Athens Stock Exchange Drops 15% On New Fears

RBS Deserts Dubai Over Â£6.7bn Refinancing Plan

Written By Unknown on Rabu, 10 Desember 2014 | 00.26

By Mark Kleinman, City Editor

The state-backed Royal Bank of Scotland (RBS) is resisting plans for a restructuring of one of Dubai's largest conglomerates, underlining the UK lender's rapid retrenchment from an ill-fated global expansion.

Sky News understands that RBS raised concerns at a meeting of Dubai World's creditors in London last week, indicating that it is unhappy with a plan to extend a $10.5bn (£6.7bn) loan due for repayment in 2018 by a further four years.

Dubai World, which has interests in logistics, property, transport and urban development, is keen to take advantage of an improving economy to secure more favourable terms for its borrowings.

The state-owned conglomerate struck a $25bn debt restructuring deal in 2011, having run into trouble during the global financial crisis.

It now needs the approval of just over two-thirds of its creditors, which include scores of regional and international banks.

Once that level is secured, the remaining creditors can be forced to accept the proposed terms under a local law known as Decree 57.

RBS does not hold enough of Dubai World's debt to block the restructuring by itself, and insiders suggested that there was sufficient support for the proposals to ensure that they would be implemented.

Like other British banks, RBS expanded rapidly in Dubai and elsewhere in the Middle East as the Emirates' economies took on huge borrowings to accelerate their economic development.

Since its taxpayer bail-out in 2008, however, RBS has gradually reduced its international presence, and is understood to be keen to see the Dubai World loans repaid at the earliest opportunity.

One observer cast doubt on the interpretation that RBS was interested in seeking to block the refinancing, suggesting that the bank was simply "agitating" in order to find a buyer for its share of Dubai World's debts.

A further meeting of creditors took place in Dubai on Monday.

RBS declined to comment.

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Wealth Gap Harms Countries' Growth - OECD

The growing wealth gap between the middle class and poor households is the single biggest factor affecting a country's economic growth, according to a new global report.

The Organisation for Economic Co-operation and Development (OECD) said income equality has a "significant impact" on a nation's ability to expand.

The report looked at countries around the world and estimated by how much growing inequality harmed potential expansion.

"The single biggest impact on growth is the widening gap between the lower middle class and poor households compared to the rest of society," the Paris-based group said.

"Education is the key - a lack of investment in education by the poor is the main factor behind inequality hurting growth."

It said almost nine percentage points were missed from the UK's GDP over the two decades preceding the banking-led global financial crisis.

This compared to 10 percentage points in Mexico and New Zealand, and around 6.5% in the US, Italy and Sweden.

It added that greater pre-crash equality in Spain, France and Ireland helped those countries' growth rates.

The OECD, previously described by The Economist as a "rich-country think tank", said its results showed inequality needed to be central to policy formulation.

It said inequality affects growth by undermining education opportunities for children from poor backgrounds, which in turn hampers social mobility and skill development.

By contrast the OECD, which represents 34 countries, said there was little or no effect on people with middle or high levels of parental education.

"This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate," OECD secretary-general Angel Gurria said.

"Countries that promote equal opportunity for all from an early age are those that will grow and prosper."

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Athens Stock Exchange Drops 15% On New Fears

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The Athens stock exchange has plunged by more the 15% over fears political turmoil will hit Greece's fiscal reform measures.

If the drop holds until markets close it would become the biggest one-day fall in almost 30 years.

Investors have been spooked that the country may be forced to hold early general elections.

Concern comes from the prospect of a left-wing opposition party, that currently leads the polls, winning and derailing reforms.

The Syriza party wants a cut to what Greece owes in bailout money, arranged with the so-called troika of the EU, IMF and European Central Bank.

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Gallery: Youth Protests Turn Violent In Athens

A protester holds a placard during clashes at the end of a youth protest to commemorate the six-year anniversary of the fatal shooting of teenager Alexis Grigoropoulos by a police officer

A protester wearing a gas mask holds a black flag in Athens

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The commemoration is held as a close friend of Grigoropoulos, 21-year-old anarchist Nikos Romanos, jailed for attempted bank robbery, is on the 26th day of a hunger strike. Here riot police fire tear gas at protesters

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Greek police take position during clashes. Click through for more pictures

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Greece has only just announced it has finally come out of a painful six-year recession.

The economic contraction has seen major social, economic and political upheaval in the struggling southern eurozone periphery.

In response to the fresh fears, Greece's government named respected former EU commissioner Stavros Dimas as its presidential candidate in a crucial parliamentary vote this month.

On Monday the government made a surprise move and brought forward the start of the presidential vote by two months to December 17.

There is now the risk of early elections if the government fails to secure a large parliamentary majority to back Mr Dimas' nomination.

The government needs 25 more votes than the 180 it currently holds in its coalition.

The conservative government hopes to bring about an early end to the €240bn (£195bn) bailout that rescued Greece at the height of its debt crisis.

But the programme is deeply unpopular with swathes of society because of the strict austerity conditions and enforced reforms.

The country was hit with a series of protests last weekend, which mirrored numerous violent demonstrations during the height of the reform process.

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ASOS Booms In UK But Unravels Abroad

Online fashion group ASOS has seen a slowdown in its quarterly sales, as international purchases continue to contract.

This comes on the back of the company being a big beneficiary of the online sales frenzy prompted by Black Friday and Cyber Monday.

It reported a 24% rise in UK retail sales in the three months to the end of November.

However the weakening eurozone economy has hit its core sales figures, as international sales dropped 2%.

Non-UK sales made up 63% of total revenue in the same quarter last year but have now dropped to 57% this year.

Investors found the results lukewarm after they were released on Tuesday, with ASOS' share price dropping 5% in midday trades.

ASOS shares have fallen more than 60% in the last 12 months, as it issued three profit warnings.

The Barnsley-based online retailer said September and October were difficult as it installed a mechanised order picking system ahead of the Christmas rush.

ASOS said total retail sales rose 8% in the latest quarter to £246m, its fiscal first quarter, down 15% on the previous quarter.

Chief executive Nick Robertson said international trading conditions remain "challenging", due in part to the strength of sterling.

The company said it received a £6.3m insurance payout related to the depot fire, which it was using to bring down international prices.

The retailer said it expects to meet forecasts for flat profits in 2014-15, after previously forecasting sales growth of 15-20% in the current financial year.

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Tory Peer Says 'Poor Don't Know How To Cook'

A Conservative peer has said she chose the wrong words after suggesting hunger in Britain is caused by poor people being unable to cook.

Baroness Jenkin was speaking at the House of Commons launch of the Feeding Britain report which calls for action from the Government, supermarkets and utility companies to stop increasing number of people using food banks.

Lady Jenkin, who served on the inquiry team that produced the document, said hunger stemmed in part from the disappearance of the knowledge needed to create cheap and nourishing meals.

"We have lost our cooking skills," said the peer, the wife of Conservative MP Bernard Jenkin.

"Poor people don't know how to cook.

"I had a large bowl of porridge today, which cost 4p. A large bowl of sugary cereals will cost you 25p."

She later acknowledged that her words had been badly chosen and said she was trying to get across the message that home-cooked meals are often cheaper and more nutritious than packaged food.

She told BBC Radio 4: "What I meant was as a society we have lost our ability to cook. That seems no longer to be handed down in the way that it was by previous generations.

"I am well aware that I made a mistake in saying it and apologise to anybody who's been offended by it.

"The point is valid. If people today had the cooking skills that previous generations had, none of us would be eating so much pre-prepared food."

Archbishop of Canterbury Justin Welby, who will be president of the new Feeding Britain group, said it was "shocking" to see thousands of people in a wealthy country reduced to seeking food handouts, and told the launch meeting that its proposals to end hunger were "eminently practical and not unreasonably expensive".

Prime Minister David Cameron said there were "elements" of the report that the Government would "want to take forward", but there was no immediate response to a plea from the Archbishop for £100,000 in state money to kick-start a new organisation designed to eliminate hunger in the UK by 2020.

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Interest Rates Rise: Will You Feel The Impact?

The Bank of England has signalled that thousands of households will have to cut back as they struggle to keep up with mortgage payments when interest rates start rising.

The bank estimates that 37% of households will either need to work more or spend less if interest rates rise by 2%, with those in their 20s, 30s and 40s hardest hit.

However, if incomes rise by 10% then only 4% of households will need to take action. But in recent years salaries have failed to increase as much as the cost of living.

Here are three scenarios showing the impact of rising rates on different households and their mortgages.

:: Mr Taylor lives alone on an income of £26,000, with £83,000 outstanding on his mortgage. He is paying a mortgage rate of 2.5%, which equates to monthly payments of £369 - 17% of his income.

Looking forward to 2019 and an interest rate of 4%, his monthly payments will be £434.

As long as his salary goes up too - to more than £30,000 - he will still be paying 17% of his income

:: The Smith family live together on a slightly higher combined household income of £43,000. Their outstanding mortgage is £150,000. At a rate of just under 2.5% it costs them £667 per month - almost 19% of their income.

By 2019, with a rate of almost 4%, they will face monthly payments of £785.

As long as they are earning more than £50,000 by then it will still be 19% of their income.

:: The Jones family's household income is £100,000 per year. Their mortgage is £400,000, which currently costs them just under £1,800 a month - 21% of their income.

Five years from now they will face monthly payments of nearly £2,100.

As long as their salaries go up to nearly £118,000, the proportion of their income they pay will remain around the same at 21%.

Higher earning families like these face the biggest rises.

The Bank of England's projections show a rise in rates from the current record low of 0.5% to 2.5% would raise the number of households struggling to pay their mortgages from 360,000 to 660,000 if wages stay the same.

The bank considers households where more than 40% of income is spent on mortgage repayments as vulnerable since they are at more risk of falling into arrears.

However, if rate rises are accompanied by a 10% rise in incomes the number of vulnerable households will only rise to 480,000.

While the interest rate has been at 0.5% for over five years, looking back over 20 years much higher rates were not unusual. The mean interest rate since 1994 is 3.9%.

Bank governor Mark Carney has warned that an increase is on the way but the scale is likely to be gradual.

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Borrowers Could Handle Rate Rise, Says BoE

Home borrowers could handle rate rises, according to the Bank of England.

Gradual increases would not have "unusually large effects" on household spending, it said.

The bank does warn a rate rise to 2.5% would see the number of families struggling to pay their mortgages rise to 660,000 if wages stay the same.

But the Governor, Mark Carney, has repeatedly stated that when rate rises come they will be gradual and over time.

The Bank of England said: "Overall, the evidence does not suggest gradual increases in interest rates from their current historically low levels would have unusually large effects on household spending."

Yet in research, the Resolution Foundation think-tank finds that 2.2 million working households in Britain with below-median incomes are spending a third or more of their disposable income on housing, leaving an average of just £135 left over each week for other necessities.

And MPs have warned that some borrowers will have overstretched themselves when taking advantage of the interest rate, which has been at a historic low of 0.5% since 2009.

Treasury select committee chairman Andrew Tyrie said: "Interest rates have been so low for so long now that some might conclude this is the new normal. They shouldn't."

Older people are in line to benefit from any increase as they are more likely to be savers.

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Don't Panic: Bank Keen Not To Alarm Borrowers

Don't panic! That's the broad gist of the Bank of England's latest analysis on the impact of higher interest rates.

And in case you were in any doubt, it has published a handy infographic explaining precisely why not.

If interest rates rose by 2%, which is actually a little more than markets expect, and household incomes rose by 10%, the "proportion of households with a high mortgage debt-servicing ratio would rise from 1.3% to 1.8%".

So DON'T PANIC!

One can understand why the Bank is so keen not to get anyone alarmed.

Many economists are worried that households are becoming overly accustomed to rock-bottom interest rates (they've been down at 0.5% for more than five years now).

Sounding the alarm over this prospect could well dent consumer confidence as households prepare their finances for a hard slog.

And the results from the latest NMG survey, carried out by the Bank each year, look encouraging.

This year the Bank applied a couple of tests to the data, which collects lots of information about household borrowing from around 6,000 households.

They found that the proportion of households who would need to "respond" to a rise in interest rates was lower than last year - under 40% rather than about 45%.

The second test found that the number of "vulnerable" households "would increase from around 360,000 to 480,000" - but, again, those numbers were said to be less elevated than last year.

So far so reassuring.

However, a comparison of this year and last year's articles on this topic raises a few questions. First off, the scenario they are testing for has changed.

While last year's question tested how households would cope with a 2.5% increase in interest rates, this year's paper tested their resilience to a 2% increase.

That's fair enough, given markets aren't even anticipating that sharp an increase in borrowing costs.

Odder, though, is the Bank's decision to redefine what it means by "vulnerable mortgagors".

A year ago, its definition was "mortgagors with mortgage payments in excess of 35% of their income". This time around, the definition of vulnerable borrowers is "mortgagors with a [debt servicing ratio] of at least 40%".

There is no explanation as to why its definition of vulnerable borrowers has changed.

Again, no doubt there is an explanation. And it's worth emphasising that, as far as I can tell, this year's survey shows households are more resilient than last year's.

But that judgement is based on these changed definitions rather than applying last year's tests to this year's data.

It might seem like a small quibble. But if the Bank is determined to reassure households, chopping and changing the key definitions in such a sensitive report from year to year is probably not the best way to go about it.

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Tesco Refuses Executives Appeal Over Sacking

By Mark Kleinman, City Editor

A number of senior managers who left Tesco after profits were overstated by £263m have been told by the retailer that they have no right to appeal over their departures.

Sky News has learnt that Tesco has informed lawyers acting for some of the executives that they cannot launch a formal appeal through the company because an ongoing Serious Fraud Office (SFO) probe has rendered it impossible for Tesco to have direct contact with them.

Last week, it emerged that Chris Bush, the UK managing director, group commercial director Kevin Grace, Carl Rogberg, the UK finance director, and John Scouler, UK food commercial director, had left Tesco approximately eight weeks after they were asked to step aside amid an investigation into the profit overstatement.

Sources said on Tuesday that at least one of the men had made enquiries through their legal representatives about their right to appeal and were informed by the company that no such appeal could be heard while the SFO investigation was taking place.

The supermarket giant's decision - which emerged as it warned on profits for the fourth time this year, sparking a further slump in its shares - may prompt a legal challenge from a number of the executives, sources indicated.

Another executive who had been asked to step aside, Matt Simister, has since returned to his role at Tesco, while Dave Lewis, the chief executive, confirmed on Tuesday that the futures of three other managers were still being assessed.

Tesco's latest impromptu trading update stunned the City with its disclosure that full-year group trading profit would not exceed £1.4bn, a figure 58% lower than last year's £3.3bn.

Mr Lewis said the worse-than-expected outcome reflected investments he was making in rebuilding Tesco's trading relationship with suppliers and in increasing employee numbers in its stores.

Shares in Tesco fell by more than 15% at one stage, although they recovered some of their losses later in the morning and were trading at around 168p, giving the company a market value of just over £15bn.

Last week, Mr Lewis said he would take direct control of the UK business although this will be a temporary move.

"Tesco is focused, and will continue to focus, on doing the right thing for customers. This means running our business in a way that everything we do creates sustainable value," he said.

"Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business.

"We will not engage in short term actions that compromise in any way our offer for customers."

The new chief executive, whose 100th day in the role was marred by the latest profit alert, said the City would receive a further update on his plans when he presents the results of Christmas trading on 8 January.

Tesco declined to comment on the position of its former executives, none of whom could be reached for comment.

A spokesman for the SFO said its inquiry was ongoing.

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Top Executives Quit Woodford Funds Venture

By Mark Kleinman, City Editor

Two of the executives who were instrumental in backing Neil Woodford, the UK's best-known fund manager, have quit his asset management start-up less than a year after its launch.

Sky News has learnt that Nick Hamilton, Woodford Investment Management's chief operating officer, and Gray Smith, the chief legal and compliance officer, resigned from the business on Tuesday.

Mr Hamilton and Mr Smith were two of the firm's most senior employees, and the circumstances surrounding their departure were unclear. Links to their profile pages on its website had been removed on Tuesday afternoon.

Woodford Investment Management became the City's most talked about funds start-up for years when it opened for business in April, and has already attracted £8.5bn of clients' money.

It has taken significant positions in blue-chip companies such as British American Tobacco, BAE Systems, GlaxoSmithKline and Rolls-Royce.

Mr Woodford, who was a prominent opponent of Pfizer's attempted £60bn takeover of the British pharmaceutical company AstraZeneca earlier this year, has also become a shareholder in Atom, a digital-only banking venture which is targeting a launch next year.

The firm, which employs 32 staff, is run by Craig Newman, its chief executive, who joined alongside the former Invesco fund manager Mr Woodford in May.

Data analysed by Hargreaves Lansdown showed that Mr Woodford's fund has returned 7.4% since its launch, making it the top performing UK Equity Income fund during this period.

By comparison, the FTSE All Share had achieved a negative return of -0.5%, while the average UK Equity Income fund returned 0.7%.

In a statement issued to Sky News, Woodford Investment Management confirmed the departures of the two men, saying that the firm's "infrastructure has evolved commensurate to its goal of building a fund management company with an operational platform fit for a regulation-heavy environment".

"Having assisted with the successful set up and launch of Woodford Investment Management LLP in their respective roles of chief operating officer and chief legal and compliance officer, Nick Hamilton and Gray Smith will be leaving the firm this month."

Craig Newman, chief executive, Woodford Investment Management, said: "Nick and Gray helped us get over the line. We thank them for their commitment and wish them all the best in the future."

Last week, Woodford Investment Management announced the appointment of several other executives to senior compliance, risk and operations roles.

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RBS Deserts Dubai Over Â£6.7bn Refinancing Plan

Written By Unknown on Rabu, 10 Desember 2014 | 00.26

Wealth Gap Harms Countries' Growth - OECD

Athens Stock Exchange Drops 15% On New Fears

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ASOS Booms In UK But Unravels Abroad

Tory Peer Says 'Poor Don't Know How To Cook'

Interest Rates Rise: Will You Feel The Impact?

Borrowers Could Handle Rate Rise, Says BoE

Don't Panic: Bank Keen Not To Alarm Borrowers

Tesco Refuses Executives Appeal Over Sacking

Top Executives Quit Woodford Funds Venture

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