Formidable Clara” Furse. When suitors ask for hand she says she has been saying “non”, “nine” and “get out of here” and on Thursday, when she presents the annual results, she will also be repeating the case for an independent LSE. But NASDAQ now owns 25.1% of the exchange, having bought another 2 million or so shares on Friday, (representing another 1% of the company.) NASDAQ now has enough shares to block a third party buying it out, but is forbidden from making another offer until the Autumn. A lot can change between now and then, maybe “The Formidable Clara” will herself will be regretting her earlier haughtiness, because, who knows, by then maybe NASDAQ may have given up on seeing its advances rejected and gone for a Deutshe Boarse merger, leaving LSE as the spinster left on the rack.

On the other hand, just bear in mid what Suzanne Dence from the IBM Institute for Business Value said recently on the publicatin of tis report “Financial Markets in 2005.” “The big question is not which exchanges are going to win or where these exchanges will be based. The real question is what will exchanges look like in 10 years’ time and will there be any need for them at all#133;While exchanges provide a level of unique value in providing surety about the counterparty that you are dealing with, much of the rest of their service is little more than a glorified Ebay”

Sources

Furse will seek support for staying independent Telegraph