FTSE 100 gains but concerns expenditure struck small caps

But analysts at Numis Promethean "add" to "buy". Commenting on prospects for management of company Whiteboard on the American market, analysts said: "we are pulling our forecast return to take account of this and an expectation of a further deterioration of here."

Axe public for Chancellor George Osborne spending hit Mouchel, which tumbling 38 p-, or 30 16pc - 88 percent as the company, which allows the Government to maintain highways and provides advice to local authorities, said that the immediate prospects remain displayed as Mouchel incertaine.Bien loss throughout the year, told that it was informed to benefit from an increase in subcontracting anticipated.

But blue-chips felt more healthy Thursday, WINS points 31.87 5677.89, results forecast-beating of Royal Dutch Shell helps lift sentiment.

The oil giant has increased from 10 p to £ 19.87 after a break for the benefit of the third quarter, thanks to rising prices for oil and gas.

Performance of shell illuminated other stocks with Essar energy reaching 7½ 543 p .but energy company focused on the Indian also had its own news announcing that he planned to increase the capacity of its plant to Vadinar.

After taking a blow earlier this week, chipmaker ARM Holdings is in demand, accusing the blue-chip leader Commission increased by 11.6 to 372 p.

H2O markets reiterated their position "buy" on the business of Cambridge, saying that he is exceptionally well placed to benefit from continued demand in smartphone and iPad markets.

Insurers are also supported with prudential WINS 17 630½p, Admiral 24 p to £ 16.35 and Standard Life reaching 3.1 226.9 p.

Panmure Gordon analysts Thursday reiterated their positive life insurance sector UK, with a rating of "buy" on prudential attitude.

But the broker has maintained a "hold" on the Standard Life, although worn his price target to 240 p 225 p.

"After share prices fall in 2nd quarter 2010, the sector has rebounded in the third quarter, largely following the resumption of stock markets," said analysts.

"From life insurance looks set to benefit from the relaxation of fears about the impact of [new capital requirements] and double-recession, which in turn facilitates the concerns of the default corporate bond sector."

Blue-chip heavy that Vodafone was lifted p 4.4 170.7 through solid results of peer channel, France Telecom, whose results third quarter exceeded forecasts of analysts. ""France Tel showed strength in France and Spain and KPN showed the German market was also performing all markets key for Vodafone," said analysts in the execution of noble.

But at the other end of the spectrum, pharmaceutical companies were as after AstraZeneca showed generic competition had improperly revenues for the third quarter.

Britain's second drug manufacturer slipped 106 p to £ 31.39½, while GlaxoSmithKline decreased 11½p to £ 12.33 sympathy and manufacturer of the medical device, Smith & Nephew abandoned to 13½ to 560 p.

21.55 Points 10848.83 acquired mid-cap market and among stars of index was crucial to SVG, checking up 13.1 to 202½p after the company stated that its net asset value increased close to one-fifth to the third trimestre.Analystes Liberum said it was a good quarter as labour Permira and SVG had to reduce the debt and drive growth private equity income repayment.

But lagging Thursday Croda International, fell 45% to £ 14.70 despite posting strong third trimestre.Le manufacturer of chemical products for customers including Estée Lauder was downgraded by Brewin Dolphin to "hold" "add" for reasons of assessment results.

Housebuilders fell after the Nationwide figures showed that housing prices continued to fall that buyers have remained away from the marché.Taylor lost 0.4 to 22.93%, Barratt Developments Wimpey fell 1.3 to 78.15%, Bovis Homes fell from 5.9 to 349 p and Redrow shed 1.9 to 114,3 p.

View the original article here

Objective principal Marcus Stuttard defends market junior claims "volatility".

This week, value doubled Petroleum desire on speculation on oil find - despite no information publicly available on the market.

However, Marcus Stuttard, head of the defended on the London Stock Exchange aim market junior of the city as a stable place to do business.

"One of the reasons monitor us the market and share price movements is to ensure that there is known by the company may be disclosed", he said.

It is not within the competency in order to stop any person displaying false rumours on the internet, bulletin boards, but it can - and - report concerns the financial authorities.

"If we suspect any type of abusive behaviour or see any sign of concern we refer to the regulatory body."In some cases we provide information help regulatory agencies to further their investigations.

Mr. Stuttard disputes the idea that there is a widespread problem.

"If there is no a strong level of confidence in the market, then we see the high level of support of investors we."

"Actually, much emphasis has been to try to increase the liquidity on the but.Ce we have a tendency to find growth markets, need more buy and sell orders."

Last year, market combined corporate AIM values totaled of £ 59bn.Toutefois Dynamics raise capital has evolved over the ans.En 2006, £ 9. 6bn was raised by selling, more than £ 5. 7bn in trésorerie.Cependant, calls in the market this year, it was only 800 m £ 5.3 £ 4 in share offers and sales.

Mr. Stuttard believes it is still obliged to wider markets State account success.

"In most markets growth very little has been raised, while we raised a total of £ 5. 5bn.".

View the original article here

Utilities stocks fail to boost lethargic FTSE 100

Leaping Board winners in wake of Scottish & South were reaching 10.4 percent 332.2 Centrica and National Grid ticking up to 6½ to 590 p.

But the utility companies failed to lift the blue-chip dull swung between gains and losses and ending almost flat.

The FTSE 100 lost 2.73 points investors 5675.16 marked time in advance of the meeting of Federal Reserve hotly awaited next week.

Languish at the head of the losers league table has British Airways, which nose dived 10 to 270.7 percent despite the swinging in the dark. Panmure Gordon analysts have been sticking to their "hold" rating, saying: "Momentum has been strong in the price of shares, powered by revenues, particularly in terms of demand for premium environment improved yields, ATI approval for the transatlantic joint venture with AA and Iberia and planned with Iberia merger".

Minors were also lower with Xstrata losing £ 12.09½ and Rio Tinto excretion 69½p 40½p to £ 40.36.

Having a better day was insurers with Aviva putting on 5.4 398.1 p Goldman Sachs reiterated its "buy belief" on shares.Next Tuesday, Aviva will report its results for the third quarter, which analysts believe will support the case of investment.

"In our opinion, the significance of the number of sales down played b.c market ' is understandable, because they have little bearing on the position of the group, capital dividend paying capacity and resilience in a prolonged low interest rate environment" said broker. "While the body is very focusing market better than expected sales of Aviva markets of Europe and the UK-based show some sustainability gains and that review group or the transition to the Solvency II are not disturbing the underlying transactions.»

Also benefit from a burst of Goldman Sachs was GKN, which rose 3.3% 177.3.Dans a note of the European automotive sector, the broker reiterated its "buy" rating on the manufacturer of parts for cars and planes and raised its price target to 285 p 220 p.

Travelers small caps automobile-related, was flat at 61 automotive dealer p.Le stated that he had seen a solid third quarter through its parts car combined with the increase in sales of new and used vehicles.

Earlier this week, there have been whispers of private investment capital interest in Miss, but Chief Executive, said Friday that they had received no offer.

Among second linings, Hikma Pharmaceuticals seeking particularly healthy, pulling 49½ at 786 p after it struck an agreement with Baxter International, American Society of health care.

Listed on the FTSE 250 Jordan-based undertaking bought Baxter us generic injectibles unit 112 m $, double the size of Hikma US business and giving more 14pc market.

Analysts said the acquisition will position Hikma as the second largest supplier of injectibles to the United States Citigroup.

"Existing expertise Hikma injection and desire of Baxter to divest non-core assets produced an attractive and financially reasonable agreement in our opinion," said the broker who Hikma "medium risk.

Oil and gas services company, hunting, has been on the rise too, breaking 41½ in 644½p .Chasse whose equipment is used in the construction and maintenance of oil, said shale drilling activity and demand for components in the West and to the Brazil he developed able top year-round market expectations.

Their "buy" rating on hunting and raised the prices kept RBS analysts 670 p 630 p.Le Broker target stated that in a context of market improvement, hunting was performing well.

But punters took their money out of the table for Partygaming, sending internet business down 10.8% 251.9 gaming.

Excitation of bidding pushed shares in resources from Berkeley to hereditary 112½p as Russian steel giant, Severstal, approached Berkeley on a possible takeover of uranium, a value on an exploration company 304 million senior dollars.Atout Berkeley is a project of uranium from Salamanca, Espagne.Severstal envisages a cash bid to $2.00 at Berkeley, appearing also in Sydney.

View the original article here

Currency wars are necessary if all else fails

They are taking active steps to prevent America extricating itself from the worst unemployment since the Great Depression, now 17.1pc on the latest U6 index and rising again.

Each country is doing so for understandable reasons: Japan to avoid a deflationary crisis, China to hold together a political order that is more fragile than it looks. In both these cases they are trapped because they clung too long to a mercantilist export strategy, failing to wean themselves off American demand when the going was good.

Yet this is an intolerable situation for the US. It should be no surprise that Washington has begun to retaliate in earnest, and not just by passing the Reform for Fair Trade Act in the House (not yet the Senate), clearing the way for punitive tariffs against currency manipulators.

The atomic bomb, of course, is quantitative easing by the Federal Reserve. America has in effect issued an ultimatum to China and G20: either you stop this predatory behaviour and agree to some formula for global rebalancing, or we will deploy QE2 `a l’outrance’ to flood your economies with excess liquidity. We will cause you to overheat and drive up your wage costs. We will impose a de facto currency revaluation by more brutal and disruptive means, and there is little you can do to stop it. Pick your poison.

This is what QE2 means, though Fed officials prefer to talk of their “mandate” of supporting employment. It is nothing like QE1, which was emergency action to halt the economic free-fall of late 2008 and early 2009. This time the Fed is using QE as a long-term tool to manage America’s chronic ailments.

Uber-dovish Fed comments over recent days have been enough to send the dollar crashing to a 15-year low of 82 against the Japanese yen, to below parity against Swiss franc, and back to the EMU pain barrier of $1.40 against the euro.

There was much tut-tutting about currency warfare at the IMF meeting over the weekend. "If one lets this slide into protectionism, we run the risk of the mistakes of the 1930," said World Bank chief Robert Zoellick.

You have to say this kind of thing if you run a Bretton Woods institution, but in real life wars occur because somebody finds the status quo unacceptable, perhaps justifiably so. As Nobel economist Paul Krugman puts it: “people are looking for innocuous ways to deal with this problem, and there aren’t any”.

Devaluation was not the mistake of the 1930s: it was the cure, albeit a bad one. The Gold Standard broke down during the inter-war years because the US and France had structurally undervalued exchange rates (like China/Asia today) and ceased recycling their trade surpluses (like China/Asia today). This caused a deflationary downward spiral for everybody.

Escaping from such a deformed system was a path to recovery. The parallel with modern globalization – though not exact – is obvious. So is the 1930s lesson that currency and trade clashes are asymmetric: they are calamitous for surplus countries, but not always for deficit countries. Britain enjoyed a five-year mini-boom after retreating into an Empire trade bloc in 1932.

Fed chair Ben Bernanke knows his history. In a speech as a junior Fed governor he described Roosevelt’s 40pc devaluation against gold as “an effective weapon” against deflation and slump, adding “1934 was one of the best years of the century for the stock market”.

I suspect that the Bernanke Fed is working with the Treasury to steer the dollar lower, and above all to stop it rising again, since the global dollar index looks poised for a powerful rebound.

There is certainly something odd about the latest Fed rhetoric. New York chief William Dudley said inflation had fallen to “unacceptable” levels. Has it really? The Dallas Fed’s `trimmed-mean’ CPE inflation index has been creeping up over the last three months.

His Chicago colleague Charles Evans has called for “much more accommodation". Why now? Bank credit has stopped contracting. The M2 money supply growth has accelerated sharply to a 7.4pc rate over the last month of published data. The St Louis Fed’s monetary multiplier has edged up at last. By the Fed’s own account, the double-dip scare of the early summer has abated.

I happen to think that the Fed will need to launch QE2 on a big scale as US fiscal tightening bites, the inventory spike fades, and the housing foreclosure crisis gathers pace. But we are not there yet. Fresh QE cannot be justified at this juncture under any normal understanding of central bank policy.

Is the Fed in reality trying to shore up consumption by juicing asset prices, and trying to ensure that the effect boosts jobs at home rather than in China, Germany, or Japan by holding down the dollar?

This is a dangerous moment for the world, and may backfire against the US itself. We are already starting to see the same sort of rush into oil and resources that played such havoc in mid-2008, and may have been a key trigger for the Great Recession. There is a risk that this commodity shock will hit before QE stimulus filters through.

And while the French deny that they are in talks with China over the creation of a new currency regime, I heard French finance minister Christine Lagarde say in person at a meeting in Italy that France would use its G20 presidency to push for an alternative to the dollar. She specifically cited the “Bancor”, the idea floated by Keynes in the 1940s for a commodity currency priced off a basket of metals. The US risks gambling away the “exorbitant privilege” it has enjoyed for two thirds of a century as currency hegemon.

Yet the surplus states have most to lose if this brinkmanship tips into commercial war. They must know this, but what we are witnessing may run deeper than a calculus of advantage. Was it naïve to think that Confucian Asia and the old democracies of the Atlantic seaboard can share an open global trading system?

View the original article here

Gold is the final refuge against universal currency debasement

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.

Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing “remedial tariffs” on Chinese goods deemed to be receiving “benefit” from an unduly weak currency.

Japan has intervened to stop the strong yen tipping the country into a deflation death spiral, though it too has a trade surplus. There is suspicion in Tokyo that Beijing’s record purchase of Japanese debt in June, July, and August was not entirely friendly, intended to secure yuan-yen advantage and perhaps to damage Japan’s industry at a time of escalating strategic tensions in the Pacific region.

Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40pc of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

The exception is Germany, which protects its surplus ($179bn, or 5.2pc of GDP) by means of an undervalued exchange rate within EMU. The global game of pass the unemployment parcel has to end somewhere. It ends in Greece, Portugal, Spain, Ireland, parts of Eastern Europe, and will end in France and Italy too, at least until their democracies object.

It is no mystery why so many states around the world are trying to steal a march on others by debasement, or to stop debasers stealing a march on them. The three pillars of global demand at the height of the credit bubble in 2007 were – by deficits – the US ($793bn), Spain ($126bn), UK ($87bn). These have shrunk to $431bn, $75bn, and $33bn respectively as we sinners tighten our belts in the aftermath of debt bubbles.. The Brazils and Indias of the world are replacing some of this half trillion lost juice, but not all.

East Asia’s surplus states seem structurally incapable of compensating for austerity in the West, whether because of the Confucian saving ethic, or the habits of mercantilist practice, or in China’s case by the lack of a welfare net. Their export models rely on the willingness of Anglo-PIGS to bankrupt themselves.

So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard). This turned the deflation tables on the surplus powers – France and the US from 1929-1931 – forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

This is not to say that gold has any particular "intrinsic value"’. It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spain’s Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value – hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britain’s gold. It has risen five-fold since then.

We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of “unsterilized” intervention.

Of course, gold can go higher.

View the original article here

Capital controls eyed as global currency wars escalate

Guido Mantega, the Brazilian Finance Minister, said an international currency war threatened the country's competitiveness.

Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows.

Peter Attard Montalto from Nomura said quantitative easing by the US Federal Reserve and other central banks is incubating serious conflict. "It is forcing money into emerging market bond funds, and to a lesser extent equity funds. There has truly been a wall of money entering many countries," he said.

"I worry that we are on the cusp of a competitive race to the bottom as country after country feels they need to keep up."

Brazil's finance minister Guido Mantega has complained repeatedly over the past month that his country is facing a "currency war" as funds flood the local bond market to take advantage of yields of 11pc, vastly higher than anything on offer in the West.

"We're in the midst of an international currency war. This threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies," he said, pointing the finger at America, Europe and Japan. He is mulling moves to tax short-term debt investments.

Goldman Sachs said net inflows have been running at annual rate of $520bn (£329bn) in Asia over the last 15 months, and $74bn in Latin America. Intervention to stop it creates all kinds of problems so the next step may be "direct capital controls", the bank warned.

Brazil's real has been one of the world's strongest currencies over the past two years, aggravating a current account deficit nearing 2.5pc of GDP. The overvalued exchange rate endangers Brazil's industry, especially companies that compete with Chinese imports. The real has appreciated to 1.7 to the dollar from 2.6 in late 2008, and by almost the same amount against China's yuan.

"Everybody is worried that global growth is fading and they are trying to use exchange rates to protect exports. Brazil has watched as the Asians intervened and feels it can't stand by," said Ian Stannard, a currency expert at BNP Paribas.

Brazil has used taxes to slow the capital inflows but the allure of super-yields and the country's status as a grain, iron ore, and commodity powerhouse have proved irresistible. It is a textbook case of the "resources curse" that can afflict commodity producers.

A $67bn share issue by Petrobras has been a fresh magnet for funds, forcing the central bank to buy an estimated $1bn of foreign bonds each day over the past two weeks. Such action is hard to "sterilise" and can it fuel inflation.

Japan has begun intervening to stop the yen appreciating to heartburn levels for Toyota, Sharp, Sony and other exporters. A strong yen risks tipping the country deeper into deflation.

Switzerland spent 80bn francs in one month to stem capital flight from the euro, only to be defeated by the force of the exchange markets, leaving its central bank nursing huge losses.

Stephen Lewis from Monument Securities said the Fed is playing a risky game toying with more QE. There are already signs of investor flight into commodities. The danger is a repeat of the spike in 2008, which was a contributory cause of the Great Recession. "Further QE at this point may prove self-defeating," he said.

Meanwhile, Dominique Strauss-Kahn, managing director of the International Monetary Fund, tried to play down the fears of a currency war, saying he did not think there was “a big risk” despite “what has been written”.

Get free advice when sending money abroad with Telegraph International Money Transfers

View the original article here

IMF admits that the West is stuck in near depression

"Not all countries can reduce the value of their currency and increase net exports at the same time," it said. Nobel economist Joe Stiglitz goes further, warning that damn may break altogether in parts of Europe, setting off a "death spiral".

The Fund said damage also doubles for states that cannot cut rates or devalue – think Spain, Portugal, Ireland, Greece, and Italy, all trapped in EMU at overvalued exchange rates.

"A fall in the value of the currency plays a key role in softening the impact. The result is consistent with standard Mundell-Fleming theory that fiscal multipliers are larger in economies with fixed exchange rate regimes." Exactly.

Let us avoid the crude claim that spending cuts in a slump are wicked or self-defeating. Britain did exactly that after leaving the Gold Standard in 1931, and the ERM in 1992, both times with success. A liberated Bank of England was able to cut interest rates. Sterling fell. The key point is whether you can offset the budget cuts.

But by the same token, it is fallacious to cite the austerity cures of Canada, and Scandinavia in the 1990s – as the European Central Bank does – as evidence that budget cuts pave the way for recovery. These countries were able export to a booming world. They could lower interest rates, and were small enough to carry out `beggar-thy-neighbour' devaluations without attracting much notice. We were not then in our New World Order of "currency wars".

Be that as it may, it is clear that Southern Europe will not recover for a long time. Portuguese premier Jose Socrates has just unveiled his latest austerity package. He has capitulated on wage cuts. There will be a rise in VAT from 21pc to 23pc, and a freeze in pensions and projects. The trade unions have called a general strike for next month.

Mr Socrates has already lost his socialist majority, leaking part of his base to the hard-Left Bloco. He must rely on conservative acquiescence – not yet forthcoming. Citigroup said the fiscal squeeze will be 3pc of GDP next year. So under the IMF's schema, this implies a 3pc loss in growth. Since there wasn't any growth to speak off, this means contraction.

Spain had a general strike last week. Elena Salgado, the defiant finance minister, refused to blink. "Economic policy will be maintained," she said. There will be another bitter budget in 2011, cutting ministry spending by 16pc.

Mrs Salgado has ruled out any risk of a double-dip. But the Bank of Spain fears the economy may contract in the third quarter.

The lesson of the 1930s is that politics can turn ugly as slumps drag into a third year, and voters lose faith in the promised recovery. Unemployment is already 20pc in Spain. If Mrs Salgado is wrong, Spanish society will face a stress test.

We are seeing a pattern – first in Ireland, now in Greece and Portugal – where cuts are failing to close the deficit as fast as hoped. Austerity itself is eroding tax revenues. Countries are chasing their own tail.

The rest of EMU is not going to help. France and Italy are cutting 1.6pc GDP next year. The German squeeze starts in earnest in 2011.

Given the risks, you would expect the ECB to stand by with monetary stimulus. But no, while the central banks of the US, the UK, and Japan are worried enough to mull a fresh blast of money, Frankfurt is talking up its exit strategy. It risks repeating the error of July 2008 when it raised rates in the teeth of the crisis.

The ECB is winding down its lending facilities for eurozone banks, regardless of the danger for Spanish, Portuguese, Irish, and Greek banks that have borrowed €362bn, or the danger for their governments. These banks have used the money to buy state bonds, playing the internal "carry trade" for extra yield. In other words, the ECB is chipping at the prop that holds up Southern Europe.

One has to conclude that the ECB is washing its hands of the PIGS, dumping the problem onto the fiscal authorities through the EU's €440bn rescue fund. That is courting fate.

Who believes that the EMU Alpinistas roped together on the North Face of the Eiger are strong enough to hold the rope if one after another loses its freezing grip on the ice?

View the original article here

Ireland should honour its debts, says Irish business federation chief Danny McCoy

Pressure is mounting on the Irish government to rethink its plans for a "haircut" on the subordinated debt of Anglo Irish and Irish Nationwide Building Society. Photo: AFP

"Ireland should honour its debts if it can," said Danny McCoy, head the Irish Business and Employers Confederation (IBEC).

"The country makes a living taking capital from people and looking after it, and you don't want to get a reputation for carrying out partial defaults," he told The Daily Telegraph.

Ireland's financial services industry is around 9.8pc of GDP, with big players such as Merrill and Citigroup operating from Dublin's 'Canary Dwarf'. But foreign investment is also the lifeblood of the country's manufacturing industry, led by computers and pharmaceuticals.

IBEC's comments come amid mounting pressure on the Irish government to rethink its plans for a "haircut" on the subordinated debt of Anglo Irish and Irish Nationwide Building Society (INBS).

Millhouse, the asset management group of Roman Abramovich, is the latest foreign fund to express fury, warning that Ireland faces possible legal action and a "huge reputation loss" if it imposes a haircut on creditors. The fund said it had been "misled and deceived" by the Irish government, though this class of debt was quietly dropped when the guarantee was extended last month.

The exact shape of any "burden-sharing" is still unclear. Brian Lenihan, finance minister, has said the junior bondholders should make a "significant contribution toward meeting the costs" of the state bailout.

These investors took extra risk to enjoy extra yield, and cannot expected shield when the bank collapses. The debt of senior bondholders is considered sacrosanct.

Mr Lenihan has to walk a fine line: talk of debt restructuring for Anglo and INBS conflicts with his other message that Ireland is recovering from the crisis and still enjoys reserves of economic wealth.

Yet like finance ministers across the West, he also has to secure political support for austerity measures. This is increasingly hard to do without forcing bondholders to share at least some of the pain.

Hedge funds also have to watch their step. The political balance of power in Europe is moving against them. If they were to bring a small country like Ireland to its knees, the EU authorities would undoubtedly respond.

IBEC's Mr McCoy said the €40bn(£35bn) total cost of bailing out the banks had landed on the shoulders of 2m people in the Irish workforce, or €20,000 per person.

While this is an understandable cause of anguish, Mr McCoy said savings from a partial default on €3bn of Anglo and INBS subordinated debt, would be a small fraction of this.

Separately, Moody's called for a "credible plan" by the Irish government to bring its budget deficit back to 3pc of GDP by 2014, warning that the country could face a further downgrade. The report had no market impact.

View the original article here

The hi-tech miracle rescuing Ireland from a banking crisis

Most of the world’s medical device giants have operations in an arc around this Atlantic outpost, where Gaelic can be heard again in the Guinness bars of Shop Street, spoken by the young. Nor are Galwegians cobbling together somebody else’s kit these days, as they did in the 1990s.

“We’re as good as Switzerland, Germany, or anywhere in the world,” said John Power, the founder of Irish start-up company Aerogen and holder of 40 patents.

He holds up his Aeroneb micropump, used to deliver drugs deep into the lungs to keep the airways open. The small contraption vibrates 140,000 times a second, emitting a superfine aerosol spray through invisible holes, each measuring just three microns. It is a surgeons’ tool, ending the need for uber-doses of intravenous drugs. One version is small enough for premature babies.

“We’re saving lives all over the world, it is a great feeling,” said Mr Power.

Besides two accountants, his team in Galway’s leafy suburbs are all scientists or engineers with degrees or PhDs. Production is farmed out. “Our annual revenues have grown 40pc a year for the past three years, and we expect the same this year. Japan is huge for us,” he said. So Japan’s aging crisis is a boon for someone, at least.

Medical products are a structural “play” on the two great trends in the world – the greying of the West and the accelerating health demands of middle-class Asia.

The medical technology plants along Ireland’s west coast – drawing on a small army of young science graduates – are together the world’s third-biggest exporter of medical devices in absolute terms, after the US and Germany.

Life sciences make up a third of Ireland’s €160bn exports. Boston Scientific alone has 4,500 employees in the country, mostly graduates, some making drug-coated stents to stop arteries clogging up.

The sector hardly missed a beat during the “Great Recession”, and will grow 10pc this year. It is insulated from Ireland’s banking debacle.

“We don’t even look at the Irish market in our planning,” said John O’Dea, head of the Galway start-up Crospon, which makes catheters with imaging technology for stomach surgery. Crospon’s products are sold to hospitals in Europe and the US.

“We got fat during the Celtic Tiger era but we’ve woken up pretty abruptly. Wages are not going up anymore – we’re bending the cost curve downwards,” said Mr O’Dea. Wages for entry-level jobs have dropped 10pc to 15pc, tracking cuts in public wages.

Barry O’Leary, head of Ireland’s Industrial Development Agency, said wage restraint has largely reversed the damage from the bubble. Unit labour costs are expected to fall 13pc viz-a-viz the eurozone from 2008 to 2011. Office rental costs

have dropped nearly 45pc. Dublin has fallen from being the world’s sixth most expensive city to 33rd.

Ireland has pulled off the remarkable feat of outright deflation to secure its place in Europe’s currency union without setting off violent protest, or even strikes.

Deflation is double-edged, of course. Ireland’s nominal GDP has shrunk by a fifth, while debt contracts are fixed. Public debt will rise to about 115pc of GDP, including the €40bn hit from Anglo Irish and other banks. The crucial issue is whether Ireland has the export base to trade its way back to life.

“When the global crisis hit, our higher costs came to the fore. We have been slowly clawing it back, giving nothing away,” said Gerry McDonnell, head of Stryker Orthopaedics in Limerick, which makes knees and hips.

Discipline has paid off, as has Swedish-style social solidarity. The US group is selling its plant at Caen in France – plagued by labour strains – and shifting the research operations to Ireland. “We’re moving up the value chain,” said Mr McDonnell.

There will be hitches.

A “patent cliff” is coming as licensing protection expires on best-selling drugs produced in Ireland: Eli Lilly’s Zyprexa for schizophrenia, Bristol-Myers’ Plavix for strokes, as well as Pfizer’s Lipitor for cholesterol – though not yet its patent for Viagra, produced for the whole world at a plant outside Cork. Drug sales tend to crash by 80pc within two months of patent expiry.

“We’ve become the Silicon Valley of the pharma industry, but the next few years are going to be very challenging,” said Eamon Judge, head of supply operations at Eli Lilly.

“It will turn up again from 2013 because we have 70 new products in the pipeline.”

Luckily for Ireland, IBM is to base its “Smart Planet” operations in Dublin, while Google, PayPal, eBay, Facebook and United Technologies are mostly recruiting again. So is Dublin’s “Canary Dwarf” and financial services export industry, ironically a safety net for the economy.

Whatever bond spreads of Irish debt seem to say from one day to the next, there is little doubt that this hub of global companies can pull the country out of its tailspin and contain the cancer of Anglo Irish Bank.

As the Habsburgs used to say: the situation is desperate but not serious.

View the original article here

Hedge fund chief David Harding earns £54m from predicting swings in commodity prices

David Harding's Winton Capital uses complex algorithms to bet on movements in the price of bonds, shares and commodities. Photo: CORBIS

The founder of hedge fund Winton Capital Management received a £54m dividend last year, according to accounts just filed at Companies House.

As the ultimate controlling party of Winton Capital, Mr Harding is also likely to be its "highest-paid director", who received £4m in pay last year, according to the accounts.

Many hedge fund owners have seen their fortunes continue to soar despite the economic downturn.

Louis Bacon, the London-based American who runs Moore Capital, saw his fortune nearly double to £1.1bn last year, according to a list compiled earlier this year. Moore Capital's global investor fund was up 18pc last year.

The latest accounts for Winton Capital, filed late last week, show that it paid out a dividend of £96.2m over the year to December 31, 2009.

Of this, £61.1m was paid to executive directors on their ordinary shareholdings in the company. Mr Harding's shareholding values his share of the pay-out at around £54m.

Over 2009, Winton Capital had a turnover of £102m, down from £395m in 2008. It made a pre-tax profit of £60.3m, compared to £288m the year before.

Although Mr Harding's recent bumper pay-out dwarfs most pay packages in the City, he actually took a cut in pay and dividends compared to 2008 due to the relatively weaker performance. Then, Mr Harding, 47, received £101m in dividends and £17m in salary.

Mr Harding used to own AHL, a commodities trading firm that was bought by Man Group. He left and in 1997 founded Winton.

The Kensington-based company uses complex algorithms to bet on movements in the price of bonds, shares and commodities.

It is thought to employ more than 50 researchers with PhDs in esoteric subjects such as extragalactic astrophysics. His staff are said to study historic data in minute detail to develop complex computer programs capable of predicting future trends.

Mr Harding himself studied theoretical physics before going into finance. He loves punk music and his hobbies include walking and economic history.

Last year, he was quoted as saying: "It is nice to have a golden life and a purpose to engage in, a reason to go to work. I wouldn't have set out to be a futures trader if I hadn't wanted to make a lot of money."

The accounts show that Winton Capital Management paid corporation tax of £16.8m in 2009, down from £86.2m the previous year when profits were higher.

View the original article here

US stock markets enjoy best September for 71 years

The New York Stock Exchange, where the Dow Jones and S&P 500 recorded their highest September rises for 71 years Photo: AFP

The broader S&P 500 rose 8.8pc on the month and the Dow Jones was up 7.7pc.

The last time Wall Street saw a stronger September, when the Dow Jones soared 13.49pc , was at the start of the Second World War, when traders anticipated a strong rise in demand for US manufactured goods and war materials.

However, on Thursday the S&P 500 fell 3.53 to 1141.20 and the Dow dropped 47.23 to 10788.05 as new data on jobs and economic growth continued to indicate the economy was recovering at a slow pace.

Gross domestic product, which measures the output of goods and services in the US, increased at an annual rate of 1.7pc in the second quarter and the number of Americans filing new claims for jobless benefits fell more than expected last week for the third time in four weeks.

Separately, the ISM-Chicago Business Survey rose in September to chalk up a full twelve months of expansion, showing an improvement in industrial activity in the key area.

Sentiment has been underpinned by solid company earnings, a spate of big corporate deals, poor returns from bonds as interest rates hovering around record lows, and hopes that the US Federal Reserve will step in if growth in the world's largest economy stalls.

The FTSE 100 has joined has rally, ending the month up 6.2pc as investors looked beyond Europe's debt woes and focused on signs that the US economy is stabilising.

London's index of leading shares, down 20.6 at 5548.62 on Thursday, has risen 323 points since the end of last month, when fears of a double-dip recession weighed on equities.

The FTSE 100's performance this month compares to a 4.6pc rise last September and a 13pc fall in 2008 - when the global financial system to the brink by the collapse of Lehman Brothers.

Other major European and Asian bourses also rose strongly during September. Germany's DAX gains 5.1pc boosted by bullish consumer sentiment and strong exports. France's CAC gained 6.1pc.

In Tokyo Nikkei 225 rose 6.18pc and Hong Kong's Hang Seng jumped 8.9pc, although mainland China's Shanghai Composite only edged 0.6pc higher.

"This year’s behaviour [in equity markets] is more akin to a broad consolidation phase with underlying support from earnings, which have been stronger than expected," said Mike Lenhoff, chief market strategist at Brewin Dolphin.

He said the "recovery mometum" lost during August had returned and could continue if newsflow on the US economy stays positive and third-quarter corporate results due in two weeks remain upbeat.

"Although, we could go from under-bought to oversold," he cautioned. He said volumes have been thin which has exaggerated moves in the market.

John Brady, senior vice-president at MF Global in Chicago, said: "We could be seeing the last vestiges of the idea that too much bad news was built into the market. We could go from being overly pessimistic to overly optimistic."

However, there is still caution.Michael James, equity trading managing director at Wedbush Morgan Securities, said :"It would be a mistake to draw a conclusion that the market strength is a vote of confidence in a significantly improving US economy."

View the original article here