Europe - Economic Data & News 01 (May 08 - Oct 08)

[millionairemind]

U.K. Housing Market `on Its Knees' Amid Crisis, Rightmove Says
By Brian Swint

Sept. 22 (Bloomberg) -- U.K. house prices fell for a fourth month in September as the global credit crisis intensified, locking out homebuyers and forcing the sale of the country's biggest mortgage lender, a report by Rightmove Plc showed.
``The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets,'' said Miles Shipside, commercial director at Rightmove. ``While this market provides a good opportunity to trade up, it requires a degree of bravery.''

The average asking price for a home fell 1 percent from August to 227,438 pounds ($414,000), Britain's most-used property Web site said today. From a year earlier, prices fell 3.3 percent.

The property market may face further weakness in coming months, provoking a ``painful'' adjustment for many families, Bank of England Chief Economist Spencer Dale said last week. HBOS Plc agreed to a takeover by Lloyds TSB Group Plc after plunging home values and the financial market crisis destroyed the value of the company and added to the threat of a recession.

Prices dropped the most in the East Midlands, where they fell 5.3 percent in the month, and values declined 3.9 percent in the southwest, Rightmove said. In London, house prices rose 4 percent in the month after a 5.3 percent drop in August.

The U.K. economy entered a recession in July, forecasts by the Confederation of British Industry, the country's largest business lobby, show. Growth stalled in the second quarter, ending the longest period of uninterrupted economic expansion in more than a century.

Tax Change

Prime Minister Gordon Brown suspended the tax on home purchases of less than 175,000 pounds this month. Still, the number of new listings per estate agent fell to a record low, Rightmove said.

``The changes in stamp duty are just tinkering at the edge of the system,'' Shipside said. ``At best they will give slightly more choice to first-time buyers.''

Other housing data also show the housing slump has deepened. Home sales plunged to a 30-year record low in August, the Royal Institution of Chartered Surveyors said Sept. 9. Prices fell by the most in a quarter century, HBOS said Sept. 4.

Bank of England policy makers said they are still concerned the fastest inflation in a decade will become embedded in the economy, making them more reluctant to lower interest rates, minutes of this month's meeting showed. They voted 8-1 to keep the rate at 5 percent, with David Blanchflower voting for the biggest reduction since the Sept. 11 attacks and Timothy Besley abandoning a push for higher rates.

[winston]

France has also announced a ban on short-selling not that it matters

[millionairemind]

I guess from this year on, a HARVARD MBA will not be so valuable if investment banks are no longer paying big bonuses...


Financial crisis: Alistair Darling to clamp down on excessive City risk-taking Alistair Darling, Chancellor of the Exchequer, has said he plans to tighten financial regulation and crack down on the City bonus culture that he believes has encouraged excessive risk-taking.
By Russell Hotten, Industry Editor
Last Updated: 12:11AM BST 23 Sep 2008

In his keynote speech to the Labour Party's annual conference, Mr Darling said that the Government will introduce a banking reform bill when Parliament returns from its summer break next month. "What has gone wrong is on such a scale I do think this is time when we need to toughen up the system," he said.

New legislation was promised by Prime Minister Gordon Brown in May and was prompted by the collapse of Northern Rock. The aim of the proposed bill is to give regulators new powers to intervene when a bank gets into difficulties, and to increase the safety of customer deposits by expanding compensation arrangements.

Speaking in Manchester, Mr Darling said: "It's not a question of light-touch regulation against heavy-handed regulation. It's about effective regulation. I can promise that wherever weaknesses are found in the financial system – whether in the powers of Government, the Bank of England or the FSA, I will take steps to deal with it."

But he warned that Britain could not act alone, as domestic regulation was not sufficient to deal with a global financial system. "The problems we face are global and will require global solutions," he said. "Just as no government on its own can combat global terrorism or tackle climate change, so no government alone can put in place the right supervisory safeguards in this global economy."

The Chancellor also said that he would "look at" the culture of big bonuses which encouraged short-term, reckless risk-taking. However, Mr Darling did not spell out the likely options to resolve the issue, and he dismissed calls from trades unions and some MPs for new law to limit the payouts.

However, the new chairman of the Financial Services Authority said on Sunday that it will continue to scrutinise bonuses and get involved if banks are not "realistic" about pay structures. Adair Turner told Sky News: "Regulators need to ask questions of institutions as to whether they are paying out bonuses before they are really sure whether the profits are really there and whether there has been a toxic problem created for the future."

On the economy, Mr Darling accepted that inflation is "too high", but believed that it would peak over the coming months as energy and food prices decline. He offered voters "reassurance" that Britain was "in much better shape now than in the past to weather these global storms... Britain is strong. Our economy is sound. Times are hard but we must keep things in perspective."

[millionairemind]

European Services, Manufacturing Contract Further (Update2)
By Fergal O'Brien

Sept. 23 (Bloomberg) -- Europe's manufacturing and service industries contracted at the fastest pace in almost seven years in September as the credit-market seizure intensified and companies scaled back production in response to slowing orders.

Royal Bank of Scotland Group Plc's composite index dropped to 47, the lowest since November 2001, from 48.2 in August. Economists had forecast a decline to 47.8, according to the median of 21 estimates in a Bloomberg News survey. The index is based on a survey of purchasing managers by Markit Economics in London and a reading below 50 indicates contraction.

Banks are hoarding cash as they struggle with the yearlong credit crisis that has claimed financial institutions including Lehman Brothers Holdings Inc. and with an economic slowdown that is curbing loan growth. Cooling demand is also hitting Europe's biggest manufacturers, with Germany's BASF SE last week announcing it will slash production of polystyrene in Europe.

``The flash PMI data for September make grim reading, showing recession-consistent activity data pretty much across the board,'' said Ken Wattret, an economist at BNP Paribas in London. ``Manufacturing has taken over from services as the main driver of weakness, reversing the pattern in the early stages of the downturn. This is linked to Germany's switch from boom to bust.''

The continued contraction in manufacturing and services industries suggests Europe's economy isn't recovering after shrinking in the second quarter for the first time in almost a decade. The European Central Bank on Sept. 4 cut its 2008 growth forecast to about 1.4 percent. The European Commission also lowered its outlook this month and predicts recessions in Germany and Spain, the region's largest and fourth-largest economies.

Manufacturing Index

Markit's manufacturing index fell to 45.3 this month from 47.6 in August, below economists' forecasts, while the services index fell to 48.2 from 48.5.

European government bonds rose after the data were released, with the yield on the two-year Germany security dropping 11 basis points to 3.92 percent as of 10:04 a.m. in London. The euro extended declines, falling 0.5 percent to $1.4700 against the dollar.

A separate report today showed industrial orders in the euro area rose 1 percent in July from the previous month and were up 1.6 percent from a year earlier. Excluding the volatile transport category, orders fell 1.4 percent on the month and dropped 2.1 percent over the year.

Frozen Lending

To ease the credit crisis that has frozen lending and shaken stock markets, the European Central Bank and the Federal Reserve joined with counterparts last week to inject $180 billion into the financial system. Over the weekend, U.S. Treasury Secretary Henry Paulson unveiled a $700 billion proposal to use public funds to buy devalued mortgage investments.

In the past 10 days, Lehman Brothers collapsed and the U.S. government took over American International Group Inc. In Europe, HBOS Plc, Britain's biggest mortgage lender, was acquired by Lloyds TSB Group Plc last week after it lost 37 percent of its market value over three days.

European car sales tumbled 16 percent last month from a year earlier, the European Automobile Manufacturers' Association said on Sept. 16. Sales at Paris-based PSA Peugeot Citroen fell 19 percent, while Germany's Volkswagen AG, the No. 1 European carmaker, suffered a 9.5 percent drop.

``We are gloomy on the European economy; we think it's probably heading into a mild recession,'' James Shugg, an economist at Westpac Banking Corp. in London, said in an interview on Bloomberg Television. The drop in the purchasing managers' index may have been ``exaggerated a little'' as the surveys were taken ``at the time all the chaos was going on in financial markets,'' he said.

Germany, France

In Germany, manufacturing shrank more than economists forecast in September and services unexpectedly contracted, according to separate data today. Manufacturing in France also shrank faster than expected this month.

The economic slowdown has prompted economists to bring forward their forecasts for interest-rate cuts by the ECB, which in July raised its benchmark rate to a seven-year high of 4.25 percent to tackle inflation.

Citigroup Inc. on Sept. 19 said the central bank will cut the rate in December of 2009 rather than next year's second quarter. BNP Paribas this month forecast three rate cuts next year, revising an earlier prediction that the ECB would keep rates on hold.

Target Rate

Inflation in the euro area eased to 3.8 percent in August from 4 percent in July, double the ECB's target rate. Oil prices, which reached a record close to $150 a barrel in July, have dropped to around $107 today.

Measures of cost inflation within the manufacturing and services industries eased this month, today's survey showed. The gauge of prices charged by companies also declined.

``This suggests that companies' pricing power is now being diluted by markedly weaker demand and activity,'' said Howard Archer, chief European economist at Global Insight in London. ``Input prices also rose at a significantly reduced rate, thereby easing pressure on companies to raise their prices charged.''

[millionairemind]

Mortgage approvals fall to record low
The number of mortgage approvals has slumped to a record low as figures show they have plunged 64 per cent since August last year.

By Myra Butterworth, Personal Finance Correspondent
Last Updated: 12:02PM BST 23 Sep 2008

The British Bankers' Association (BBA) said mortgages approved for house purchases mortgage approvals slumped to just 21,086 in August.

This was the lowest level since the series started in 1997 and down from 58,564 in August 2007 when mortgage lending had already started to slow.

It said mortgage lending was £2.1 billion in August, which was less than half the average level of £4.7 billion for the previous six months.

The BBA blamed the decline on falling property prices, economic pressures on households, and tighter lending criteria.

Trucated
http://www.telegraph.co.uk/finance/pers ... d-low.html

[kennynah]

European Economics Preview: German GfK Consumer Confidence Forecast To Weaken Further
9/25/2008 1:58 AM ET

(RTTNews) - Thursday, the German consumer confidence survey is expected to dominate the news flow in Europe.

The Statistics Estonia is set to release the foreign trade data at 2.00am ET. The external trade deficit in June had widened to 3.56 billion kroons from 2.85 billion kroons in May.

At 2.10am ET, the German consumer confidence monthly survey is expected from the GfK market research group. The consumer confidence is expected to weaken further in October. The indicator is predicted to fall to 1.3 in October from 1.5 in the prior month.

The Spanish producer price inflation report is due from the National Institute of Statistics at 3.00am ET. Producer price inflation is seen at 9.5% in August, down from 10.2% in July.

At the same time, the Czech Statistical Office is slated to issue monthly business cycle survey. In August, business confidence stood at 98.9 and consumer confidence was 98.3.

At 3.30am ET, Swedish producer price inflation and the Dutch final GDP data are expected from the Statistics Sweden and Statistics Netherlands, respectively. The Swedish producer price annual inflation is forecast to rise to 3.6% in August from 3.3% in July. A foreign trade data is also due from Sweden in the meantime.

Elsewhere, the Statistics Netherlands is predicted to confirm the annual economic growth of 2.8% for the second quarter. The Dutch statistical office is also expected to issue consumer confidence as well as producer confidence data for September. Consumer confidence is forecast to fall to minus 29 in September, while producer confidence is expected to weaken to 3.

Half an hour later, the European Central Bank is expected to issue a report on the monetary developments in the euro area. After growing 9.3% in July, M3 money supply is forecast to rise 9.1% in August.

In the meantime, foreign trade data is due from the Italian statistical office ISTAT.

The Central Statistical Office is scheduled to release a slew of reports at 6.00am ET. Irish reports for the day includes quarterly national accounts for second quarter, balance of international payments and the external trade report.

[winston]

A Spanish bank is offering its customers cars free of charge in exchange for opening long-term, interest-free deposits.

Banesto, a mid-sized lender controlled by Santander, Spain's largest bank, is offering savers Citroën cars or Piaggio motor scooters in lieu of interest payments under a promotion called Sobre Ruedas, which translates as "smooth running".

Banks routinely offer customers opening new deposits small gifts like pens, although Banesto has in the past given clients computers and flat-screen televisions. The latest offer, however, marks the bank's biggest product giveaway to date.

Banesto does not pay interest on depositors' capital during the lock-in period of the offer, but is offering to take care of details such as registration and transport to the nearest dealership. Those customers who do take it up pay tax as if the vehicle's value were interest.
– Financial Times

[helios]

Credit crunch claims another victim as furniture giant MFI struggles to survive

27-Sept - High-street furnishings chain MFI has become another victim of the credit crunch.

It faces a crucial weekend amid ongoing efforts to secure the future of the business.

MFI, which was bought by current owner Merchant Equity Partners for £1 in 2006, has been hit by a sharp fall in demand for big-ticket goods but faces a quarterly rent bill on Monday.

The business has reportedly written two letters to its landlords - one asking for a rent-free period, and the other saying it wants to continue trading despite going into administration - according to an email circulating among property sources.

MEP declined to comment but it is understood that four main options are likely to be weighed up over the weekend - a management buyout, further cash from existing investors, a sale to another private equity firm, or administration.

MFI, which is headquartered in north London, has around 3,100 staff and 185 stores.

The group was at the centre of speculation over a possible merger with Homeform, the owner of rival kitchens brand Moben, earlier this month.

Talks were also said to have taken place with Nobia, the Swedish retailer, about combining its UK business Magnet Kitchens with MFI.

A MEP spokesman said at the time that it was looking at strategic options and 'possible business combinations' due to the deteriorating market conditions.

MFI, one of the UK's best known retail brands, has been the subject of frequent speculation about its future.

It established itself as a major player in home furnishing shortly after it was founded in 1964 by Noel Lister and Donald Searle, who called it Mulland Furniture Industries after Searle's wife's maiden name.

It started out as a mail order business but three years later opened its first shop, in Balham, south London.

Over the next 30 years it became the biggest furniture retailer in the UK with a value of £1 billion.

But its position as market leader was hit by the growth of stores such as Ikea, B&Q and Homebase, causing sales to fall from £854 million in 2003 to £742 million in 2005.

It also suffered problems with its supply chain, with customers becoming increasingly fed up with delays and errors to orders, which damaged confidence in the brand.

Source: Daily Mail UK Online

[winston]

Problem-hit Fortis eyes sale
Monday, September 29, 2008

Troubled Belgian-Dutch financial group Fortis may sell itself or the ABN Amro Dutch banking business it acquired last year, according to sources in Belgium and Holland.

Fortis's problems stem from its purchase of ABN with partners Royal Bank of Scotland and Spain's Santander in a 70 billion euro (HK$794.2 billion) deal just as the credit crisis struck, slashing the value of banking assets.

BNP Paribas is a potentially interested buyer for all of Fortis or just ABN, while Dutch rivals ING or Rabobank may be eyeing the private banking unit of Fortis, sources said.

REUTERS

[LenaHuat]

The nationalisation stir in UK and Belgium/Netherlands smacks of Putinomics or Paulsonomics. Or as Bernanke said : "We were shocked at how broad 'too big to fail' had become" Things are really ugly now.